Until 1972, they (NZ) enjoyed as high a standard of living as any country in the world, but the artificial diversion of Britain’s trade flows that followed EEC membership was calamitous for New Zealand. That the Common Market turned out to damage Britain’s economy, too, was no consolation. Since then, advances in technology have made regional blocs redundant. It is as easy to sell to the other side of the world as to the next town. Capital surges around the planet at the touch of a button. British businesses find it easier to deal with countries which share their language, common law system, commercial traditions and accountancy practices than with countries which simply happen to be geographically close. Our very first act when we leave the EU should be to offer unrestricted commercial access, including free movement of labour, to Australia and New Zealand. It’s the least we can do.

Like the prodigal son returning home.  I’m sure ANZ would reciprocate. The only question everyone has is if David Cameron is up to it? And also I suppose, what is Kevin Rudd doing to lobby for it?

These days, you have to travel far to find a national leader who is talking about market-based approaches to the global recession. All the way to the other side of the world.

“We don’t tell New Zealanders we can stop the global recession, because we can’t,” says Prime Minister John Key, leaning forward in his armchair at his office in the Beehive, the executive wing of New Zealand’s parliament. “What we do tell them is we can use this time to transform the economy to make us stronger so that when the world starts growing again we can be running faster than other countries we compete with.”

That idea — growing a nation out of recession by improving productivity — puts Mr. Key and his conservative National Party at odds with Washington, Tokyo and Canberra. Those capitals are rolling out billions of dollars in stimulus packages — with taxpayers’ money — to try to prop up growth. That’s “risky,” Mr. Key says. “You’ve saddled future generations with an enormous amount of debt that then they have to repay,” he explains. “There is actually a limit to what governments can do.”

Sanity somewhere in the world still exists.

Mr. Key says his biggest fear is rising inflation on the back of rising money supplies. “Economic theory will tell you that inflation is going to rise — and that inflation will be exported around the world. . . . In the short term, I’m not criticizing U.S. policy: I think inflation is probably the thing that’s going to be necessary to get them out of the current issue. [Federal Reserve Chairman Ben] Bernanke sort of signaled that. But longer term, inflation is cancerous to your economy.”

This movement is incredibly significant. It is the first time ever that the NZ 50 has out-performed the ASX 200:

So it seems the market’s verdict on the many packages announced over the last eight months is, they are bad for markets. Now remember that $85 billion could soon grow by another $60 million, with Rudd having lifted Commonwealth borrowing restrictions to $200 billion. Markets know this, but it has had no effect. The massive growth in Commonwealth debt will likely hurt markets by drawing capital away from stocks and into Federal bonds to fund programmes that have little to do with getting markets and the economy going north. Rudd’s changes to deposit insurance and his botched changes to short-selling regulations have also compounded the situation. The more consideration I give to the issue, the more I realise that Rudd has actually provided incentives for people not too invest in the markets. This will ultimately hurt the capacity of the economy to invest in capital, jobs and therefore future growth.

By contrast, New Zealand has adopted a set of measures which aim to support business, markets and therefore the economy. I’ve previously covered this article from the WSJ, but here it is again:

While the U.S., Australia and Japan spray cash in every direction to “stimulate” their economies, New Zealand has a novel idea: Why not grow one’s way out of recession?

….a package of regulatory reform and tax initiatives aimed at making it easier for companies to do business…provisions to allow companies to retain their taxable income for longer periods, reduce penalties on underpayments…simplified tax-deduction rules for business-related legal expenses…harder for small companies to be sued in certain courts…a series of income-tax cuts and eased unfair dismissal laws….streamline the Resource Management Act, an environmental protection statue that has blocked or slowed business developments across the country….

If Rudd cannot deliver in the next six months – as reflected by dramatically improved market performance – then we will be able to say with this measure alone, that his many packages have a been a definitive failure. It’s heading that way already.

While the U.S., Australia and Japan spray cash in every direction to “stimulate” their economies, New Zealand has a novel idea: Why not grow one’s way out of recession?

Prime Minister John Key declared yesterday that “during this global downturn, we can work to improve the performance of our economy relative to other countries, and we can emerge better off.” He then announced a package of regulatory reform and tax initiatives aimed at making it easier for companies to do business — and keep Kiwis employed. While the total benefit, at NZ$480 million ($246 million) is small, the positive message it sends to business is much greater.

SEATS (% vote)
National 59 (45.4%)
Labour 43 (33.7%)
Green 8 (6.4%)
Act 5 (3.7%)
Maori 5 (2.2%)
Progressive 1 (0.9%)
United Future 1 (0.9%)
(likely coalition partners in bold)

How it works in NZ’s preferential system is, a party has to achieve at least 5 per cent of the vote or win a electoral seat to win a seat in parliament. NZ First (4.2%) and Progressives (0.9%) failed on both counts. So party time!

Support for National…has risen slightly, by 1.4 percentage points, to 51.4 per cent of decided voters. This would give it 68 seats in Parliament – enough for it to govern without a coalition partner.

The same poll listed the main issues voters consider as important election issues and global warming racked up only 6 per cent of the total, the economy and fiscal policy being by far and away the number one issue at 44.5 per cent.

In the UK, the Labour Party suffered a humiliating defeat at the hands of the conservatives:

A HUMILIATING fifth place finish for the Labour Party in a parliamentary by-election was Gordon Brown’s anniversary present yesterday as he marked his first year as Prime Minister.

Labour’s candidate even lost his pound stg. 500 ($1036) deposit after failing to reach the 5per cent threshold intended to discourage joke candidates.

Labour supporters who have been wondering just how low the Government’s fortunes could plunge may have found out in the Henley-on-Thames by-election, as their candidate polled just 3.1per cent of the vote.

For the first time, Labour was beaten not just by the Conservatives and the Liberal Democrats, but even by two parties that lack a single member of parliament: the Greens and the far-right British National Party.

Combined with promising polling in New Zealand for the conservative Nationals, and also with Liberal state oppositions here, it looks like the political pendulum is swinging back to the right all round. The latest from the SMH about Premier Morris Iemma:

The results of today’s Sun-Herald/Taverner Poll will be the final straw for MPs, who have stoically stuck by their man only to see their party’s support plummet, with political oblivion a certainty unless something is done.

The damning verdict of voters surveyed on Wednesday, Thursday and Friday nights will alarm Labor MPs.

An election held now would propel the Opposition into government with a 56-44 two-party preferred landslide.

A Fairfax Media-Nielsen opinion poll published at the weekend showed Opposition leader John Key’s National Party on 56 percent and Clark’s Labour on 29 percent.

And in the UK the Labour Party has been routed in by-elections this week:

Mr Timpson surpassed Labour’s worst fears achieving a swing of 17.6 per cent in his party’s first by-election gain since 1983 – and the first from Labour for 30 years.

David Cameron described the result as “remarkable” and attacked Labour’s campaign which targeted independent school-educated Mr Timpson’s background, portraying him as a “Tory toff”.

He remarked: “It was in many ways the end of New Labour. I think it was a great mistake.”

Lets hope the trend continues in Australia.

“New Zealand’s conservatives have managed to maintain a wide lead over the governing Labour party this month, according to a poll by Roy Morgan International. 51 per cent of respondents would vote for the opposition National party in the next election to the House of Representatives, up 1.5 points since early March.”

The New Zealand Nationals have been out of power since 1999.

Chief Blogger @ March 30, 2008 (This is a restoration of a previously posted blog)

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