Day: September 18, 2018

A bouquet for the Government

Michael Reddell NZ politics, Reserve Bank, Reserve Bank Act reforms, Transparency

They don’t deserve many, but this announcement this morning is unambiguously positive.

Cabinet papers will be proactively released, Minister of State Services Chris Hipkins announced today.

The move is part of the Government’s wider plan to improve openness and reflects its commitment to the international Open Government Partnership.

The Cabinet papers will be released no later than 30 business days after a Cabinet decision. This process will be in place for Cabinet papers lodged from 1 January 2019, Chris Hipkins – who is also responsible for Open Government – said. ……

“Cabinet papers will be released within 30 business days of the Cabinet decision unless there is good reason not to publish. If we can publish it, we will.”

It will, almost certainly, end up less good than it sounds.  But it is a start.    The official papers upon which our governors make their official decisions should be open to public scrutiny, with only a short delay.  As the Minister’s press release notes

“This change is consistent with the spirit of the OIA which states that information should be made available unless a good reason exists for withholding it.

“Proactive release of official information promotes good government and transparency and fosters public trust and confidence in government and the public agencies.”

Of course, only time will tell how (a) this government chooses to run the system, and (b) whether future governments regard themselves bound by the newly-established practice (the law isn’t being amended to require pro-active release, but it probably should be).  I don’t suppose we will ever see any Cabinet papers that might deal with awkward issues around the relationship with the People’s Republic of China, or PRC interference in New Zealand public and commercial life.   Perhaps we shouldn’t either.  Some things – a few –  need to be not only deliberated in secret, but to able to have the relevant considerations and supporting evidence kept under wraps for a longer period.  And, reasonably enough in my view, they won’t be releasing papers relating to recommendations for honours (they say they will withhold papers relating to appointments as well, and that is more concerning).

What worries me a little more is that

Individual ministers will have responsibility for releasing Cabinet papers, which will be subject to an assessment to decide if there are good reasons to withhold any of the information.

If individual ministers are making the decision, how will we be confident that all ministers are applying more or less the same standard?  There is no suggestion of a central monitoring process, and there will be more or less ornery ministers, more or less politically uncomfortable issues, weaker and less confident ministers, and –  as our arrangements have developed –  ministers who hold ministerial warrants but aren’t part of Cabinet, or even of the government itself.  Will, for example, the Greens ministers be bound by this new Cabinet practice?

But if the principle is that the official papers upon which our governors make their official decisions should be open to public scrutiny, with only a short delay, shouldn’t this principle be extended –  either voluntarily, or mandatorily –  to other state agencies that make major policy decisions, that attract considerable public interest and scrutiny?

One could readily extend the principle to the boards of all Crown entities (subject to similar specific exclusions as the Cabinet will apply to itself).

But, of course, the entity I particularly had in mind was the Reserve Bank.   The Bank’s longstanding line has been that, even though they make vital economic decisions that can materially affect the short to medium term performance of the economy, it would be costly, damaging, and confusing to release the background papers that the Governor receives prior to making his or her decision.  After all, they tell us, there is the MPS or the press release, and the Governor holds a press conference once a quarter.  What more do we need to know, they argue?   They simply generally refuse to release background papers –  although I did once manage to get them to release some that were ten years old (to make the point that, at most, there is a time dimension to any decision on whether material can be released under the OIA).

But those arguments apply –  if at all –  just as much to decisions made by Cabinet, often on much more complex and sensitive issues than those the Reserve Bank deals with.  Cabinet decisions are announced by ministers, the PM holds press conferences, and ministers are generally pretty accessible to the media  (more so than most Governors).  But the Cabinet has rightly decided to release (most) Cabinet papers, and recognises that doing so is right and proper in a free and open society, and will over time enhance confidence.

The same should go for the Reserve Bank.  If the Governor is serious when he talks about being open and transparent –  as he seems to be on all matters that he isn’t responsible for –  he’d take the lead on this issue, and announce that in future the big folder of background papers prepared going into each Monetary Policy Statement, together with the (anonymised) written advice of his advisers on the OCR decision, would be routinely released (perhaps with a small number of redactions) six weeks after the OCR/MPS announcement to which they relate.  Six weeks is long enough that plenty of new data will have emerged since the papers were written (indeed, it will be close to the next OCR decision), and short enough to still be of use/interest to analysts in understanding the Bank’s thinking (recall that we still have no idea what analysis they used last year when they announced they were assuming half of the building associated with Kiwibuild houses would be offset by reduced other residential building activity).

