OnPoint by Keith Ng


The Master Plan

It's pretty maddening to hear Bill Ralston mischaracterise everything that's happened in the past week, claiming that Cullen and Bollard are sitting on their hands and oblivious to the impending economic meltdown.

Did Ralston read

This Government does not intend to react to this situation by slashing government expenditure, thus making the slowdown worse. The fiscal prudence adopted over the previous six years, in other words allowing the automatic stabilisers to work on the upside, means they can now be allowed to work on the downside. This contrasts with the position in 1999 when the previous Government reacted to a downturn by such moves as cutting the level of New Zealand Superannuation.”

(Translation: The downturn is coming, and the government can and will run a deficit, pumping money back into the slowing economy in the same way that it's been taking money out.)

And now, this is the exact same line that Cullen is running.

This is not, by any stretch of the imagination, some kind of coincidence, or an excuse that Cullen is exploiting to break the bank. This – buffering the economy from global shocks by stimulating it with a massive injection – is precisely why he was maintaining the surplus in the first place.

Sure, he's been aided by fine economic weather, and perhaps he's dipped into the bank more than he should have these last few years, but the bottom line is that after eight years, he has genuinely left the government in a strong position to respond.

Now, finally, everyone can STFU about the goddamn surplus, and focus on the kind of response required, which depends on events in other parts of the world, which remains unclear. The risk of acting before the facts are in?

“If things do turn out to be weaker over the next six months, [Cullen] can come to the rescue and deliver $2b or $2.5b worth of tax cuts.”

(Translation: If you spend like there's going to be a recession when there isn't one, inflation will get nasty.)


And as

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