Aug 18 2024 4 mins
The corner has been turned. The 5-year pandemic pandemonium has been tamed.
Inflation is down and we've had the first interest rate cut since the Reserve Bank realised they’d overstimulated everything 5 years ago.
Proof that tax cuts were not inflationary, says the Finance Minister. And that is the case, but it’s not a sign that the cost of living crisis is over. Inflation and cost of living increases are two heads of the same monster.
Tax cuts are not being sucked up by discretionary spending. But they are by increases in charges brought about by a cut in Government spending, a continued housing shortage and its costs, and local Government trying to bridge the infrastructure deficit that’s been growing for decades.
For example, my family's tax cuts are going straight onto increased rates and increased public transport costs now that the subsidies have ended.
But put on your dancing shoes - said Thomas Couglan at the Herald in the weekend. The rock star economy is back. And we can thank Luxon and Willis. This is a nightmare scenario for the opposition.
Well sure. Even though economists have been saying that would happen for a year now.
In fact, Shamubeel Eeaqub has been saying all year that a lot of money has been dormant waiting for a turn in the interest rates as a signal that it’s all back on again. So here we go.
But was the rock star economy really ever a rock star in the first place? And do we want it back?
It was an economy of growth spurred on by high immigration, low interest rates, and big capital gains from a strangled housing market. It was a rock star as long as you had property that you could raise capital on.
Throughout the glory days, many warned that there were no productivity gains, that there was too much reliance on dairy and tourism, that there was too much spending on fripperies, there was too little investment on infrastructure that made us competitive
Can we really say the rock star economy is back when we wait a month for a doctor's appointment? Or 3 months for surgery in a rotting, past its use by hospital? Can we be a rockstar economy if we can't make enough electricity? Can we say we're a rock star economy when half our water is lost in leaks?
The return of a Key Government-style rock star economy will benefit me and I'm grateful. But I want something better than that.
It's time this country put its big boy pants on and fixed the stuff that's been plaguing us for decades and makes us seem like a third-world country.
Then we will be a true rock star. And the people who manage that will be hailed as true masters of an economy.
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