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Mike's Minute: The Government are digging a deeper financial hole

Mike Hosking,
Publish Date
Mon, 25 Jul 2022, 9:56am

Mike's Minute: The Government are digging a deeper financial hole

Mike Hosking,
Publish Date
Mon, 25 Jul 2022, 9:56am

As schools return, let’s begin the term with a little Economics 101.

When you artificially inject yourself into an economy with the view to helping people out financially, what do you do?

Do you:

- Give the help to everyone no matter whether they need it or not?

- Give it those who need it most?

- When do you stop, and under what circumstances?

- Was any of this explained in a way at the start that would allow you to enter the programme and exit it, in a way as to avoid fiscal and political fallout?

- If not, why not?

So, we got the extension of the petrol subsidy last Sunday.

We got it last Sunday out of the blue because the Government knew on Monday the inflation figures were coming out, and they would be ugly, and they would yet again be faced with the quite accurate charge that they are economically incompetent.

So what better way to appease a growing number of angry people than to give us all some free stuff?

You might remember after the budget, Grant Robertson gleefully told us that by the time we added the petrol subsidy and all the other largesse they had tossed at the country, 81% of us were receiving some sort of Government help.

The fact he saw that as good, and not an embarassment, tells you all you need to know about their approach to life.

But he also said that come August the petrol deal was over - until of course it wasn't.

So it’s now a billion dollar proposition and goes until January.

Or does it?

January is election year so do they pull the plug in election year? When exactly and how exactly do they pull the plug without the ensuing fury?

What are the criteria to pull the plug? Does oil need to be at 50 bucks a barrel? Does the war in Ukraine need to be over? Does inflation need to be trending down?

Just what is the scenario?

They don’t have one of course, and in that is the danger of free stuff. Once you give it, you can’t take it away without a fight - or in their case a drop in the polls.

All of this is paid for, as always, with money we don’t have.

That is the cost of:

- Not having a proper plan,

- The danger of artificiality,

- Giving it to everyone whether they need it or not.

They have dug themselves a gargantuan hole without the slightest of clues as to how to extract themselves.

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