Here’s some free advice to Prime Minister John Key. I’m being a bit cheeky here, but it’s advice that’s well meant and genuine.

I’ve met Key a couple of times and was always impressed with how much he “got” New Zealand and wanted to do the right thing for the country in the long term. Sometimes I’ve worried that Key is too tactical and reactive to issues, rather than proactive and strategic. But I’ve also been impressed at how sometimes he has taken a bold decision that surprises everyone. Let’s hope he surprises us again with a strategic message that is realistic and encourages us all (including the government) to do the right thing: to spend less, to save more and to invest more.

Dear John,

Please tell us the truth about the economy and what it means for our standards of living. Tell us what we need to do as a nation

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To be fair to the good burghers of Dunedin (though I’m not feeling very charitable at this moment), they are not the only people in the world doing stupid things right now with other people’s money.

Sports stadiums seem to hypnotise local politicians. All around the world they lose their senses whenever a much-loved sports team asks for subsidies or grants for a fancy concrete and glass monument. In America the pressure is even greater because sports franchises there are mobile and threaten to jump to other cities if they don’t get their big toy. It happens too in Australia (the Telstra Dome in Melbourne and the ANZ Stadium in Sydney are both bankrupt) and Britain (Google “Wembley Stadium” and “delay” to find 44,800 links in 0.33 seconds for a laugh).

Dunedin City Council doesn’t even have the imminent threat of the Highlanders departing as an excuse. The Highlanders are unlikely to

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It appears everyone and their dogs are Keynesians now. They believe the only hope for turning around the global economy is lots of government spending and quick. Spend, spend, and borrow even more, they say.

There’s a frenzy of calls for governments to give handouts to taxpayers and to spend up large to support consumption in slowing or recessed economies. The biggest poster boys for this approach are UK Prime Minister Gordon Brown, US President Barack Obama and Australian Prime Minister Kevin Rudd.

The US Congress is expected to sign off on a pared-down US$780 billion plan this week. It doesn’t have everything Obama wanted, but most of it. Last week Rudd announced a A$42 billion package of spending, including a A$950 cheque for most adults by March.

Then last week our Prime Minister John Key appeared to announce a damp squib of a package aimed at small business. It was “only” costing

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Prime Minister John Key is considering how much to increase the legislated minimum wage and is weighing up the impact on jobs. This suggests he may be looking to restrict the size of the increase to less than the inflation rate to avoid increasing employers’ costs and causing job losses.

Opposition leader Phil Goff has called on Key to increase the minimum wage by 25% to $15/hour. This is ludicrous and should be dismissed out of hand.

But Key should stop mucking around and increase the minimum wage by the consumer price inflation rate. People on the minimum wage are struggling and spend a higher proportion of their disposable incomes than those on higher wages. If the logic of encouraging consumers to spend to defeat the “Paradox of Thrift” is correct, then increasing the wages of

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Those shocked by Act’s strong showing in the weekend’s election and its likely influence in any National-Act-United Future government should look off the beaten path for the policies Act is likely to push for.

The first assumption after any such result is that Act would want to restart privatisations, slash government spending, drastically reform health and education delivery, and generally turn back the clock on Labour’s policies through 1999 to 2008.

I think that’s unlikely. Firstly, John Key really is a centrist and also wants to be re-elected. Secondly, Act are a bit more subtle these days and like doing things that are likely to stick (i.e. past the next election).

One of these more subtle and more sustainable policies is a Taxpayers’ Rights Bill. Act leader Rodney Hide pushed this quite hard during the election campaign, not that many people noticed. Most voters didn’t get beyond the yellow jacket and flat taxes.

The

Here’s a picture of a crucial period in our history.  

The nation is at an unfortunate but not completely unusual political and economic crossroads. New Zealand is having a financial crisis at the same time as an election campaign. Big decisions that affect all New Zealanders for a long time will have to be made in the heat and smoke of an election campaign while it is unclear exactly who is in charge.

The protagonists are a Prime Minister who has ruled the machinery of government with a velvet gloved fist for nine years and a popular newcomer who is widely expected to win. The Prime Minister’s attacks on the newcomer have become vituperative and personal. The Prime Minister has successfully bullied and corralled the ruling party and the mandarins in the bureaucracy into accepting the Prime Minister’s views. The Prime Minister appears to be personally driving economic and financial policy.

I argued for bank deposit insurance scheme bank in March and at the beginning of last week. But I’m beginning to wish I hadn’t encouraged the politicians to get busy because this deposit guarantee scheme dumped on us is an unholy and dangerous mess.

I realise things had to be done in a hurry because Australia was about to announce its own deposit guarantee scheme and all hell was breaking loose on global markets, but the scheme proposed by Prime Minister Helen Clark in her re-election campaign launch on Sunday is a dogs breakfast. It  must be cleaned up before it putrifies into something so ugly and painful it could:

* Kill the stock market stone dead.

* Trigger a massive shift of cash from managed equity funds and corporate bonds to banks.

* Unleash a new generation of toxic finance companies.

* Vastly increase the cost of government borrowing.

* Mean deposit rates are all the same, or to be regulated to the same level, regardless of

National Party leader John Key hit two hot buttons in his speech at the weekend when  he promised to increase government borrowing by 2% of GDP to invest in infrastructure.

First, he correctly pointed out that New Zealand needs to invest heavily in infrastructure to boost productivity. Second, he said the government needed to borrow to do it. The first hot button is crucial, but not so controversial. The second hot button is both controversial and crucial. Both should be central election issues. 

Key pointed out what everyone has known but has been unable to achieve for years:   New Zealand needs better infrastructure to improve our productivity and therefore improve our wealth-generating potential. NZ Inc needs to find ways to invest in this infrastructure quickly and heavily. New Zealand needs better broadband, better hospitals, better schools, better roads and better energy networks. We all know this. The question is how do we do it? 

The unsolved problems have always been:

No wonder the human icon in the Sparc logo is jumping for joy.

He (or could it be a very svelte she…) has probably just trousered $100,000 plus a year for being employed by the government-run Sparc (Sport and Recreation New Zealand) to help 84 other people give away $74 million of taxpayer and Lotto money to a bunch of clubs, sportspeople and other good athletic causes.

I stumbled across this not so-little-gem of government mis-spending in a John Key speech about National’s policy on sport. Frankly, I couldn’t believe what he’d said. It was simply too outrageous. Key said 47 of Sparc’s 86 staff were paid more than $100,000 a year and that Sparc spent $35 million on activities in its Wellington office, including spending $5.5 million this year on its website.

Surely this was wrong, I thought. So I looked at that very expensive Sparc website