Executive Director of the The New Zealand Institute, Dr Oliver Hartwich, has written an interesting missive in the think tank’s latest weekly newsletter, expressing concern that the recent destabilisation present in Australian politics and the economy poses major risks to New Zealand:
…politics is not about entertainment, nor is its goal to land punches or kill off your opponents. Politics is, in theory at least, about providing good governance for the country. On this front, Australia is sadly lacking.
As Australia’s headlines are dominated by political infighting, its economic conditions keep deteriorating. Every day, the federal government spends A$100m more than it receives in taxes. Budget deficits are forecast to stay high for years to come. The only thing rising faster than the unemployment rate are house prices, while disappointing economic growth figures last week prompted the Reserve Bank of Australia to cut interest rates to a record low of 2.25 percent.
There is no shortage of problems that would need to be addressed. Yet Australian politicians are fiddling while their economy is burning.
That is a tragedy not just for Australia but for New Zealand as well. The political and economic destabilisation of our second-largest trading partner (after China) should now be considered one of the major concerns for the New Zealand economy.
Dr Hartwich is, of course, correct. Except that the “fiddling” extends not just to our politicians – who are undoubtedly incompetent – but also to our central bank and prudential regulator.
Rather than follow its New Zealand counterpart, the RBNZ (which is also the prudential regulator), and put pressure on our politicians to undertake reform, the RBA has effectively remained silent on the huge structural adjustments that Australia needs to undertake, instead referring simply to the need to boost confidence and “animal spirits”. The RBA’s neglect of housing market risks has been particularly negligent, for a long time explicitly arguing against a housing bubble and the broader economy-wide risks that it entails.
APRA has been equally negligent, ignoring the unprecedented speculator frenzy taking place in Sydney and to a lesser extent Melbourne, which have driven Australian housing values and mortgage debt to unprecedented heights, and risk blowing-up the economy as it launches off the mining cliff, the local car industry shutters, and/or the next global crisis hits.
It is a “tragedy” alright, and the negligence is broad-based, not confined to our useless politicians.
