As Michelle Boag cancelled her National Party membership, she carried out one final act of spite for the party that has feathered her nest for so long; she implicated Michael Woodhouse in the appalling saga over the leaked COVID patient information. She did not need to do this, as she had already done enough damage to the party to ensure their path to electoral victory would be even harder than it already was, but such was the venom of the woman who had brought her career crashing down around her own head that she simply could not help herself. The media ran with the story relentlessly all day Friday, while Jacinda and Chris Hipkins must have been considering putting Boag on their payroll, for the extra votes she had just steered towards Labour.
Nevertheless, she has gone, hopefully never to be seen again, but where does that leave the party damaged by so much stupidity, so much broken trust and so much bad media coverage? Muller tried to be swift and decisive, and this was going as well as could be expected until Boag came forth with her final blow to the party and its leader. Now he looks dishonest and shifty. She could not have done more for the electoral success of Labour if she had tried.
Now all hopes of a National-ACT government after the election look to be fading away; not that they were ever very strong. What makes me so furious with Michelle Boag and her self-centred stupidity is that she is condemning the country to three more years of economic sabotage, from which we may never recover.
We all know that Labour’s fundamental economic policy is ‘Tax and Spend’. It has always been the same. This government bound itself to a policy of fiscal restraint for the first two years, in order to avoid the inevitable comparison with drunken sailors, but COVID and an economic recession have put an end to all that. Now they are splashing money around like there is no tomorrow. The trouble is, there will be a tomorrow, and all this fiscal laxness is going to have to be paid for eventually.
The government has been smart enough to have pushed out the worst of the economic carnage until after the election. Sure, there are people losing their jobs everywhere, but as Jacinda travels around the country with an open chequebook and a dazzling smile, she looks every bit the ‘saviour’ that she is purported to be. $10 million to AJ Hackett, $25 million for student mental health, an extension to the wage subsidy, $136 million for the America’s Cup… nothing for Southland and Tiwai Point though, where something like 2600 people will lose their jobs. Well, Grant Robertson did say that the government will not be able to save every job, and they are mostly pesky National voters down there anyway.
The wage subsidy extension started in mid-June and is to last only 8 weeks, which means mid-August, but that only applies to those businesses who applied for the subsidy immediately. In fact, anyone can apply for it up until the end of August, meaning that those businesses who experienced an immediate post-COVID rush, such as hairdressers and car mechanics, might not have qualified immediately as their income for the previous month had not fallen by 40%. But once everyone had done their oil changes and had their haircuts, such businesses may have experienced a drop off in trade and may have applied for the wage subsidy later. This means there will be a staggered effect to the end of the wage subsidy, which will go on until after the election. Economic experts are predicting carnage once the wage subsidy ends, as it is all that is keeping many businesses from ruin at the moment. By the end of the year, the true extent of the economic devastation will have been revealed to us all, but chances are, we will have another Labour-led government by then, and it will be too late to stop them.
Jacinda has noticeably distanced herself from the Green’s taxation policy, which includes two higher tax brackets and a wealth tax, saying that Labour will bring out its own party’s taxation policy in due course, but there is no getting away from the fact that higher taxes must be on the agenda at some stage. The government’s accounts had fallen into deficit in the December 2019 quarter, and that was well before the ravages of COVID, demonstrating that this government was in the red well before the economic storm really hit. The deficit for the June and September quarters will be staggering, but we won’t know for some time. The government will blame COVID, of course, and to some degree, they will be right, but then again, they could never be accused of good economic stewardship. That their pre-COVID deficits are not considerably higher is due only to the fact that they are incapable of actually carrying out any of their promised projects, but they have been splashing the cash with gay abandon recently.
Helen Clark introduced a new top tax rate of 39% shortly after she was elected, and I expect this government to do something similar, although election campaigning on tax increases is not normally a great success with voters. Either they will blame COVID and say that there is no choice but to increase taxes, which might be reluctantly accepted by star-struck voters, or they will not mention it at all until after the election. Either way, remember one thing. Clark brought her top tax rate in on incomes over $60,000, which even in the year 2000, were not exactly high earnings. The reason for this is simple. There are just not enough really big earners in this country to enable governments to make enough tax revenue from thresholds at much higher levels. In other words, expect any new top tax rates to kick in at about $100,000, or maybe less. The government will not generate enough additional tax revenue unless it does so.
There is, of course, no need for this. National is campaigning on no tax increases, believing that it can recover the economy, as it did after the GFC, by generating growth rather than increasing taxes, but a combination of Jacinda’s sainted image, an unimpressive leader of the opposition and now a vindictive parting shot by Michelle Boag makes all that seem unlikely.
When you go to the ballot box, whoever you decide to vote for, just remember this. Labour does not have a reputation for being the party of ‘Tax and Spend’ for nothing. If they are voted back in, particularly if there is still a Green element to their government, higher taxes will be the first thing on the agenda. They simply cannot help themselves, and COVID will have paved the way to make it palatable to voters. It is just like taking foul tasting medicine really; you may not like it, but in the end, it will be for your own good. That is what they will tell you anyway. Believe it at your own peril.
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