Greg Sheridan, the Australian newspaper’s foreign editor was wrong on at least one count in his miasma of accusations about the new defence policy. The Prime Minister is decidedly not flakey.
Flinty would be nearer the mark. In her first three years as Labour leader Helen Clark weathered a hail of personal abuse and white-anting that would have filleted many a supposedly stronger male politician.
Ms Clark’s defence policy is the biggest shift of direction since 1945. Unless the dollar miraculously recovers its past few years’ lost gloss, her commitment to spend the 1.1 per cent of GDP now being spent will mean much less equipment than the National government’s late-1990s pretensions. By mid-decade there will be no air strike capacity and limited combat capability on the water.
But for a guide as to what she would do if the security environment turned grimmer than her policy assumes, look to Peter Fraser, Labour’s toughest Prime Minister, with whom she is often compared. Jailed for opposing the first world war, Mr Fraser turned warrior in the second, then Cold Warrior.
When Ms Clark reminded Mr Sheridan that New Zealand had stood beside Australia in all conflicts last century, she was echoing that Fraser flintiness. Whatever the peacetime implications of her policy shift, in a crunch she would be at the front.
In the meantime she is milking the fiscal fiasco caused by the plunge in the currency. The funds are not there for the F16s, which have to be bought in foreign currency, the cost of which has risen as the kiwi dollar has fallen.
This is part of her demonisation of the previous government. All new governments do this, to accentuate in voters’ minds the virtue of their choice and give the new team a few boat-lengths’ lead at the first buoy. This government is demonising devilishly – witness the relentless assault on high public service salaries and golden handshakes.
On defence the government can go only so far. Because it does not want to spend more, it cannot hammer National for cutting spending by more than a third during its decade in power – a record which adds a tinge of hypocrisy to National’s current moralising. Labour didn’t cancel the third and fourth frigates (though it would have); National did.
Labour can demonise untrammelled, however, when it comes to social services and the public service’s capability.
Actually, spending on social policy rose in real terms under National, though still far short of demand. But in many places the public service is threadbare, incapable of the quality advice good government needs. (The attacks on salaries won’t help recruitment of the best and brightest, but that is another story.)
Today we get our first real fix on how much Labour will spend to remedy these deficiencies. The budget policy statement sets out the three-year spending and revenue track and projects forward seven years beyond that.
Michael Cullen last Friday stated his aim as keeping the accounts in balance over the business cycle, including salting away funds for baby-boomers’ pensions after 2020. He had earlier put the cumulative spending increase over the next three fiscal years at $5.9 billion, the equivalent of spending an additional $843 million each fiscal year.
This is larger than National’s spending surges but not wildly so. As ACT constantly complained, National steadily dolloped out goodies once Ruth Richardson’s hand had been prised off the levers.
Mr Cullen’s challenge will be to get his colleagues to treat the next two years as fat years — that is, to understand that the economy will be growing faster than its long-term sustainable capability.
While Mr Cullen insists his “prosperity triangle” of economic policy will lift that long-term capability, that will not happen in the next two years. So if ministers spend up to the limit in the next two fat years, they will be forced into cuts or deficit during the next round of lean years in the business cycle.
Who will ensure this does not happen? Here we come back to where we came in: the flinty Ms Clark. Her first year as Health Minister was spent cutting 6 per cent out of her budget in a lean year. Fiscal flake she is not.