And if the Governor won’t take the lead, the Minister of Finance should insist on this sort of approach as part of the legislation and procedures around the establishment of the new statutory Monetary Policy Committee.

Most likely the Bank will continue to fall back on spurious arguments about potential damage to the “substantial economic interests of New Zealand” (an OIA ground that hasn’t been well-tested), or risks of confusion.  Those arguments are just wrong, and risk sounding (or perhaps are) self-serving: powerful bureaucrats protecting their particular monopoly on information/advice.  Cabinet has been willing to step beyond those arguments, and we should expect the Reserve Bank Governor –  a very powerful unelected policymaker –  to be even more ready to do so (being, after all, unelected and thus with less legitimacy).  If he doesn’t do so willingly, he should be left with no choice.

 

Having read the Our Plan speech

Michael Reddell New Zealand economic performance, NZ politics, Uncategorized

The Prime Minister’s speech on Sunday has attracted quite a lot of, generally not very favourable, attention.  I was interested in a few things that were there, and a few others that weren’t, particularly when compared to the Speech from the Throne that inaugurated the government’s programme last November.

The first was the apparent lack of ambition around the economy.    The Prime Minister continues to repeat the meaningless claim that “we’ve enjoyed enviable GDP growth in recent years”, as if headline GDP – as distinct from GDP per capita or GDP per hour worked –  means anything at all.    Here’s the track record: it has been pretty poor over the last couple of years (we’ll get an update on Thursday).

gdp pc to mar 18

Productivity growth has been even worse, and for longer.  Here, for example, is the comparison with Australia.

aus nz rgdp phw

The Prime Minister seems to sort of know there is an issue.

We cannot continue to rely on an economy built on population growth, an overheated housing market and volatile commodity markets. It’s not sustainable, and it risks wasting our potential.

That’s why our first priority is to grow and share more fairly New Zealand’s prosperity.

That means being smarter in how we work. It means an economy that produces and exports higher value goods, and one that makes sure that all New Zealanders share in the rewards of economic growth.

So what will we do?

First, we need a concerted effort to lift the prosperity side of the ledger. Working alongside business, we will encourage innovation, productivity and build a skilled workforce better equipped for the 21st century.

But what Our Plan has to offer is slim pickings indeed.  The only specific is

We are doing that by bringing back significant support for businesses to expand their investment in research and development through the R&D tax incentive, a key component of building a new innovative economy.

Perhaps you think R&D subsidies are a good idea. I’m rather more sceptical, and worry that there is no sign the government has thought hard about why firms don’t regard it as being in their interests to spend more here on R&D.   But don’t just take it from me.  I was interested that in the Secretary to the Treasury’s speech about productivity a couple of weeks back, which I wrote about here , there was no mention at all of R&D subsidies/credits as any part of the answer to our sustained underperformance.  If R&D subsidies were the answer, it would have to be a pretty small question, and our economic underperformance is much worse than that.

It was also interesting that the tax system seemed to have disappeared from the list of answers to our economic underperformance.    In the Speech from the Throne this

The government will review the tax system, looking at all options to improve its structure, fairness and balance, including better supporting regions and exporters, addressing the capital gain associated with property speculation and ensuring that multinationals contribute their share. Penalties for corporate fraud and tax evasion will increase.

and in various speeches since the Minister of Finance has continued to talk up tax system changes,  but in Our Plan on Sunday the only reference I could see to the tax system was those R&D subsidies.

And then there was this

After all, we have always been inclined to do things differently. Or to do them first.

Whether it’s Kate Sheppard championing the right to vote, Michael Joseph Savage designing the welfare state, or Sir Edmund Hillary reaching brave new heights – we don’t mind if no one else has done something before we do.

But we do mind being left behind.

and

You asked us to make sure New Zealand wasn’t left behind.

But the problem is, Prime Minister, that we’ve fallen badly behind, and nothing you or your predecessors did seems to be stopping, let alone reversing that decline.  Nothing.

Here are a couple of productivity charts, comparing New Zealand and some other advanced countries in 1970 (when the OECD data start) and 2016 (the last year the OECD has data for all countries).

First the G7 countries.

G7 comparison

As recently as 1970, real GDP per hour worked in New Zealand was more or less that of the median G7 country (100 years ago, we would have been ahead of all but one, and basically level with the US).    Now it would take a 30 per cent lift in New Zealand productivity –  with no changes in the G7 countries –  to get us back to parity with these big advanced economies.

