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).
Productivity growth has been even worse, and for longer. Here, for example, is the comparison with Australia.
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.
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.
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.
croaking cassandra 
Huawei
You can see this one coming down the line
Australia bans Huawei from its communications networks
New Zealand dithers and tippy-toes around it
Meanwhile the Five-Eyes will contest the inter-connectivity of the systems
LikeLike
Good review. You missed doing business with Saudi Arabia one of the worst abusers of people in the world under shariah. Or being the country that promoted the lie that Jerusalem is not the capital of Israel now and historically. Banning kosher meat solely to please Muslim demands. Or the hypocrisy of claiming to be a clean and green country, when billions of herbicides, pesticides and fungicides are needlessly poured into our land.
LikeLike
Is there any practical, policy problem from trying to ensure everyone is “earning, learning, caring, or volunteering” or is your problem with this just theoretical?
If they had left it at “earning, learning, caring”, I would certainly be concerned. I can imagine many people, perhaps supported by their partner, choosing not to work and I don’t want the government to judge them, even indirectly, for their choice. But I think anyone I’ve known who is healthy and has chosen not to work is either looking after children or pretty heavily involved in volunteer community work. It seems like “volunteering” is included in the government’s priorities there.
LikeLike
“earning, learning, caring, or volunteering” – well I do none of those and have adequate health. Or does taking an interest in this blog count as ‘learning’ and with a different meaning also ‘caring’?
LikeLiked by 1 person
You must be earning, Bob – earning does not necessarily equate to working – people earn in their retirement, and pay taxes on those earnings.
That said, the sentence really did stand out to me as well. First I felt it signaled a recognition of the value to society of unpaid work (i.e., care-giving/raising children, looking after older relatives etc.) and voluntary/community work.
And perhaps it also signaled, the coalition’s thoughts regarding the ‘future of work’ and ‘working-for-the-dole’ schemes going forward – i.e., an update/replacement for this scheme; https://www.workandincome.govt.nz/providers/programmes-and-projects/youth-service.html
I agree with Michael, the word “ensure” is pretty interesting – but I don’t think the intent was to mean a life of leisure will be forbidden 🙂 – that’s perhaps taking it too literally.
One can only live a life of leisure if one has the means to do so – which implies someone in the household is earning, or has savings or capital, unless living under a bridge and begging for a living – in which case, I think the point is that that is where the state would hope to intervene and get the individual in to one of those four activities (earning, learning, caring, or volunteering).
That said, the list should have had an “and/or”, rather than just an “or” – heaps of people do all of those things simultaneously.
LikeLike
“”Earn: obtain (money) in return for labour or services””. Does not apply to me. I have the UK state pension which is taxed by NZ but it is not earned although it was paid for. My wife earns.
Happy for the govt to ensure I have the opportunity for its 4 choices for spending time but until they force me to choose one I will spend my time in unproductive liesure: reading and gardening.
But to take Jacinda seriously I believe she was expressing a desire to improve access to “earning, learning, caring, volunteering” and if so I hope to see some of the subsidies to tertiary education spread to members of the public who are older, a smaller fraction of the population under-employed, payment for caring making it a career for New Zealanders not just importing cheap foreigners and a serious review of the obstacles the govt has put in the way of volunteer organisations.
LikeLike
By definition, the Government can’t “ensure” that people are volunteering. It can make volunteering easy in various ways, but it can’t and shouldn’t make people volunteer.
LikeLike
I think Bob’s response below partly answers the point. I do happen to look after the kids and house, and do do a couple of voluntary governance roles, but if I didn’t why should it be of interest to the Prime Minister?
Since I don’t suppose anyone is about to compel Bob to change his ways, I guess one can argue it has little practical import, but I suspect it is more important than that, as a philosophy that clear guides the PM, and in a world where rhetoric matters, shapes expectations etc.
I’m actually not unhappy with injunctions to everyone to do their bit/play their part, over the course of their life, but such urgings should probably come from families, churches, and other intermediate organisations of society, not from the (inevitably partisan) govt.
LikeLike
Jacinda’s ‘creating an international reputation we can be proud of’ consists of asking for small sacrifices (fuel prices, plastic bags, housing more refugees) which hit the poor harder than the rest of us. If she spoke honestly about Myanmar, Saudi, Russia, Iran, and China then it might cause a minor temporary dent to our economy but it would disproportionately harm National and Labour party funding and reduce all the perks available to semi-retired politicians.
Realpolitik : a system of politics or principles based on practical rather than moral or ideological considerations.
