Stuart Smith
National MP Kaikoura
It is ironic that when Covid first entered New Zealand tighter restrictions were imposed on freedom of movement and association as the outbreak progressed and eased along with the waning of the outbreak. Now though we have a completely opposite approach, with restrictions easing as the more infectious but relatively mild Omicron variant becomes more prevalent in the community. This is an appropriate development as case numbers and close contacts will be such that our previous approach would be impractical for the current situation.
Our responses to date have saved Covid deaths, but it has come at a cost, which has come into focus this week with the RBNZ announcing an increase in the OCR from 0.75 to 1 per cent. And this is just the beginning, as the OCR is expected to go to 3.3 per cent by the end of next year in an attempt to combat inflation, inflation which has been stoked along by the RBNZ printing money with their $60 billion Large Scale Asset Purchase program. There is no doubt that financial stimulus was needed to help New Zealand through the lockdowns, but not all of the $60 billion was spent wisely or Covid related. So the party is over and now we have one heck of a hangover that will be with us for a long time.
To look at this another way, our public debt increased by 24.5 per cent of our annual economic output from 2019, more than any other advanced nation. Australia kept their increase to 19.8 per cent, others were much more conservative such as Sweden 5, Denmark 4, Switzerland 1.8, and Norway 1.5.
Economic or fiscal management really matters, the nations listed above have higher living standards than New Zealand, and Covid hit them much harder than it did here. Leaving aside Australia for a moment, the European nations have more porous borders and Covid initially hit them during their winter which is more conducive to spreading the virus.
The die is cast and we not only have to get our economy back on its feet, we have a huge debt that will take generations to pay back. This lack of fiscal discipline has let inflation off the leash, and it is slowly eating away at our standard of living. When our border opens again it is likely that we will see an exodus of New Zealanders heading to Australia, where there is lower inflation and higher wages.
Reckless government spending has far-reaching consequences.