Cullen has lost the plot

Michael Cullen’s response to the global financial crisis has been woeful.

His solution was in good times to spend more of your money and in bad times spend more.

If Keynesian spending policies worked we would not have gone into recession a few months ago.

Even more red ink will not fire up investors or give them more confidence.

Sound economic management would.

The problem is this.

New Zealand is running a current account deficit of 7.5%.

The funds needed to sustain that level of deficit have now dried up.

New Zealand needs to make an adjustment and the government can play a big role in making that adjustment easier.

What Cullen has done is to make it a whole lot harder.

The National party response has been to make no response.

Cullen on one hand declared that the banks were safe and then underwrote them with your money.

He has also underwritten the finance companies totally distorting the finance markets.

That will produce a misallocation of capital right when we need it to be put to best effect.

I am meeting with the Governor of the reserve bank this afternoon to try and find out what Cullen has signed up for.

ACT will be giving a considered response tomorrow morning.