In a week when more than 340 jobs were lost from the economy it was not surprising – but still nauseating – to see politicians ducking for cover or looking for political advantage from this crisis for working New Zealanders and their families.
More so because the loss of these jobs is an entirely self-inflicted injury.
The list of jobs lost is beginning to look like a World War I casualty list. The first redundancies were at beef jerky maker Jack Links in South Auckland where 102 jobs were lost with another 75 going at Christchurch’s GL Bowron factory.
They were followed by Panahome in Rotorua (112), Renaissance Furniture in Christchurch (20) and companies supplying materials for Click-clack products (35)
And the indications are that this is just the tip of a redundancy iceberg.
The loss of export orders because of the high value of the New Zealand dollar has been given as the reason for the layoffs and sure enough this is the immediate cause.
However delve just a bit deeper and the reason becomes clearer. The blame sits squarely with successive Labour and National governments which have legislated away their ability to manage our economy.
The Reserve Bank – working under the dead weight of the Reserve Bank Act – has control of inflation as its number one objective but the only mechanism it has to do this is to change interest rates.
And so the bank has been slowly but surely increasing interest rates to keep the rate of inflation below 3% as the legislation requires. This has led to New Zealand having one of the highest interest rate regimes in the world. Enter the foreign investors and speculators. They gain a better return investing in New Zealand compared to most other countries. This extra demand for the New Zealand dollar pushes its value higher and has kept it at a level described as “ridiculously high” by Click-clack chief executive John Heng.
This is good news for importers because they can import goods more cheaply – they get more for their money when buying overseas because our dollar is worth more. Not only does this worsen our balance of payments situation as we import more and export less but the cheap imports will sink more local companies and more New Zealand families will end up on the free-market scrapheap.
When Labour was elected in 1984 the government could directly intervene to control the value of the New Zealand dollar and in fact those incoming politicians devalued the dollar as virtually their first act of government.
However the dollar was later floated to let the “market” decide its value without government interference. This means foreign currency speculators and assorted economic parasites now decide the value of our dollar and hence the problem for working New Zealanders.
With no power to act decisively to reduce our dollar’s value we can only cringe with embarrassment at the news of our Treasury and Reserve Bank officials travelling the world to plead with investors to leave New Zealand alone.
If the Reserve Bank Act wasn’t bad enough the 1994 Fiscal Responsibility Act (later incorporated into the Public Finance Act) put further heavy restrictions on the government’s ability to manage the economy. One provision of this legislation for example requires the government to always run a surplus. This prevents the government from “evening-out” the economic bumps from year to year as governments did successfully for many decades previously.
So with a government with both hands tied behind its back our economy is left to the madness of the market.
It’s easy to see why businessman Hugh Fletcher said in a 1995 interview “The authority that a New Zealand parliament has today, as against 20 or 30 years ago, is so small. Increasingly, they’ve got to run their fiscal and monetary policy to stay within the bounds of what is acceptable to global capital”
New Zealand must break free from the constraints imposed by the free market on our democratically elected government. This will take courage and strong government leadership so don’t hold your breath. Michael Cullen and John Key are men of the market who policies have led directly to our inability to manage this growing crisis.
At the same time however the debate on our economy is hopelessly stifled by the “economic correctness” of the free market which prevents discussion of any serious alternatives to the suffering of working New Zealanders and their families.
In the meantime most of those losing jobs will find work but for many it will be in low paid, part-time jobs and for those families their standard of living will drop – pushing even more kiwi families below the poverty line.
New Zealand needs an economy which works for people instead of people working for an economy.