National's Toolbox Is Empty

Nobody will be surprised to learn that Treasury is forecasting a deficit blowout. Treasury forecasts always have to be taken with a grain of salt, but the tendency in recent times has been for Treasury forecasts to be unduly optimistic. The fact that the news is so grim isn’t promising, because if recent trends are anything to go by the next set of forecasts will reveal an even direr picture.

At the same time National’s asset sales programme appears to be ramping up, and it becomes clearer by the day that the shares sold will return much less to the country than previously predicted.

Those few protections we were told would be in place to ensure the partially-sold SOEs acted responsibly and that New Zealanders would be first in line to buy the shares, have gone missing from the asset sales legislation introduced into Parliament. Now we are told “don’t worry, we’ll make sure rules are in place to put Kiwis first in line”, though why this can’t be legislated for isn’t clear. We are expected to trust the Government that there's a perfectly sound reason for this omission.

We are also assured that big corporations already act in a socially responsible manner, meaning that legislation entrenching this obligation is not necessary.

If big corporations are already behaving as good corporate citizens, then what would National have to lose by including a social responsibility obligation?

Could it be that some large companies do in fact act in a socially irresponsible manner, and that when the need for profit clashes with social responsibility the profit motive often wins? This should be no surprise, because most corporations exist for the purpose of maximising returns to shareholders.

I can see how removing constraints on the operations of the partially-sold SOEs might potentially make them more attractive to investors, especially overseas investors who might be nervous about investing in a market they are not intimately familiar with, and under conditions where participants can’t just maximise profits.

I can also see why the government would want to hoodwink us into thinking that such restrictions are not important and that social responsibility obligations don’t matter, and that the main recipients of the shares will be “Mum and Dad investors”.

But the desire to maximise the return on the sale of assets will come at a long-term cost. It seems likely that a large proportion of the shares sold to private investors will end up in overseas hands, meaning that much of the profits of these companies will go offshore, worsening our current-account deficit.

The good news for opponents of this government is that it is doing a lot of quite unpopular things, at a time when the economic news just gets worse and worse, and it appears to be showing in the polls. The bad news is that by the time we finally get rid of these incompetents a lot of the damage will already be done.

A conspiracy theorist might conclude that the further the public accounts worsen the easier it will be for the government to justify urgent and drastic measures, such as extending the asset sales programme and gutting public services.

But it’s much more likely that this government just doesn’t have a clue how to grow the economy. National’s only tools appear to be the knife and the box of matches.