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Was National a ‘good economic manager’?

It’s a crucial part of the mythology around National Party Governments that they are “good economic managers”, as their new leader, Simon Bridges, is repeating. The business commentariat repeat it endlessly too. How true is this?

‘Economic management’ often confuses fiscal – management of the government’s finances – with management of the entire economy over which the Government of the day has relatively limited influence: it cannot take credit or blame for existing trends or random events – luck. And what is ‘good’? The business media have typically assumed that ‘good fiscal management’ is simply holding down spending, balancing the budget and reducing debt. But it is hardly good management to hold down spending if in the real world people can’t find jobs or cannot afford acceptable housing or are living in poverty or can’t get the health care they need. Similarly ‘good economic management’ is not just strong GDP growth. It is hardly good economic management if GDP is growing but the income is not fairly spread or growth is in areas that provide a poor basis for future development or creates growing environmental degradation.

I look at National’s record on growth in GDP (and GDP per person), productivity, trade, employment, unemployment and joblessness, wages and salaries, inequality, poverty, housing and environmental sustainability. Even on GDP growth its record is mediocre; it has a little to be proud of in employment but less so when looking at the quality of the employment and continuing levels of joblessness. In the other areas there are demonstrable failures.

Its management of government finances started well in its handling of the Global Financial Crisis: using debt rather than austerity reduced the social and economic impacts. It sensibly funded the Canterbury earthquake recovery partly from debt. Yet there their praiseworthy fiscal management largely ends. Their 2010 tax cuts were inappropriate in a recessionary economy with high levels of inequality and poverty. National used the crisis and a supposed excessive debt level (even at its peak, still much lower than most countries in the OECD) to justify a programme of spending cuts for its entire period in office. It put off spending in a host of areas that would inevitably come home to roost on a future Government including in Health, Superannuation, Education, Housing, Poverty, Environment and Conservation.

This is not responsible fiscal management: it is turning a blind eye to the future. On this record, National cannot fairly claim to be a good economic or fiscal manager unless its definition is so narrow as to ignore the consequences of its management policies.

Download the full bulletin: CTU Economic Bulletin 197 February 2018