Prime Minister, John Key, state of the nation speech to Parliament was the opening salvo of the general election that he later announced was to be held on 26th November. In the firing line, if the National Party is re-elected to government in November, are deep cuts to public services and the part privatisation of state assets.
The Nats excuse for this is the growing public debt, and the threat of down grading the country’s credit rating by Standard and Poor amoungst others. We are constantly being told that the governmant is borrowing/ rolling over $300 million a week debt to fund public services, and they are rising the spectre of default as witnessed in Europe.
The issue here is the Nats are not telling the whole story. Nothing new there! In fact public debt has risen to about 25% of GDP. Even with the recent earthquake in Christchurch it is estimated to rise to 40% of GDP. At present this is one of the lowest in the OECD. In fact the USA and the European nations are no doubt envious of such a position. The reason for this is that the New Zealand banks were not bailed out here by the public purse like in the above nations. New Zealand main 4 banks were propped up by their Australian parent banks.
Private Debt
The problem for the government is that the country’s debt is in the private sector. Private sector debt stands at 85% of GDP. This covers both corporate and personal debt. The reason why the economy is about to enter another recession is due to the fact that people and corporations are paying off debt and are not consuming like they used to. Hence the poor retail sales in the run up to Christmas.
Additionally, for workers, the increases in the cost of living and job insecurity is not giving them confidence to ‘consume’ as they are not certain of the future and have less cash to spend on consumables. The governmant policy has created deflationary wages and conditions and inflationary costs!
So what is the government going to do to address the indebtness in the private sector. The answer is very little!. Appartently we are being told to save and invest more. This is highly unlikely when average wages struggle even to keep up with inflation and the effects of over 20 years of creating a low paid economy by first world standards.
Instead the government is going to further reduce the state sector through merging ministries and sacking more public servants. Of course there will be rhetoric regarding reducing backroom staff, but they never define this. Clearly what is happening is that so called front-line staff end up having to to the back office functions making them more inefficient in service delivery!
Privatisation
On top of this is the governments’s proposal, if re-elected, to sell of the family silver with the part-privatisation of Solid Energy, Mighty River Power, Genesis Power, Meridan Energy and a sell down of Air New Zealand. If this is carried out the government will have less money from which to fund the state sector with!
What this shows is the blind alley that New Zealand capitalism is in. The medicine being given out by the Nats is that the workers and benficieries are to pay for the crises of capitalism. Hence the PM statements regarding the ‘lifestyle choice’ people make when going to a foodbank or the Finance Minister’s comments around ‘waffle’ when talking about state sector workers.
In reply to the PM , Phil Goff had ‘fire in his belly’. Pointing out the devestating effect cuts have had so far and comparing the 25c rise in the minimum wage with the extra $1000 week the PM salary has increased due to the recent tax cuts.
However, it is a mistake for Phil Goff to say once privatised it is lost forever as it basically supports the idea that private property is untoucable. Labour needs co-herant socialialst policies to win the general election. A starting point of such a policy should be nationalisation and a programme of useful public works.