Tuesday, October 31, 2017

Three years is plenty to screw up New Zealand

One of the more interesting pieces of work I've done recently is preparing a briefing for clients on the impact on their business of New Zealand's new coalition government. I went through the details of the coalition agreements between Labour, New Zealand First and the Greens and also, with a fine-tooth comb, through their manifestos. I believe I now have a pretty good understanding of all of their promises.

The total cost of new spending over the next few years is more than $15 billion. It is not obvious how they are going to pay for it, with only a few hundred million of new revenue identified. The source of the money, of course, will be new taxes and borrowing (i.e. deferred taxes) - they just weren't honest enough to admit it in the election campaign. They have revealed only that they intend to cancel the previous National Government's proposed tax cuts for next year and that they will establish a Tax Working Group to look at the tax system. The latter sounds to me like a surreptitious means of justifying the higher taxes the coalition will require to fund all that extra spending.

The other shocking aspect of my analysis is the sheer number of new policy initiatives and laws the Labour-led government plans to introduce. I have written before of how there are ordinarily about five hundred pieces of legislation winding their way through Parliament's processes. Expect this to increase substantially. If we are not already one of the most regulated countries in the world, we are about to become so. 

I believe the coalition government won't last more than three years (and possibly considerably less). Unfortunately, three years is plenty to screw up New Zealand, given that they seem to be seriously commited to the task.

No comments: