Saturday, November 15, 2008

NZ gets its ACT together

New Zealand's electoral system might be completely incomprehensible, but it does have some benefits.  At the election last weekend, the ACT party, with around 4 per cent of the vote, won five of the 122 seats in the parliament in the previous parliament it had one seat.  John Key's National Party won 59 seats, and the Nationals will need the support of ACT to maintain a parliamentary majority.

ACT (so named because it's the successor to the Association of Consumers and Taxpayers) is probably the only political party of its type in a parliament in the English-speaking world.  It is unashamedly small government and libertarian.  Its main policy is a flat-rate personal tax of 15 percent.

Even better than ACT increasing its representation is the return to politics of Roger Douglas.  Now 70, the former Labour finance minister (what New Zealanders called their treasurer) will be in parliament as an ACT MP.

In the 1980s it was Douglas who led a series of reforms that once made New Zealand the envy of the world.  "Rogemomics" involved floating the currency, deregulating the banking sector and privatising public assets.  For everything that Bob Hawke, Paul Keating, John Howard and Peter Costello did, none of them ever had a special word coined in their honour.

Douglas slashed agricultural subsidies, infamously saying: "It's possible to grow bananas on Mt Cook, but is it worth spending the money it takes to do so?"  Much ofNew Zealand's reform program was reproduced in Australia, except for the fact that Douglas introduced a consumption tax a decade before Howard and halved the highest rate ofpersonal tax to 33 per cent.  Douglas has recently written Just do it -- Beat Australia by 2020.  The way things are going in Australia at the moment his ambition is not unrealistic.

ACT's climate change policy is something that no major party would dare contemplate.  ACT would repeal New Zealand's emissions trading scheme and withdraw from the Kyoto Protocol.  According to ACT, decisions should be "based on sound science not on blind belief or ideology which is increasingly divorced from reason".  Its platform says that green business opportunities "which address nonexistent problems and needs are not business opportunities but a massive risk and likely to destroy wealth on a massive scale".

It seems the smaller a country's contribution to the carbon emission of the world, the bigger the issue of climate change is in that country's politics.  Although New Zealand's share of global greenhouse gas emission is minuscule, it didn't stop the previous Labour government from pledging it would be a leader, not a follower, in the debate.  New Zealand has no less than eight different schemes, programs, strategies and plans of action to combat climate change.  All of this for a nation of 4 million people, of whom 10 per cent live overseas.  It's unfortunate that the National Party has committed itself to implement an emissions trading scheme that is "as closely aligned as possible" with Australia's.  As ACT points out, "nothing New Zealand could do, including disappearing off the face of the planet, would have any impact on global climate".

The idea that in an economic downturn people will automatically turn to the comfortable bosom of overnment was disproved by Key's victory.  New Zealand is officially in a recession, and every prediction is that the economic condition of the country will get worse.  During the election campaign both the Nationals and Labour offered special "emergency" packages for the unemployed.  In somewhat of an understatement, Key described the situation as "not a pretty picture".

Since the election much has been made of the differences between Kevin Rudd's Labor Party and Key's National Party.  In Australia, Rudd is embracing economic and social paternalism, yet this is precisely the path that was rejected at the weekend by the New Zealand electorate.

However, there's a more significant difference that hasn't been commented on.  In Australia, Rudd needs the Greens to get his legislation through the parliament.  In New Zealand, Key will need ACT.  Businesses deciding in which country to invest will quickly make up their mind as to which of those two minor parties is more friendly to business, and in a worldwide recession would business prefer to operate in New Zealand under Key or Australia under Rudd?


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