Thursday\u2019s bleak GDP figures prompted a weekend of hard questions about whether the government has what it takes to get NZ growing again, writes Catherine McGregor in today\u2019s extract from The Bulletin.<\/p>\n
To receive The Bulletin in full each weekday,\u00a0sign up here<\/a>.<\/p>\n Commentators react to grim GDP numbers<\/p>\n The weekend\u2019s papers were dominated by reaction to Thursday\u2019s GDP numbers and renewed scrutiny of where the government has gone wrong. Domestic output shrunk 0.9% in the June quarter, a dramatic fall after a promising, if small, uptick in March.\u00a0In the Sunday Star-Times<\/a>, Vernon Small noted the result was \u201cthree times as bad as the central bank had expected and twice as bad as the broad consensus of bank economists\u201d.<\/p>\n Across the commentariat, a common thread emerged: the government looks adrift, unable to settle on a clear economic plan or find a message that instils confidence that it can turn the ship around. As Matthew Hooton acidly put it in the Herald<\/a>\u00a0(paywalled), \u201cthis Government \u2026 claimed to be led by a global expert in turnaround jobs, promised to get New Zealand back on track and believed its mere election would rebuild business confidence to prompt an immediate economic boom to pay for its promises. In fact, the economy has now completely crashed off the track.\u201d<\/p>\n Luxon\u2019s messaging under fire<\/p>\n In the Weekend Post<\/a>, Luke Malpass argued that Luxon\u2019s one-note rhetorical style is compounding government\u2019s problems: \u201cHis preternatural, American-style enthusiasm for basically everything means that he fundamentally oversells what his Government can do, or indeed, what governments are capable of doing in general.\u201d Hooton, as ever, was even blunter: Luxon \u201chas no overarching story of where he wants to take New Zealand, except to put more money in the median voter\u2019s pocket\u201d, and everything he says in support of that overly modest aim \u201cis shallow and trite\u201d. Hooton\u2019s conclusion was stark: Luxon, he said, \u201cneeds to go\u201d.<\/p>\n The stimulus bind<\/p>\n On what to do next, Small said the economy is \u201ccrying out for greater stimulus\u201d, while acknowledging that the risk of inflation and ballooning deficits made borrowing to spend a non-starter. Most commentators thought the government was boxed in, with no good options other than to hope interest rate cuts would get the economy moving.<\/p>\n Speaking to reporters on Thursday, Nicola Willis stressed that the government \u201cis borrowing at very high levels right now \u2013 we are running an annualised deficit bigger than many countries around the world\u201d. That\u2019s an unusual comment from a centre-right finance minister,\u00a0noted the Herald\u2019s Thomas Coughlan<\/a>\u00a0(paywalled), and a marked change from Willis\u2019s first year in office. Then, her \u201cgreat economic test was whether her tax cuts would be excessively stimulatory \u2013 now the great debate is over whether they\u2019re stimulatory enough.\u201d<\/p>\n Austerity, and the case against it<\/p>\n While Small favoured stimulus, Hooton argued the opposite. He said the government erred by allowing Willis\u2019s \u201cheroic\u201d savings to be spent on health, education and welfare \u201crather than used to stop or even reduce borrowing\u201d.\u00a0On Newstalk ZB<\/a>, former National finance minister Ruth Richardson went further, urging Willis to make a UK-style spring statement \u2013 a mini-budget \u2013 featuring a set of sharp spending cuts to balance the budget.<\/p>\n