Duncan Garner: Five years on – Key passes the test

John Key

By Duncan Garner

National is celebrating five years in Government and John Key can be pretty pleased with his efforts.

Five years on and, if you look at the rolling poll of polls, National sits at around 48% and Labour 33%. Though that masks how close any MMP election would be; add the Greens to Labour and it’s much, much closer.

A single percentage point will probably decide the next election. The Prime Minister is well aware of that. He can count. It’s why Key is now openly talking about Colin Craig and the Conservatives as a potential coalition partner.

Key prefers Craig to Winston Peters. I’m not surprised. I think National will offer Craig some electoral deal to get him over the line. National will help the Conservatives win a seat so its 2-3% vote is not wasted. Craig could bring with him 3-5 MPs, which could be the difference.

John Key has ruled out Winston Peters in the past – my feeling is he will probably do something similar again, early next year, but the decision is yet to be made. Key will, in my view, lay out who his preferred coalition partners are – he will list Peters and New Zealand First last – he may go the next step and tell Kiwis he won’t work with him. On principle – if Key is highly principled on Peters – he will stick to his previous stance and rule him out.

I think it’s more tricky for Key this time – his current coalition partners – Act and United Future are basket cases – but if Key wants them back – he will get them across the line. Do not under-estimate how tight the next election will be.

So how should we view the last 5 years? When Key took over, the country was already in recession and heading deeper into it. Labour had not only emptied the collective wallet, but it had committed the next Government to very expensive KiwiSaver and Working for Families policies costing more than $3billion every year.

National trimmed Kiwisaver. What was the point of borrowing publicly so we could all save privately? It was a good call and hardly radical. The Working for Families policy was trimmed too, but that was barely noticed – giving welfare to families earning more than $100k was simply ridiculous.

Key held a Jobs Summit which came up with the 9-day fortnight. It saved hundreds of jobs and business liked the leadership and flexibility.

The national cycleway went ahead too, but the much hyped 4,500 jobs never eventuated – it was a great headline but a much smaller regional collection of cycleways in reality.

Because of the global recession, National found itself borrowing $350m a week at one stage, to keep benefits flowing and schools and hospitals open.

Key was far from radical. He is a centrist that loves capitalism, but not pure capitalism. He understands when it doesn’t work and when it’s hurting people. He understands business and banking, and he is close to the country’s top business leaders and bank CEOs. They wish he was more right wing and aggressive on the business front. That he’s not shows he knows where the votes are.

But Key’s trick is this: He knows he must remain firmly in the centre of NZ life and politics to remain in office. He has done that pretty well, in my view. His opponents have consistently under-estimated him. He is much smarter than they give him credit for and he can come across as very ordinary at times.

He promised the underclass a future, but the recession wiped that out. Many lost their jobs, the rest kept their benefits because Key made sure he kept borrowing to put money in their pockets. In fact he inflation-indexed their benefits so they kept getting pay rises annually.

Unemployment rose past seven percent, but in other countries it was ten percent, so, by comparison, we looked OK.

He managed the Christchurch earthquake well initially, but it’s a 20 year rebuild and problems have emerged – which is entirely predictable. There were always going to be problems. What worries me is the lack of activity now. The place has been demolished, but where are the builders and the growth? Why aren’t we employing more New Zealanders in Christchurch – why are we relying on foreigners?

This is the biggest make-work scheme a country could ever imagine and it’s being paid for largely by private insurers. This is our chance to create something truly remarkable – but I fear we are not maximising it.

He promised the Pike River families he would do everything in his powers to get into the tunnel. They started going in last week. He kept his promise.

But he also couldn’t stop Kiwis crossing the Tasman, despite his cheap shots at Labour over the brain-drain 53,000 shot through the year before last.

Though he scared few people in his first term, his second term has been different. He promised partial asset sales and has followed through.

They have been a failure. Labour and the Greens made sure of that in part by promising to heavily regulate the market before the first sale went ahead. Just 62,000 Kiwis bought Meridian shares three weeks ago, yet 220,000 thousand Kiwis bought Contact shares in 1999. Mighty River shares are priced below what New Zealanders bought them at – and Meridian had to be given away to be bought.

Key’s ‘crony-capitalism’ and ‘corporate welfare’ has created a stench this term. He did a late night deal with Casino bosses to get a $400m Sky City Convention Centre that won’t cost the taxpayers anything. It will provide jobs to up to 1,000 people, but it also means more pokies, more tables and crucially an extension their licence when there was an official moratorium on all this.

Key played them – and they played him. He’s a trader and we saw it in this deal. But is this how business should be done with the Prime Minister?

He also flicked $30m to Rio Tinto – a mining and smelter business worth billions of dollars – so they would stay in NZ and Meridian shares would be bought by Kiwis. That was a waste of money. Would Rio have really walked from NZ? Not for a while and they still can anyway.

The good news is it looks like the economy is bouncing. This is the good part of the story that even Key’s opponents acknowledge, but usually in private.

Growth is expected to be 3.5 percent for the next two years. Some economists put it at four percent. Much of that is expected to come from Christchurch. Let’s hope it gets going sooner rather than later.

Unemployment is down to 6.2 percent. That is actually OK given the world’s collapse. Italy and Greece are on their knees and broke. Spain is the same. Australia and the US have nudged 10 percent unemployment.

Australia’s economic writers wax lyrical about the New Zealand economy and the management of it by Key and Bill English. In fact, more Kiwis are now heading home to NZ than leaving for Australia. The brain-drain trend has reversed.

But still more than 45,000 Kiwis that had jobs when Key took office don’t have jobs now.

Maori unemployment is 12.2 percent. 37,000 Maori who want a job can’t get one. Many of the regions are depressed. Otago is at a 22 year low for business confidence and growth.

Wage growth has also been very flat. Just 0.5 percent in the last quarter - lower than inflation. People have jobs, but how well paid are they?

Mining jobs have increased, but people are worried Key is allowing deep sea oil drilling this summer. Time will tell whether this is a disaster or whether the whole issue has been overhyped. But it’s true if there is a spill and a blow-out, a clean-up won’t start for two weeks because it will take that amount of time to get the right gear into the country. Is that good enough? No.

Is it worth the risk? The Government thinks so.

The Government also took its eye off the ball on housing. Prices sky-rocketed and ordinary Kiwis struggled to buy. Only in recent months has National started to address it, but this horse has bolted and only around the margins can National make a difference.

People feel a false sense of security too – because of the low interest rates. They won’t last – and I still think the bubble could burst.

The Government should also have told the Reserve Bank to exempt first home buyers from the higher deposit requirements. The very people they are meant to be concerned about have been affected. Investors, speculators and the wealthy have been untouched. That is wrong in my view. Would a capital gains tax slow them? Treasury thinks so. But Key won’t do that.

He’s also ignoring the ticking time-bomb of the future cost of superannuation. It is time to signal changes to the age of eligibility. It is his blind-spot. Most experts say he is wrong.

His coalition partners are a mess – but they still vote for him and he gets 61 votes everyday- sometimes 64 – that’s all that counts when you are in Government.

So Key has had his challenges. Some of them have been monumental. He has, largely, negotiated them very well. He has made mistakes. He, at times, gets it wrong.

But he’s still high in the polls. Kiwis have largely trusted him to negotiate these tricky economic times.

I give him a 7.5 out of 10.

Your choice is between John Key and Bill English with a few rag-tag minor right wing parties – or David Cunliffe and Russel Norman – with perhaps Winston Peters in tow.

Who do you trust?

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