Scoop Election 08: edited by Gordon Campbell

Gordon Campbell on the petrol price hike

December 19th, 2012

One can only imagine the outcry if a centre left government could manage to meet its goals as economic managers – in this case, to get the country back in surplus by 2014/2015 – only by suddenly raising the petrol tax and by keeping ACC levies at a punitive level even in the face of official recommendations that they be lowered. How the tax and spend addictions of socialists in government would be being decried! It would be being depicted as highway robbery, pure and simple. More taxes on ordinary folks to disguise the sickness within the government accounts. Because if this were a centre-left government, you can bet it would be being pointed out that boosting the petrol tax was not a sustainable path to prosperity, because it didn’t address the root causes of poor economic growth. Much tut-tutting would ensue about socialists needing to learn how to grow the cake.

At this dark hour, the editorial writers would also be noting sagely, how fortunate it was that prior centre-right governments had kept our government debt at manageably low levels, thus saving us from the worst consequences of socialist mismanagement. A few sterner types would be lecturing the government that this was all sideshow politicking in any case: because what say you sir, that a miserly $66 million surplus is an absolutely meaningless achievement? Meaning: the surplus/deficit would have to be a billion dollars either way before it had any noticeable economic impact. Verily, people would be being forced into paying higher petrol taxes and unnecessarily high ACC levies merely to make the government look good. Lipstick on a pig etc etc.

By now, it should be clear from this laboured intro that the actual culprit raising petrol taxes and maintaining ACC levies at their current level is in fact, the centre-right government of Mr. John Key. And the only reason New Zealand isn’t in worse strife with the rating agencies (such as Moody’s) is that the previous centre-left management team led by Michael Cullen wisely paid down government debt – at a time when spendthrifts such as John Key were chastising him for not dishing that (genuine, not engineered) surplus out in tax cuts. And how come yesterday’s half yearly fiscal update had made the petrol tax/ACC levy jiggery pokery a necessity in the first place? Because Treasury’s growth estimates six months ago in the Budget had been overly optimistic.

Logical, really. Why should we think this government can manage the economy without fiddling the books, when they can’t seem to manage anything else? In that sense, yesterday’s episode was a truly fitting end to the year. In almost every portfolio area you care to name, the roof is caving in. Education? On Hekia Parata’s watch, there have been successive disasters with respect to class sizes, the schools closures in Christchurch, the Novopay fiasco and her plan for a special girls’ school in Nelson now deemed illegal by the courts. In most other countries she would be facing two options: resign, or be sacked. Then there were the McCully reforms at MFAT, which have thrown one of our most competent departments into total disarray in pursuit of illusory cost savings. (Again, if a centre-left government had disabled the foreign affairs arm of government so comprehensively, the wretch responsible would have faced calls of treason, and been drummed out of office months ago.)

Moving right along…according to Steven Joyce, only the hippies and the Greens were stopping our oil and gas exploration bonanza from being realized. Yet by year’s end, the hard-headed pragmatists at Petrobras had handed back their East Cape exploration permits and similarly, Anadarko had postponed their exploration plans off the Taranaki coast. It wasn’t the hippies that stampeded them out. The cost/benefit exercises just didn’t stack up. Like the government as a whole, Joyce had over-promised and under-delivered.

Wait, there’s more. Judith Collins and the Bain compensation claim, Nick Smith and the policy and management problems at ACC, the privacy breaches at WINZ and Corrections, the futile involvement in Afghanistan, the failed promises to the Pike River families, the oft-delayed rebuild of Christchurch, the bungled asset sales programme, the Kim Dotcom fiasco and its related memory lapses …This year really has been a litany of incompetence. Leaving aside the ideological disagreements for a moment, one has to look hard for signs of basic managerial ability even on the things that the government professes to believe in. Just about the only controversial issue that is advancing on schedule is the welfare reform package. And that is in no small part due to the fact that David “Beneficiary on the Roof” Shearer and his Labour Party have been too terrified of the public response to seriously join battle with Paula Bennett on the subject.

The petrol tax hike though will be an interesting test of Key’s current “What, me worry?” style of governance. (It doesn’t bother him, so what’s your problem again?) The nine cents a litre petrol cost rise will be phased in over three years. That rise could well be forgotten by Christmas Day 2012. But it may not. Surely, it should be possible for the Greens (if not Labour) to turn this into the goof that keeps on giving. Because every time you fill up at the pump in future, you will be paying primarily to confirm a National Party promise to be competent economic managers. How ironic, as Alanis used to say. And you are to be reminded of this shonky deal every year, as the price goes up from three cents, to six cents to nine cents. All in order to create an utterly meaningless mini-surplus (if they’re lucky) and/or to finance a massive roading programme, much of which fails any rigorous cost/benefit analysis.

