Something important is happening in New Zealand politics. After two-and-a-half decades in which economic policy has been a no-go area for political discussion, we have at last seen the beginnings of a debate about what is potentially the central issue of our politics.

The takeover of the Act Party by Don Brash should be ringing alarm bells in thinking people’s minds. Even more alarming is the apparent pleasure of John Key at the success of the takeover. A further lurch to right-wing economics is the absolute last thing we need.

Not since the 1930s has New Zealand been in greater need of the Social Credit agenda.
National and Labour — and their supporting parties — have chosen not to engage each other or anyone else over the basic principles of economic policy. The reluctance to discuss economic policy is nevertheless surprising, given the constantly expressed concern and disappointment at our poor economic performance. Indeed, it has been even more significant here, because the aggressive free market orthodoxy was first introduced by a Labour government and reinforced by their National successors.

It is only now that the realisation seems at last to have dawned that our comparative economic decline might, just might, have something to do with the economic policy settings we have faithfully followed for 25 years.

As the gap between New Zealand and Australia has widened, and our productivity figures remain unimpressive, the finger has been pointed at every conceivable explanation — bar the obvious one.

Don Brash’s answer is to sell whatever remaining assets we collectively own and to lower taxes of the rich. His view is that government’s involvement in the economy should be limited to regulating monetary conditions and that even that limited function should be delegated to unelected bankers charged with the equally limited goal of controlling inflation. Beyond that, the rest of the economy can safely be left to look after itself. Yeah right!

The productive sectors of our economy have been constantly handicapped by high interest rates and an overvalued dollar, and by secondary consequences like the relative attractiveness of investing in property as opposed to productive capacity.

So, what has changed? The Labour opposition seems to have grasped that there is no upside — in either electoral or practical terms — in simply agreeing with the Government, and that the evidence before our eyes demands that New Zealand should strike out in a new direction. Maybe “back to the future” to the policies that dragged us out of the great depression four years ahead of the rest of the world!

The regime at the Reserve Bank under Alan Bollard is clearly less doctrinaire than it was under Don Brash. Even the Treasury cannot be entirely immune from common sense.

To get the debate under way is not of course to win the argument. But whatever the outcome, our public life will be stronger for reopening a real discussion about the role of government and money creation in achieving economic success. And not for the first time, we might even lead a worldwide trend.

- contributed by Harry Alchin-Smith, Gisborne
This column first appeared in the Gisborne Herald 18.11.11