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Peter Wilson: Labour Will Have To Prove Itself In Opposition

Contributor:
Peter Wilson
Peter Wilson

Labour MPs aren't saying it, but they must be thinking it: this year's election wasn't a bad one to lose.

If the results had been different, and if Labour had managed to stitch together a majority, it would have been a fourth term government facing the worst economic crisis in decades with the Greens, New Zealand First and possibly the Maori Party on its back.

Now there's an uncomfortable thought.

As it is, Labour in opposition is revitalised with promising new MPs in its ranks and whatever goes wrong during the next three years will be someone else's fault.

And they will let you know it. They've already started.

"Where's the plan?" finance spokesman David Cunliffe asked last week, accusing the Government of offering nothing more than "slung together slogans" as a remedy for what ministers acknowledge is going to be a very tough year ahead.

More likely two or three very tough years as the international recession hits New Zealand with increasing severity.

A huge burden is coming to rest on the government that has just taken office, and it is mainly on the shoulders of Prime Minister John Key and his deputy, Finance Minister Bill English.

Last week the Treasury released a fiscal and economic update with horrendous projections of soaring government debt and rising unemployment. Government revenue will fall as benefit payments increase, a vicious cycle that perpetuates itself as people have less money to spend, retail sales slump and shops and manufacturers lay off workers.

The really alarming thing is that every time the Treasury does this, the forecasts are worse than the last time.

English cut a sombre figure when he talked about his next budget. "Austere" was the word he chose but it could be a real shocker.

The only bright sign on his horizon, it seems, is that government debt is very low at 16.8 percent of GDP. And there was rich irony in his comment that "this is the rainy day that government has been saving for".

It was his predecessor, Michael Cullen, who did the saving and was ferociously criticised by National for the way he was running big surpluses and not giving it away through tax cuts.

It means the new government has the space to borrow money, and Treasury expects debt to rise to 33 percent of GDP by 2012/13 and higher than that in the long term.

Forget about surpluses, in a few years we won't remember what they were.

Contrary to Cunliffe's complaints, the Government does has a plan. The question is whether it's going to work well enough to protect New Zealand from the sharpest edge of recession, or whether it's going to work at all.

The tax cuts that come in on April 1 will put money into the economy and infrastructure projects are going to be brought forward so that jobs are created to soak up some of the workers who have been made redundant.

But building new roads and fixing up schools seems to be a solution restricted to a small part of the workforce which is suited to such tasks. It leaves a big gap for those who aren't.

The really tough task in English's first budget is going to be keeping the show on the road without spending any more money, because costs always go up.

The chief executives of government departments are being told there is little or no room for spending bids. At the same time the ruler is being run over what they are spending now, with the aim being to cut out "wasteful" or "low quality" expenditure.

That's a no pain, no gain exercise and there's going to be a lot of pain.

Also in for the chop is what English calls the previous government's wish-list of unfunded projects, like pouring millions into KiwiRail. That caused cries of outrage from Labour, as have other cost-cutting announcements, but they must know that if they were still in office the calls they would have had to make would be just as hard.

How Labour handles the situation in the next year or two will be important in terms of public perception. With the country in crisis, it needs to do more than groan and grizzle every time the Government says something can't be afforded.

If it demands a plan from the Government that adapts to a worsening situation, it must produce its own blueprint for economic survival.

If the Government says it has to cut funding and Labour doesn't like that, it must say what it would do under the same circumstances.

Labour leader Phil Goff says his party will be constructive and won't oppose just for the sake of it. He will need to live up to that, because three years of moaning won't put Labour back in the Beehive.

From the Government's perspective, it is much better to be facing hard years in its first term than in subsequent terms. Voters have a "fair go" attitude toward first-term governments, they don't easily kick them out and they're not likely to load all the blame on them for problems driven by external factors.

But for National this is going to be a first term like few others. The challenges are enormous, they could make or break its leaders.

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