Shearer and Cunliffe: yes, there is a difference

There are two big differences between the current rivals for the Labour crown, Davids Shearer and Cunliffe.

Well, biggish differences.

The two are united on policy.

Nothing in Labour leader David Shearer's Sunday speech was at odds with anything economic development spokesman David Cunliffe has been saying, not only this year but before the election, before his demotion from the finance spokesmanship. 

It was all there: the veneration of manufacturing over other sectors; the laments over the high New Zealand dollar and the need for some "tool" to deal with it; the need to encourage savings; the belief a capital gains tax on all the country's businesses and a third of the property market will encourage people to invest less in property and more in New Zealand businesses. 

Mr Shearer added to it Kiwibuild, a programme to build 100,000 new "affordable" houses, but there was nothing in that which was at odds with anything Mr Cunliffe has been advocating.

And Mr Cunliffe has not criticised this latest initiative.

It should be stated that all these policies or goals are not bad in themselves. Some are highly desirable.

Not a coherent programme

It is just they do not hang together as a coherent programme. Economically, they are contradictory and they will cause more problems than they solve.

And this is the first difference between the two. Mr Cunliffe is economically qualified enough to know they are incoherent and will strain against each other. Mr Shearer has no such knowledge and probably believes what he is saying.

According to Mr Shearer, some unnamed "tools" are to be used to get the exchange rate down and help New Zealand manufacturers.

As an aside, why manufacturers are more treasured than other exporters in Labour rhetoric is baffling until you remember the Engineering Printing and Manufacturing Union is a key Labour lobby group and will become more so when unions are given voting power in leadership elections from February onwards.

What those "tools" are is not clear. One thing is certain: Mr Shearer is not going to pick them up in a pre-Christmas sale at Mitre 10 Mega.

There aren't really any tools. The only tool which is going to lower New Zealand's exchange rate is to have less borrowing from overseas, and the only way to do that is a combination of more savings by New Zealanders and containing government spending.

Restricting lending further through more bank regulation means restricting, mostly, the ability for people to buy houses, as well as restricting the ability for businesses to borrow to expand.

None of that fits with Labour policies, which are based on promising more government spending in areas such as extending paid parental leave from its present 14 weeks to 26 weeks and in encouraging people into "affordable" housing.

A highly stimulatory housing policy is not going to help reduce the current account deficit – something Mr Shearer identified as a key economic goal for his party – and nor is it going to reduce the country's debt levels.

Highly questionable

True, there is compulsory KiwiSaver. But whether this would add to the pool of savings is highly questionable. With a little more than half the working population already in KiwiSaver, it does not seem unreasonable to conclude that most of those who can afford to save more are doing so.

In any case, half of the money in KiwiSaver is not individual savings but the various subsidies and incentives provided via the taxpayer. 

Most of those who have not yet joined have done so because they cannot afford to, and making them do so will only add to the amount the taxpayer has to put into KiwiSaver.

As noted, Mr Cunliffe is economically savvy enough to know all this, and is shameless enough to peddle it to people who do not know any better. It is one of the ironies of all this that many of those who do not know any better are in the Labour Party and include its current leader.

The second difference between the two is presentational and/or personal and is best described in terms of how they might be seen in election mode.

Mr Shearer's enemies fear that in the heat and pressure of an election campaign he will waffle and stammer as he has in so many interviews in the 11 months since he became leader, and leave an impression of indecision and incoherence.

While Mr Shearer did deliver a good speech on Sunday, delivering such a speech to your own party is a minimum standard to meet, not a maximum one.

Mr Cunliffe's enemies, on the other hand, fear that in the heat and pressure of an election campaign the New Lynn MP's grandiosity and self-regard – which never lie dormant for long – will be unleashed on an unsuspecting public. 

After weeks of exposure to this, the "turn-off" factor could be crucial. New Zealanders do not like a smart alec and the chorus of "get your hand off it, mate" will be heard from Spirits Bay to Stewart Island.

email Rob Hosking