Whilst governments in countries such as Australia and the USA are spending like drunken sailors in the hope that it will stimulate the economy, New Zealand appears to be taking what is at the moment a unique alternate approach. Rather than fiddling with the demand side of the equation they seem to be focused on the supply side.
An extract from a recent Wall Street Journal article:-
“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.”
And whilst Australia experiments with ever higher amounts of public spending the New Zealand government includes a coalition partner, The ACT Party, that is pushing for Colorado style legislation that would put a cap on growth in government expenditure. An approach sometimes refered to as a Taxpayer Bill of Rights or TABOR. According to the ACT / National agreement this looks set to be drafted as a legislative bill some time around May this year.
Current political and economic trends in New Zealand continue to be well worth watching.