One last analogy. Yesterday’s petrol price hike is like taking out a loan to buy Christmas presents, and then making everyone else pay the subsequent bill, just because…at the time, you wanted to look like a good parent. That’s the Key approach to economic management, in a nutshell. Just don’t expect to see it condemned necessarily, in the NZ Herald, or on TVNZ.


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    1. 6 Responses to “Gordon Campbell on the petrol price hike”

    2. By AAMCommons on Dec 19, 2012 | Reply

      Neither Left or Right should consider the Deficit / Surplus in isolation.

    3. By Brian Vercoe on Dec 19, 2012 | Reply

      The petrol tax hike is a completely bad economics.One,taxes do not pay For anything per se.Taxes should be seen as having three functions.First,
      to give a currency value,secondly to control aggregate demand,i.e.control
      ling spending power,and, thirdly,taxes should be used to distribute resco
      ures in the economy.Taxes come from govt. spending not the other way
      round.Government surplus equals a corresponding decrease in the non-
      govt. sector wealth dollar for dollar.Govt.Deficits do the exact opposite.In
      other words deficits, contrary to neo-liberal myth are not the bogey-man
      but are actually the way for a country to increase its wealth,if done for the
      public purpose.When Ruthensia passed the so called fiscal responbiliy act in 1995 fiscal spending has be used as a weapon against the economy as a whole but especially workers and industry.Taxation is used to remove rescoures from the public to the 1%.
      taxation has also be used to keep unemployment high Note, when ever
      tax increases unemployment rises and businesses go bust.
      Taxes are far to high and are regressive i.e.gst.
      Your article is a mishmash of neo liberal lies.
      Whenever you discuss you should point out that the not revenue
      constrained, being the monoply issuer of its own currency.
      It can never ran out of money.The constraints on it are self imposed .
      This is one of the many smokescreens the Politicans put up to deflect
      the publics never be able to untangle the finacial war being waged
      against them.So policiticans,,economic writers etc ,now have an entrenched privilege which they know longer share with the rest
      It is easier to fool someone on a daily basis than to convince them that
      they have been fooled since the 4th Labour Govt.

    4. By Dave McArthur on Dec 19, 2012 | Reply

      You are correct Gordon that our media is vastly hypocritical. However you too seem caught up in the universal delusion that motorists pay their way. The reality is they receive a huge array of hidden subsidies and so this small change is actually not a tax hike but rather a minimal removal of these unsustainable subsidies.

    5. By Paula Warren on Dec 20, 2012 | Reply

      The petrol tax makes sense if it was to pay for better transport systems. But it isn’t. It’s to pay for roads that aren’t needed, and that will reduce rather than improve the overall quality of the transport system.

      For example the Mackays to Pekapeka Expressway was an invention of Mr Joyce. What Kapiti wanted and the region supported was a two lane local road to divert local traffic off the state highway. Everyone seemed to agree, for years, that this would solve the traffic problem. The community re-designed themselves around that road proposal. But suddenly Kapiti was told that they had to have a four lane expressway, that would cut through the area along a completely different alignment, and that had a benefit to cost ratio (BCR) of 0.2 (so for every $1 of petrol tax, we get 20c of benefit).

      Meanwhile far cheaper projects with high BCR languish because they aren’t roads of national significance. And road maintenance budgets are being slashed. And other values (streams, harbours, quiet neighbourhoods) get trashed.

    6. By Jason on Dec 20, 2012 | Reply

      Hi Gordon, nice article. I’d argue it’s a simple consequence of being governed by a party of individuals who are pretty explicit in their belief that Government is the problem. :). Tho’ I too am hugely disappointed that they’ve gotten/are getting a free ride on the damage their austerity measures are causing.
      BTW Brian, Dave…It might just be me, but I don’t see any argument for the gas tax in the article. Irrespective of it’s objective value or irrationality, it’s pretty clear that a lot more vitriol would have been given to “Aunty Helen”, etc, if it had come out in a Labour term.

    7. By Joe Blow on Dec 20, 2012 | Reply

      And where’s the economic growth this government has been promising? GDP grows 0.2% last quarter only with the stimulus of the Christchurch rebuild (4.5% growth in construction).

      Who needs a better argument for government playing a role in stimulating economic growth? Without the rebuild we’d be in negative growth! In fact, we are experiencing negative economic growth every where except for in Christchurch and the city there has been brought to its knees…

      Well Mr Key those tax cuts (predominantly to the rich) just aren’t working, are they?

      What a chump! And English is your chumpette!

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