Monday, April 20, 2009

Deepening the recession

Back in 1990, a newly-elected National government faced a financial panic over a recession and spiralling debt levels. They responded by slashing government spending to the bone. But rather than cutting their way out of recession, they deepened it. Now National looks set to make the same mistake again in next month's budget:

Prime Minister John Key is planning to tighten the belt on government spending, not loosen it, in the Budget next month.

The government has decided against any fresh fiscal stimulus in the May 28 Budget because it cannot afford to provoke ratings agency Standard & Poor's into downgrading New Zealand's AA+ sovereign credit rating, Key told the Financial Times in an interview over the weekend.

This is simply madness - you don't respond to a failure of demand by cutting demand even further. But National's focus isn't on the economy, but about repairing the damage done to the government's books by their unaffordable giveaway to the rich, in the hope of being able to give more away in future. They don't care about us, but only about their rich mates...

Worse, we don't hear about this through the local media, but from a foreign source, because once again John Key is telling them things he won't tell us. It's another example of his habit of telling different stories to different people in the hope of keeping everyone happy. But in the age of the internet, where foreign news is as accessible as the New Zealand Herald, its simply unsustainable - and instead of keeping people happy, it makes Key look deceitful and two-faced.