The void where an economic strategy should be

During the week, rather lost amid the Jami-Lee Ross claims and counter-claims (how did a major party have the indecency to keep on rapidly promoting the man when their hierarchy clear knew at least a couple of years ago –  and kept quiet about – his character?  Unless of course, the main required quality for a National MP is now fundraising –  often of the most questionable kind –  not character or legislative/policy skills) the Prime Minister announced the membership of her Business Advisory Council.

This is the group

Prime Minister’s Business Advisory Council members

Christopher Luxon (Chair)                  Air New Zealand
Peter Beck                                                Rocket Lab
Barbara Chapman                                 Professional director
Jacqui Coombes                                   Bunnings
Anna Curzon                                           Xero
Andrew Grant                                        McKinsey & Company
Miles Hurrell                                          Fonterra
Bailey Mackey                                        Pango Productions
David McLean                                        Westpac
Joc O’Donnell                                          HW Richardson
Gretta Stephens                                     Bluescope/NZ Steel
Rachel Taulelei                                      Kono
Fraser Whineray                                   Mercury

And the terms of reference are here.

Here is how the Prime Minister’s statement begins

Prime Minister Jacinda Ardern has announced a diverse cross section of leaders from the business community will form her Business Advisory Council to advise the Coalition Government as it works on building a productive, sustainable and inclusive economy that improves the wellbeing of New Zealanders.

And here is how she was talking a couple of months ago when the Council was first foreshadowed.

“The Council will provide a forum for business leaders to advise me and the Government and to join us in taking the lead on some of the important areas of reform the Government is undertaking,” said Jacinda Ardern.

“The Council will report to me on opportunities it sees and identify emerging challenges. It will bring new ideas to the table on how we can scale up New Zealand businesses and grow our export led wealth.

“I want to work closely with, and be advised by, senior business leaders who take a helicopter view of our economy, who are long term strategic thinkers who have the time and energy to lead key aspects of our economic agenda.

Perhaps all the people on her group are very able at what they do.  Perhaps many are even good at thinking about the implications for their own businesses of specific technical advice.

But not one of them seems to have the background or skill set that suggests they have anything more to add to fixing New Zealand’s woeful economic underperformance –  over multiple decades –  than, say, the first 100 people in the Wellington phone book.

Drawing on old article from Paul Krugman, when this Council was first announced I wrote a post about how a company is not a country, and the skills that equip someone to run a company bear little or no relationship to those involved in identifying the economic failings, and appropriate remedies, for a country.

Expertise on economic management, and the particular confounding challenges the New Zealand economy faces, just aren’t the sort of thing that tends to be fostered in the course of a corporate career.   Many of these people might have been superb marketers, exceptional operations managers, corporate finance whizzes, smooth operators around the edges of regulation and the tax system, and have risen to assume overall responsibility for (by New Zealand standards) fairly large organisations. They are absolutely vital skills, and business roles done well are a big part of how, in pursuing the interests of shareholders, society is also made better off.   But those skills bear no resemblance to the issues involved in addressing long-term economic underperformance.  For a start, the things businesses have to take as given are precisely the sorts of things governments often can vary, and (as Krugman eloquently notes) the sorts of constraints even a large business faces are very different from those an entire economy faces.   And so on.

It is great that these individuals care about New Zealand’s economic performance, but there is no particular reason to believe that in general they will have more useful perspectives to offer than the average moderately-educated voter chosen from the phone book at random.  Running a business no more equips you to provide useful advice on economic policy more generally (as distinct perhaps from specific bits around your industry) than it does to, in Krugman’s words, write great poetry or make military strategy.

What isn’t clear is whether the Prime Minister genuinely expects this group to make a difference –  successfully identifying the key issues governments need to address –  or is simply buying a bit of time and goodwill with the big end of town in the hope that something will turn up.   One interpretation would suggest extreme naivete and the other a quite cynical approach.  Take your pick which you think is worse.  Perhaps it is just wishful thinking?  But whatever the answer, a year into the government’s three year term, there is no economic strategy, nothing that anyone credibly thinks will lift our long-term productivity underperformance, successfully reorient the economy outwards.    For a short time perhaps any goodwill around the creation of this council will paper over the void…..but a void it is.


  • the level of productivity is flat or even falling,
  • the export and import shares of GDP have been falling,
  • in per capita terms, the tradable sector of the economy hasn’t grown at all this century.
  • (and if we want to talk “inclusion” there is no sign of a structural fix to the housing o or urban land supply market),
  • while we are left with a structurally overvalued real exchange rate and the highest average real interest rates in the OECD.