Biking through the recession

Let's all ride our bikes merrily down the length of New Zealand, laughing in the face of the economic disaster that's made the rest of the world resort to actually doing stuff

Nine years ago, I occupied Waikato University with the man who must be New Zealand’s most genuine socialist revolutionary, Joe Carolan. Most of us have (ahem) moved on to other things; Joe keeps the cause alive. Outside the Jobs Summit last week, he and a spirited back-up group chanted, "Eat your pork, drink your wine! Your days are numbered, bourgeois swine!"

Aside from Joe, there seemed to be very few critics of the Jobs Summit. Indeed, media coverage fairly glowed: apparently this was a talk-fest that produced "big ideas".

Perhaps the bourgeois journalists’ heads were turned by all the pork and wine.

Barack Obama’s gazillion-dollar budget is a mammoth idea. The Canadian Conservative-led government’s u-turn from being the promoters of small government and deregulation to extending welfare-state entitlements and spending taxpayer cash on the auto industry – that’s a big idea. Australia’s repeated stimulus plans – big ideas repeating themselves slightly absurdly.

Nine-day fortnights for factories and building a rather long bike track are intriguing concepts. But neither immediately qualifies as a “big idea” that will help New Zealand weather the financial crisis.

Don’t get me wrong. The foreign examples of “big ideas” are of course, fundamentally just the very old idea of borrow-and-spend-your-way-out-of-a-tight-spot.

But is it just me, or does the kiwi response to the financial crisis seem a touch blasé in comparison? While the rest of the world panics – and that’s certainly what they’re doing, with poor old Eastern Europe the latest to require urgent assistance – little old New Zealand seems to be saying: Wheeeee! We’re going to build a bike track!

Apparently, John Key’s series of small, un-dramatic announcements – a little up-front infrastructure spending, a bit more on the capital budget, ‘Re-Start’ for laid-off workers – form a “rolling maul” approach.

(I’m no rugby expert, but I note the suggestion by one blogger that a rolling maul is “commonly employed as a 'go-to' tactic by distinctly average teams”).

Now, it seems to me that there are two possible reasons for this approach. One is ideology. But of course, everybody is leaving their “ideology at the door”, so therefore the no-big-spend-up approach seems to be driven at least in part by fear of a credit rating downgrade. That’s the suggestion of the sensible Bernard Hickey, in any case.

As Bernard notes, “Choosing a big spend-up now would just increase interest rates, increase debt and slow growth later.”

So New Zealand's strategy, it seems, is that there’s no grand strategy. Just a series of practical gestures designed to help keep the economy as productive as possible, and let us innovate our way out of this situation.

It’s a nice theory. One that could give rise to cynical questions like: if this is a really nifty strategy, why isn’t it being embraced by our major trading partners (including those whose economies are less stressed than ours)?

But there are many more pragmatic questions that are perhaps a little more urgent. Given, as John Key says, the first signs of this financial crisis started more than a year ago, I’m sure that National has given them a lot of thought:

Where exactly in the public service will cuts be made? NB: Defining the “core” public service as “the bit that’s not going to be cut”, as Gerry Brownlee did in parliament last week, is not really an answer.

Japan shows what happens when consumers stop spending. Given New Zealand consumer confidence is extremely low – and our currency is making imports ever-more expensive (whoops, it just dropped again) – there’s a strong risk that tax cuts won’t stimulate the economy, but will instead be tucked under the mattress. So: which bits of the  tax-cuts will be deferred, if any?

In Australia, the financial crisis is driving calls to delay or replace the Emissions Trading Scheme introduction. How has the financial crisis affected National’s commitment to its ETS? (Because if it hasn't, it should have).

Is the government just flirting with the idea of a contributions holiday to the Cullen Fund, or what? And does the fact it’s even considered it (no matter how briefly) mean it has given up on the ridiculous concept of forcing the Cullen Fund to invest in New Zealand firms?

And while we’re on that subject: this proposed investment fund partnership with New Zealand banks to buy shares in threatened businesses… it obviously offers rewards to fragile kiwi corporations and significant risk to the taxpayer – so, how will that risk be managed? When do you buy in, when do you sell out?

And, if the whole idea is to keep confidence propped up by telling the world that we’re innovating our way out of this mess with a bike track and a day off for factories: shouldn’t the government swiftly rule out seemingly panicky moves like the investment fund partnership and a contributions holiday to the Cullen Fund?

It might be that the part where the rolling maul stops to answer these boring questions comes later, it's just gotta keep on rolling for a while first.

But the problem with a strategy that’s a ‘rolling maul’ in the first-place is that it all seems slightly incoherent unless these sorts of details get cleared up.

Aside from Joe Carolan and his spirited band of socialist revolutionaries, John Key seems to have most New Zealanders convinced that he has a ferrity cunning plan. While Matt McCarten's wrong that Key's honeymoon is longer than any other new PM's – Clark's was extraordinarily lengthy – all this goodwill isn't necessarily so helpful right now. Especially with the verdict from NZIER that the recession here could last four years. Some tricky questions and straight-forward answers would be nice.

I see John Key's not bothering President Obama with a meeting request this year. It's a shame. Our PM could have passed on the news: you didn't need to spend trillions, you just needed a bike track.