Fiscal policy

Governments have expanded in times of crisis, and they have done so to meet the public’s growing expectations of social services. In effect, government growth is really the growth of the redistributive state. It’s the state that robs Peter to pay Paul – and often it also robs Peter to pay, well, Peter.

Ultimately, fiscal management is about choices: choices made according to principle and responding to circumstance. Swan made easy but poor choices, while English made difficult but sensible choices. As a result, New Zealand’s public finances are in good shape, and the Kiwi economy looks forward to continuing its healthy growth rates.

Predictably, but regrettably, the Budget does little to defuse the fiscal time bomb that an ageing population poses for future spending on health care and retirement incomes. There is much still to be done after this still-laudable budget.

At the moment, the only countries able to function with the euro are those of the healthier euro core. They should allow the other eurozone members to depart from monetary union. Otherwise we will never be able to see some actual green shoots in Europe.

Make no mistake about it: New Zealand’s enduring economic viability depends upon the government’s ability to demography-proof public finances. And on living up to this task depends the Prime Minister’s historic legacy.

At the moment, monetary policy presents itself as part of the solution to the West’s sovereign debt crisis. If current policies continue much longer, it will become clear that it is part of the problem.

What the United States can least afford is four more years of election campaign-style politics. Both camps must work together to avert fiscal disaster. But are Democrats and Republicans willing to cooperate for positive change?

To be clear, Britain is not Greece. Under enormous pressure, the Greeks actually had to cut public spending while the British so far are only talking about it. However, unlike the Greeks the British still have their own currency and central bank (and they pay some taxes, too). As long as the Bank of England continues to buy UK government bonds as if there was no tomorrow, they will be just fine.