Monday, March 25, 2024

Professor Robert MacCulloch: NZ Herald Gets its Economics Wrong Again.

NZ Herald Gets its Economics Wrong Again. The New Coalition is not doing Austerity - it is seeking to boost growth using supply-side economics.

We've all enough of Big Media lecturing us on how to make NZ a better place. We've found out the hard way that it rarely has a clue what its talking about and when it does, its pushing its own ideological agenda. Now in its latest effort to discredit the New Coalition, the NZ Herald's Business Editor argues National, ACT & NZ First don't know how economics works. In doing so, the Herald reveals it doesn't know how economics works. Its' Editor writes:

"Tax cuts are stimulatory which means, in terms of fiscal impulse, the Government will be pushing back against its own austerity measures. Arguments from the PM & Finance Minister that cuts to government spending will offset stimulus are circular. They're an admission that tax cuts will water down the disinflationary benefits of the spending cuts".

Can the Herald get it into its head that this government is not doing "austerity"? It was not voted in to do "austerity". Austerity is tax increases or spending cuts, or both, to reduce the deficit. Instead the National-led coalition was voted in to kick-start growth by doing "supply side" economics which is about tax & spending cuts to reduce the size of government, and designed to also decrease the deficit over time to pay down pubic debt. This argument is not "circular". One of the world's great authorities on such matters, the late US-Italian economist, Alberto Alesina, argued that in times like NZ is suffering, the government should signal its future course is one of lower taxes, otherwise no-one will want to invest here & the economy will go down the tubes. The Coalition is also doing classic "supply side" economics by cutting regulations, which ACT's David Seymour is in charge of.

After years of mismanagement by NZ's Worst Finance Minister Ever and Worst Reserve Bank Governor Ever, whereby taxes rose, spending rose, inflation rose, unemployment is rising & regulation skyrocketed, without falls in inequality, it is not unreasonable for Kiwis to have overwhelmingly voted them out and supported National-ACT-NZ First's proposals of smaller government. The public did not vote for an austerity program in which taxes would be further increased, or even held at current levels, together with public spending cuts.

Maybe the Herald should wake up to one of the few agreed-upon facts in all of economics, namely that, "In the long-run, it is a country's capacity to produce goods and services that determined the standard of living of its citizens", where capacity depends on labor, capital and technology. The new Coalition is seeking to increase the capacity to produce by giving more resources to private individuals in terms of lower taxes and cuts in red-tape. That is what right wing parties have done for centuries. Its time Big Media journalists in NZ stopped arguing supply-side policies are bad just because the biased journo in question didn't vote for them. This government is not an austerity government, OK?


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.

1 comment:

Kiwialan said...

Nobody with half a brain believes the woke bullshit the mainstream media publish or broadcast so it's irrelevant in the big picture. Only left wing socialists or treaty trough feeders subscribe to the publications and they would swallow any crap thrown at them. Kiwialan.