Andeton rejects past

This news report tells us Anderton Rejects Failed Policies of the Past. I guessed that this had to mean he was rejecting socialism, but no. Oh well.

Anderton is quoted as saying

This looks like the National Party policy. National should distance itself from the proposal or come clean. Will National endorse the idea of the biggest tax cuts going for those who need them least?

Doesn't everybody need to have their money returned to them? No matter what their income. Anderton goes on to say

Tax cuts for middle income earners, reducing student debt and more housing affordability are higher priorities for this coalition government and will grow the economy faster than tax cuts for the most affluent New Zealanders.

He is right, the middle class do need a tax cut, just like everybody else. If he wants to reduce student debt then start charging the market rate of interest on it. The greater the rate of interest the lower the quantity demanded for loans will be. As to affordable housing how about removing the central and local restrictions that prevent the expansion of the supply of housing. An increase in supply will lower the price of housing. To increase the rate of growth we need to increase the rate of productivity growth and its not clear how Anderton's objectives will do this. Anderton then says

The priority for tax cuts and other assistance has to be people who can best use the help. If you are likely to spend your next dollar buying your first home, you will add more to the economy than if you are weighing up whether or not to purchase your fourth home. If we spend our next dollar on sending a kid to school with a full tummy and a nutritious lunch, that is better for the overall economy than spending the next dollar on an overseas holiday.

It not clear what buying your first home will have any different effect on the economy than buying your fourth home. In each case a house is bought and sold. Actually as far as the aggregate economy is concerned spending on food or travel have the same effect. If a dollar is spent on food aggregate demand increases by a dollar and aggregate demand increases by a dollar if that dollar is spent on travel. Anderton ends by saying

In the 80s and 90s, under policies proposed by the Business Roundtable, the economy went backwards. We are now undoing the damage. Everything the Business Roundtable has ever advocated turned out to be wrong,” Jim Anderton said. “When the government of New Zealand stopped doing the work of privileged special interests, and began governing for all New Zealand, New Zealand started to turn around.

Its worth noting that the average annual growth rate in labour productivity for the 1992-2000 period was 3.0, for the 2000-7 period it was 1.2 per cent. The graph below gives a longer term perspective. The post 2000 period doesn't look good.

As far as total factor productivity is concerned the average annual growth rate for the 1992-2000 period was 2.6 per cent while for the 2000-7 period it was 0.5 per cent. The importance of this was noted by James Allan in an article in the The Australian. Allan wrote

During the past decade, as a whole NZ has averaged a 3.3 per cent rate, only a tad behind Australia's 3.4 per cent rate. Not bad at first sight, although during that period Ireland averaged 6 per cent and Singapore 5.8 per cent. The problem is that NZ's economic and productivity growth rates have been declining in that period, with its Treasury now forecasting annual growth of only 2per cent during the next couple of years. That's about half of Australia's expected rate, and at least half what would be needed for a fair number of years to have any hope of getting the Kiwis into the top half of the OECD league tables.

Doesn't look like much of a turn around to me.