Today Phil Goff has admitted that monetarism doesn't work.

At the Federated Farmer's annual conference this morning, he told delegates that the Reserve Bank's sole focus on inflation had impacted adversely on our currency. 

Where was he when the Reserve Bank Act 1989 was introduced? Aaaaah, he was in the Fourth Labour Government's cabinet! Furthermore, he was a Rogernome to boot!

In 2009, we have the new, (supposedly) non-neoliberal version of Phil Goff. The vague panacea that he has put forward is that while the Reserve Bank will retain its independence, the bank will no longer have the maintenance of price stability as its sole objective. Goff has told the media that Labour will consult with relevant stakeholders on the specifics. Until then, the party will continue to hammer home the message that the bank needs to have a wider set of policy targets.

I have to say that this is (somewhat) welcome news. After nearly two decades where employment and productivity growth has been hampered by the need to raise interest rates at the even the remotest sign of inflation, something has had to give. If the policy is retained, it will simply continue to reward speculative rather than productive economic investment. Therefore, if this past recession has taught us anything, to keep investing in property and other non-productive assets is, in the long-term, a losing proposition.

If Phil Goff and his finance spokesperson David Cunliffe need any guidance, then they should look to the Council of Trade Union's Alternative Economic Strategy. It was placed before delegates at the recent biennial conference of this country's peak trade union body.

This document, developed by new CTU economist Bill Rosenberg provides the starting point for a debate about a more Keynesian directed economic policy. Major principles underlying the document are those of fairness, participation, security, improving living standards and sustainability.

To translate these principles into reality the strategy outlines the following ideas:

• Economic development: to be achieved through active support to firms; the development of export and import-substitution industries; negotiation of industry related employment agreements and moves towards pay equity; encouragement of worker cooperatives and trusts; re-nationalisation of Telecom and gradual re-nationalisation of the electricity sector; tripartite negotiation of national economic priorities; support for Maori economic development; and a "human infrastructure" fund for workplace and tertiary training.
• Financial and monetary policy: exercise of greater control over financial institutions; stabilisation of the exchange rate; greater powers to be granted to the Reserve Bank to exercise control over capital and exchange rate flows; creation of Kiwi Bonds to finance infrastructural investment; and the New Zealand Superannuation Fund to be directed to invest more in the domestic economy.
• International economic relationships: support global moves to increase financial regulation; impose a Tobin tax on all international financial transactions; and stress the need for fair trade rather than free trade through a "new internationalism".
• Taxation: introduce a progressive tax regime for both personal and company income; impose capital gains and land taxes and end tax deductibility for rental property; increased research and development funding.
• Environment: initiate a 'Green New Deal' promoting the development of clean, green industries.
• Employment: 'Flexicurity' enabling security of employment for workers whilst enabling firms to adapt to changing circumstances; an increase in the minimum wage to $16 an hour; and a requirement that pay equity be introduced in both the public and private sectors.

Other suggested policies are affordable housing financed through Reserve Bank credit for both low and middle-income earners and that the public housing rental stock be increased by 20 percent; an augmented Kiwisaver scheme where low paid workers and beneficiaries would receive greater government top ups; and industrial democracy whereby workers would have a full say in enterprise governance and management.

I applaud these moves. In fact, many of them can be found in current Alliance and Green Party policies. Furthermore, the National Government's taxation review group has floated the idea of capital gains and land taxes. It now appears that Labour is flirting with the idea that monetarism should die a slow (but not sudden) death. It seems that aspects of the CTU's strategy are being picked up across the political spectrum.

However, it would be more likely that the CTU's policy prescriptions (which I could classify as being radical social democratic in tone) would be endorsed by the centre-left. But I don't see Labour as going the full hog as they are still wedded to much of the New Right consensus they helped create 25 years ago. At the moment, it appears that the Greens want to take a more centrist economic approach in order for them to become an MMP 'swing party'. The Alliance Party (to which I belong) has adopted many of these positions and I wonder whether Rosenberg has been influenced by reading the party manifestos that have been published by it since 2005? Even the Democrats for Social Credit will be pleased to see the policy endorsing the extension of Reserve Bank credit for housing.

As for the centre-right parties, I don't see them adopting these policy prescriptions, even for a second! John Key has already brushed aside calls for land and capital gains taxes. And Act would not have a bar of any of them. In terms of peak capitalist organisations like the Chamber of Commerce, Business Roundtable, and the Employers and Manufacturers Federation, their response is predictable. Like Act, they would spurn any return to interventionism, even in the current economic environment.

That's why Phil Goff's speech today should reopen the economic debate in this country. A month ago the CTU document barely got mentioned within the mainstream media. With a reconstructed Rogernome like Goff now coming out and making the speech he did today, perhaps it's a good time to begin discussing a more progressive economic and social future.

New Zealand needs to have one!