Robert MacCulloch: PM Hipkins goes pro-business on economics

When Hipkins became PM he said he'd make economics and reducing the high cost-of-living his priorities, since people had tired of former PM Ardern's focus on non-economic, moral issues, symbolized by the "kindness" mantra. However, as costs soared, his promises on that front now look empty. Two crucial policies strongly supported by Finance Minister Robertson and Revenue Minister Parker, namely unemployment insurance & capital taxes, have now been shelved by the PM.

Unemployment insurance (UI) would have given workers more security, especially now as unemployment rises in these recessionary times. I am an advocate of UI. Meanwhile, Parkers' advocacy of capital taxes was based on his desire to put more of the tax burden onto high wealth folks and away from those with less. I am not a great fan of such taxes, since believe they lower savings, but recognize Parker's proposals were fully in line with Labour Party principles and everything for which he stands. David presented the IRD report on effective tax rates paid by the average Kiwi compared to the wealthiest to my class at the University.

To add to his swing right, PM Hipkins caved into industry demands to open the flood-gates on immigration which is likely to depress the wages of local Kiwis, particularly less-skilled ones, since that is where the current boom in immigration amazingly seems based.

When Hipkins became PM & announced a new focus on economics, I wondered whether he'd go right or left of Ardern on this dimension. That question has been answered. He has re-affirmed her opposition to capital taxes, but gone further by dropping unemployment insurance and giving business what they wanted on immigration.

My view is that Hipkins "policy bonfire" was a mistake for Labour as it's looking now like the Party has burnt down its own house by abandoning its principles. Hipkins has deserted the Party's core support base due to his lust for power and shameless attempt to court business, even if it meant selling his grandmother in the process. He has fractured cabinet and is in the process of causing a seismic crack in the party itself.

Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.