And here is the same comparison for the (small) Nordic countries.

nordic comparison

It would take a 50 per cent lift in New Zealand productivity –  all else equal –  to match the median of these countries.    Even in 1970 we’d fallen behind them, but 100 years ago  –  in fact even when Michael Joseph Savage was in office – we were richer and more productive than all of them.

We’ve been left behind, and our politicians show no sign of doing anything to remedy the failure.

One could say much the same about housing.  The Speech from the Throne –  only 10 months ago –  was actually quite encouraging.  There were hints –  nothing specific of course –  that the government might actually want to lower the real prices of houses, reversing at least some of the disgraceful lift in house and land prices that policy (various strands interacting) has helped deliver over the last 25 years or so.

But what about in Our Plan?  There is talk of warm dry homes, and of the Kiwibuild lottery for the lucky few (“I cannot tell you how exciting it was to open the ballot for those first homes this week”), but of the market generally only this

“But not everyone wants to own, or can right now.”

And nothing –  at all – about what the government might do to systematically transform the outlook for those –  all too many –  who can’t.  It might be terribly exciting for the Prime Minister that a few can win the lottery –  as no doubt it is in the weekly Lotto draw –  but in a serious government wouldn’t it be much more satisfying to have laid the ground work for systematic, across the board, affordability?  In a country with so much land (in particular), it is pure political choice that we fail to have better outcomes.

There were a couple of other bits that took my eye.  There was this, in prominent bold letters.

That’s why our first priority is to ensure that everyone who is able to, is either earning, learning, caring or volunteering.

Frankly, what business is it of the government’s.  We aren’t resources at their disposal.  Provided someone isn’t a financial burden on the state, why does the Prime Minister think it is for her to suggest –  nay propose to “ensure” – that a life of leisure is not an option?  The mindset is disconcerting to say the least.

And then there was the international dimension.

That brings me to our final priority area- creating an international reputation we can be proud of.

In this uncertain world, where long accepted positions have been met with fresh challenge – our response lies in the approach that we have historically taken.  Speaking up for what we believe in, pitching in when our values are challenged and working tirelessly to draw in partners with shared views.

This Government’s view is that we can pursue this with more vigor – across the Pacific through the Pacific reset, in disarmament and in climate change, and in our defence of important institutions.

Ultimately though, my hope is that New Zealanders recognise themselves in the approach this Government takes.

I’d be ashamed if I recognised myself in the approach this government –  and its predecessors – take.  A government that is slow and reluctant to condemn Russia’s involvement in the Skripal poisoning, a government that appears to say nothing about the situation in Burma, a government that says not a word about the Saudi-led US-supported abuses in Yemen (trade deals to pursue I suppose).  And then there is the People’s Republic of China.

The Prime Minister apparently won’t say a word (certainly not openly –  and yet she talks about “transparent” government) about:

  • the aggressive and illegal militarisation of the South China Sea,
  • the growing military threat to Taiwan, a free and independent democracy,
  • about the Xinjiang concentration camps, the similarly extreme measures used against Falun Gong, or the growing repression of Christian churches in China,
  • about new PRC efforts to ensure that all Chinese corporates are treated, and operate, as agents of the state (is the Prime Minister going to do anything about Huawei for example?)
  • about the activities of the PRC in attempting to subvert democracy and neutralise criticism in a growing list of countries.

And what is she going to do about the Belt and Road Initiative, which the previous government –  in the specific form of Simon Bridges – signed onto last year, enthusing about a “fusion of civilisations”?

But then, why would we be surprised by this indifference.  Her own party president, presumably with her imprimatur, praises Xi Jinping and the regime.  Her predecessor, Phil Goff, had his mayoral campaign heavily funded by a large donation from donors in the PRC.   And she won’t even criticise the fact that a former PRC intelligence official, a keen supporter of the PRC, sits in our Parliament, refusing to answer any substantive questions about his position.

If those are her values, they certainly aren’t mine. I hope they aren’t those of most New Zealanders.

If her “response lies in the approach that we have historically taken” it must seem pretty unrecognisable to the people, many on her side of politics, who protested French nuclear tests, or against apartheid in South Africa (and associated rugby tours).   And would surely be unrecognisable to the ministers and Prime Ministers of that first Labour government, who were among those (internationally) most willing to take a stand against Italian and German aggression and repression in the 1930s.