Extraordinary action always justified in the age of crises we now live in

Wednesday, 16 March 2022

Ben Thomas is a public relations consultant and political commentator. He is a former National government press secretary, and is part of the Gone By Lunchtime podcast.

OPINION: In the 2012 United States presidential debates, Barack Obama coolly put rival Mitt Romney in his place when he volunteered Russia as the most pressing geopolitical issue facing the United States.

“The 1980s are calling now,” Obama scoffed, “to ask for their foreign policy back. Because the Cold War’s been over for 20 years.”

Finance Minister Grant Robertson essentially invoked the Obama clause when he was asked about asset inflation from the Reserve Bank’s (essentially) cash-pumping monetary response to Covid-19, saying “I wouldn’t say it worries me”, in August 2020.

**READ MORE:

* The politics of petrol – fuel excise cut just the start in wider inflation war

* Mobil, Z, BP, Gull to drop petrol prices 25c a litre after Government fuel tax cut

* Government cuts fuel taxes by 25c and halves public transport fares for three months

* A jump at the pump: Government has little control as petrol tops $3 a litre

* National repeats calls for Regional Fuel Tax to be dropped amid 'cost-of-living crisis'

**

For the past 30 years, after all, inflation in the West had gone the way of the Cold War, thanks to the work of single-focused independent central banks. But the inexorable logic – that too much money chasing too few goods will push up prices – never changed.

The return of these antediluvian forces, of warmongering in Europe and inflation, have combined in what prime minister Jacinda Ardern called this week a “perfect storm” for living costs in general and fuel prices in particular.

The National opposition successfully branded it the “cost of living crisis”, providing (along with the dulling of Ardern’s Covid halo) the backdrop for National overtaking Labour in last week’s 1News Kantar poll, for the first time since before the pandemic.

Leader Chris Luxon’s state-of-the-nation address two weeks ago also sounded oddly old-fashioned. His warnings about the perils of socialism, and the story of an elderly couple huddled in a Moscow flat, could have been pulled straight from a Ronald Reagan speech. Quick wits like Obama or Robertson could have had a field day. But in talking about runaway inflation and high petrol prices, Luxon sounded both like an echo of the past and very much of the moment.

The reaction from the Beehive to changed polling fortunes has been swift. Just as households have tightened their belts on luxuries, the prime minister has been looking around for contentious policies to cut. Ardern said planned hate speech laws would not be introduced in this term, essentially dumping the policy like an unwanted Netflix subscription.

The starker response was this week’s temporary slashing of the fuel excise tax and (coming) reductions in road user charges. On a headline level, it was the obvious answer: fuel prices are high; cut the part the Government controls. However, in doing so, by increasingly micromanaging the economy, the Government is leaving the door ajar for another unexpected and unwanted visit from history.

The past two years have given many parts of the electorate not just a tolerance, but an appetite, for direct government intervention unthinkable since the days of Robert Muldoon, price controls and wage freezes. As prime minister (and as his own finance minister), Muldoon single-handedly wrestled with the world and domestic economy, unsuccessfully attempting to bend it to his will.

The pandemic demanded sudden and decisive action, such as the wage subsidy to keep afloat businesses prevented from trading by state-imposed lockdowns. This decision-making-on-a-dime has become a new norm.

Both the economic and political wisdom of the excise cut are borderline, outside the short term. Well received by beleaguered motorists, the 25 cents per litre reduction could be obliterated in a week by increases in volatile international oil prices, along with the electorate’s gratitude. It doesn’t take a born sceptic to wonder how much of Tuesday’s overnight price drop could be surreptitiously reclaimed over time as profit by the notoriously untransparent fuel retail sector, no matter how many letters Energy Minister Megan Woods writes it.

Conversely, oil fell to under US$100 a barrel between the prime minister’s announcement and the policy taking effect at the pump, its lowest level in two weeks. How is one finance minister supposed to keep up?

The cuts help all drivers, at all levels of income, not just the least well off, for whom the current cost of living is a crisis rather than an imposition. Unlike a tax cut or (as suggested by David Seymour) a rebate of proceeds from the government’s emissions trading scheme, taxpayers don’t get more options about how to spend. It’s a solution for a specific problem, and that problem is headlines about high petrol costs alienating centre voters on middle incomes.

In the debate between “hands-on” and “hands-off” economic management, the new paradigm from the Covid response - continued in the temporary fuel excise cut – is hands-on in the same way as playing a pinball machine is: frenetic and continuous manipulations, reactively smashing buttons and yanking levers, with no clear understanding of the outcomes.

For the public, one hip-pocket crisis blurs very much into the next. The Government is even paying for its fuel tax cuts from the massive Covid response. We live in an age of crises where extraordinary action is now always justified. But the next time the crisis line rings and the Government picks up it, it could be the 1980s calling, and wanting its policies back.