It is Key’s to loose… {Updted}

With the polls all showing there was a mood in the public, for change in political leadership in NZ, I’ve always maintained that this election was National’s and Key’s to loose not Helen’s to win.

Seems that Key is doing his dam best to do that. With all the polls showing a closing of the gaps (as of course they would do leading up to actual vote time), Key is starting to really piss off his core right wing vote. Today Key announced that they would be legislating for Kiwisaver to invest 40% of it’s funds (which stand at roughly $14B NZD) into New Zealand investment (link here). On the face of it, to the left that seems like a good idea, but the reality of it seems to be so much worse than Key could possibly imagine.

I don’t know what game he is playing with this announcement. Was it reactionary to the last weeks events? Are they (in the face of some pretty damming criticism) trying to look like they are doing something? Is this because they are planning to scrap the $700m R&D tax credit/fund and they suddenly realise they need some sort of stimulus package. That fund scrapping was met with some pretty angry business reaction, and several firms within hours were talking of moving overseas. To quote “Business NZ chief executive Phil O’Reilly said the research and development credit scheme should have been given more time”. Manufacturers and Exporters Association were also extremely critical of this move (link).

So that’s Business NZ, the Manufacturers and Exporters Association and now tonight the economists themselves are turning on National. Rod Oram (not the pinko commie described at Kiwiblog), Bernard Hickey and Infometrics have all criticised the move to force the guardians of the $14b fund to invest here. Chris Worthington of Infometrics, thinks it’s ‘disastrous’ and will make ‘the entire country poor’. OUCH!

As Oram put it, it will have a 3 fold negative affect.

1. By this action you are telling the Guardians of the fund to not find the best investments available, you must invest here, regardless if commodities, bonds, equities or whatever are all performing less than overseas investment choices. Automatically you are telling it not to do the best for the fund and ultimately all Kiwis.
2. It will over inflate the local economy investment landscape. It will force up prices and squeeze out smaller investors. Ultimately it could very well see a reduction in investment if it’s not affordable for the tens of thousands of small investors in NZ
3. Kiwisaver will become a political plaything once again, at the whim of every government following, leaving little stability (and markets love stability).

Now I’m pretty bloody left in my thinking, but not so ideologically stuck in dogma to see that if most right wing commentators and business groups think that two important economic packages announced this week by National are bad, where are they looking for their vote to come from?

A month ago I though this election was done and dusted, lets just get these buggers in and hope the damage isn’t bad. Now I have no idea. With polls showing a narrowing of opinion, National pissing off it’s natural political allies (ACT) and distancing itself from the only other possibility for minority government (Maori – he lied to Sharples and that’s about the dumbest thing you could do to him), who the hell do they think are going to vote for them and support them in government. What are the chances that United Future pics up 15-50% of vote – next to nothing.

I can understand so called lolly scramble bribes, but to actively piss off the natural support base of your party is just bewildering? This isn’t going to be the boring election I thought it would.


Since this had all blown up, Key fronted up on Sunrise TV, the TV3 breakfast show to explain the policy position.

Some points:

‘National wants New Zealand to be a high growth country’, and as thus will be a place that the fund could invest with maximised returns. Excuse my champagne socialism (and a huge ounce of naivety), could someone please explain the implications of this. Sure higher growth must be a goal, but is this inflationary? Do all sectors of the economy grow, is this an export lead growth or are there several fronts. How long and fast will we need to grow to make this place an attractive prospect for the fund managers (I’m guessing it’s a lot longer than 3 years that this political hot potato has now become). What are we going to export that we aren’t already exporting to facilitate this growth. We are a bloody good primary producer, but we are sod all able to call on extraction industries which are even higher yielding. And as illustrated recently, some of our export commodities can be very exposed to overseas troubles as in the wood processing industry which has been hit on several fronts including the downturn in both the local and US building industry – you don’t just over night get another industry to fill the void.

Key’s also guessing that it’s recently lost a lot more money than the recent $800m it lost in it’s last report. But Key reckons that’s because the stock market crashes. Surely this fund isn’t massively invested in stock equities, that would make it too vunerable? The fund must have commodities, bonds (not that they are any more appealing considering most banks are government secured bonds), and other capital assets?

Is Fonterra ever likely to float – that would require massive restructuring of what is still essentially a co-op wouldn’t it?

Sorry Mr Key, but a toll road in Auckland is not going to see any significant productivity gains. Auckland needs more roads like a hole in the head, and yes that is an ideological position, but one that has been reinforced by playing on some of the worlds best public transport systems.

Full video here and hat tip to The Standard.



Filed under economics, Policy, Politics

2 responses to “It is Key’s to loose… {Updted}

  1. I think you will find that Rod Oram is a pinko commie. Everyone who doubts National’s commitments and has numbers to support his argument is a pinko commie.

  2. That’s funny.

    Infometrics is a pinko commie institution, and Bernard Hickey’s a stark raving commie.

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