Political Realism : an approach to the study and practice of international politics. It emphasizes the role of the nation-state and makes a broad assumption that all nation-states are motivated by national interests, or, at best, national interests disguised as moral concerns.
LikeLike
Government needs to beef up its focus on competition.
A free market doesn’t mean a competitive one, particularly in a small country like New Zealand. We have an issue with rent seeking in natural monopolies and in oligopolies. The last government was hard on social welfare but generous in corporate welfare and large scale enterprises have become adept at building relations with Ministers and their Ministries. If we extended the focus on competition that we have in telecoms and electricity to banking, supermarkets, fuel companies, ports and airports we’d start seeing a lift in productivity performance.
Will it happen? No.
LikeLiked by 1 person
Our problems have slowly built over decades. Decades that have been run by both sides of the political spectrum. Labour and National both being as destructive as each other, all the time promising they have the answer. Can we really expect things to change without major input from the voting public. Many can see that the system is not working as planned. Most of the fixes being attempted seem to impact on those most in need or removes a few more middle class and dumps them down a level.
But what is the answer for an improved future. We can voice opinions on blogs and to each other, but is there a reasonable fix available. As both parties are equally culpable, just screaming for a change of government is futile. Or will it be put up with it until the answer must be extreme and possibly violent.
LikeLike
“Is there a reasonable fix available?” I’d like to think so, but am not optimistic. At one level, I’d suggest it needs someone (and a group behind them) to dramatically shake-up and revitalise policy and public life, focusing wholeheartedly on reversing the underperformance across so many fronts, and reclaiming some self-respect. But it isn’t obvious that such a figure is on the horizon and, as we know from history, people who appear that way at first can quite quickly disillusion (perhaps Macron fits that bill, to some extent, at present).
LikeLike
As long as our businesses and government are focused on Primary Industries(with 10 million cows and 30 million sheep), Tourism and International students($15 billion Service industry generating PAYE and GST revenue) then NZ will continue to poorly perform from a economic productivity viewpoint even with rising GDP. This economic productivity issue is easily fixed by moving NZ industries back into automated manufacturing. 71% of the governments tax revenue is dependent on PAYE and GST. They have a vested interest in making sure the Services industries that employ more and more people that consume continue to grow.
LikeLike
We are a small country, we’ve got land and some natural resources but we are far, far away from everything. Pretty much those commodity markets is our bread and butter, tourism is fickle, as is international students who tend to vanish like a mirage in an economic downturn. Our distance is crippling, and have to import fuels and raw materials for any manufacturing we do. We’ve got a government that has put the cart before the horse, banning oil and gas exploration which has a range of impacts and they did this knowing that Maui gas will run out in 7 to 10 years and with no ready replacement. The employment policies are a dog, simple. We were having the brain drain reversed, those immigration figures included instead of the loss of 40,000 kiwis departing permanently a return to a positive number because of good economic times, they’ve managed to quickly reverse this from the last figures I’ve seen. Actually the previous government had a building plan and the home insulation scheme started up at least 3 years ago. That part of it is nothing new, even if they pretend that doesn’t exist.
In that speech they run basically on slogans, I notice the change from the alarmist housing crisis to an “overheated” (Auckland) market without even a nod to the settings like LVRs put in place to achieve that, and now “population growth” instead of scaremongering about foreigners buying up the country and Chinese sounding names coupled with Winston’s “Asian invasion”.
None of this is going to encourage productivity, innovation and a skilled workforce. It’s one thing to say those words and spout off about values, but what they needed to say and didn’t was what this was envisaged to look like. R&D into what? What are these higher value goods? If we stop producing commodities (as in food) as they consider that a bad thing how do they envision we feed ourselves and what is going to replace the export earnings from that? What workforce skills do we need, in what areas and how they plan to get people to do that? What’s this working alongside business going to look like, given employment policy settings for FPA agreements and unions mean more control of others and government over how a business is run? How is that going to encourage business investment? What about the mixed messages on housing, they complain we invest too much in that, but moan that people can’t get into home ownership and plan to tax CGT but leave the family home out of that.
Huge disconnect between what they needed to say and what we got. Then they followed it up with appearing not to know what GDP is or what an embargo is and hinting in a way that affected the money market. I mean, what is going on, they should have a grip on things by now and know how it works. The staff at Stats NZ now have to do damage control over that for a starter.
We deserve better than this, there is no overall strategy and it isn’t even clear they’ve got a grip on where things are tracking. The government inherited an unexpected surplus, unexpected high tax tax and while we might be lagging, a better economy. Even if it wasn’t growing stratospherically, it was stable.
LikeLike