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.
Meanwhile,
- 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.
croaking cassandra 
Well said Michael. Thank you.
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I didn’t find the list to have any inspiring persons on it (rocket lab is cool but are they highly productive).
Given the problem has existed across multiple generations, the notion that some working group that was knocked up (regardless of if they have experience in government type operations), falls in to the same old trap of thinking that all those before us were idiots.
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Should a advisory council contain inspiring people? Leave that to the politicians. An experienced team discussing ideas with no dominant voice is what the govt needs. I would reduce the number of businessmen/women and try to boost the HR component: a couple of trade union leaders and maybe just one academic would add intellectual diversity.
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It is about alignment of skills. 10 macroeconomists would generally be hopeless running one of the companies those people run. We shouldn’t expect anything much better when this group try to fix the economy.
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To be fair the only thing a macroeconomist can do is impress another macroeconomist whereas a businessman can make a profit and a politician can garner votes and a chef can feed customers. Macroeconomics is a weird career choice.
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If 10 macroeconomists do not factor in 10 million cows in their productivity calculations, then I would not expect those 10 macroeconomists to have anymore success in fixing our economy.
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Depends on how you measure productivity. One man who has a smart idea such as launching a electron graphite rocket from NZ with a 130kg payload, makes it work and sells that idea to a US corporation for $200 Million sure is highly productive in anyone books I would have thought.
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But that is part of the point: “sells to a US corporation for $200 Million” is not part of the range of options available to the Government, yet for many NZ business leaders expanding overseas or outright selling the company is an important strategic option. Consider Michael Hill (successfully expanded overseas when the NZ market saturated), Fisher & Paykel (sold out to Haier), or many other NZ businesses that have been quite successful for their shareholders.
I do a little consulting for a firm that was founded in Wellington, moved to Brisbane, and is now based in New York, which is its natural home. It has operations in Ireland and India, but not in NZ (because NZ makes no sense for this particular firm). It apparently employs several hundred people in well-paying positions. What is the NZ productivity story here?
Is the way to fix NZ’s productivity problems to sell the country to the Chinese? – perhaps that is actually the undeclared strategy of both major parties. Or should NZers move overseas, where economic opportunities are better? – they do this without any need for Government to set policy for them.
In reality, the problem “how to improve the performance of a particular geographic area” bears no relation to “how to improve the performance of a particular organisation which may be based anywhere”. And that is one part of Michael’s point.
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The government will prefer and also made to, by the dumb NZ courts to fund culling cows and kiwifruit disease prevention to the tune of $1 billion plus. Rather than continue to subsidise primary industries by the billions, the same billions would have kept this leading edge tech in NZ. Going overseas is a function of volume and Investment capital to grow. Both of which NZ does not have because it is wasted in Primary Industries.
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If Peter Beck retains a percentage of that $200 million in NZ and Rocketlab continues to launch rockets in NZ using US capital then that adds to GDP which is the numerator in any productivity calculation. Even if he just builds himself a mega mansion to live in that would add to domestic GDP.
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“Depends on how you measure productivity”
How productivity is measured is not up for debate, unless your hope is to define yourself out of a problem. Might as well cut to the chase and figure out how to redefine a deficit into a surplus.
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Of course you have to debate productivity. We can Add another 20 million cows and our productivity will be significantly higher. But is that an intelligent thing to do to boost our economy?
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I agree Michael. And I’d add that one of the key issues we appear to have is a lack of competition. A free market isn’t necessarily an efficient one from the perspective of the broader population if it ends up creating monopolies and oligopoly as we currently face in many industries.
I’d argue that the lack of discipline in ensuring competition and efficient pricing of industries at the Big End of town is a key challenge we face.
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““People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”” – Adam Smith.
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The small population in NZ and the resulting lack of volume forces margin to be the primary focus to enable a sustainable business.
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re JLR
cream and scum rise to the top
but also JLR has followed the tried and true path pioneered by one Joan Withers, do the dirty work and keep your trap shut, and we will promote you upwards from a wilderness background
but bridges clearly underestimated the backlash when he tried to, in effect, blackmail JLR with his own sins
and being from nothing, and seeing what a stupid backfiring threat that was, he had nothing to lose
Tony Gavigan Director Joint Action Funding Limited anthonyjgavigan@gmail.com +64 21 32 62 72
>
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Reblogged this on The Inquiring Mind.
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On this question, Michael – “Unless of course, the main required quality for a National MP is now fundraising – often of the most questionable kind…”
A previous GM of the National Party was on The Nation this morning and somewhat answered your question:
“The party is very different to the— I used to call the politicians the salespeople, the retail arm. Their job was to go out and sell. There’s always a natural sort of a contest between the two organisations where the politicians will say to the party ‘we need this’, and as a party general manager I would say, ‘No, you can take that out of your leader’s budget, because we’re running a business over here.’”
http://www.scoop.co.nz/stories/PO1810/S00307/the-nation-chris-simpson-and-david-collings.htm
Also he points out, he was part of the National Party hierarchy who went to Melanie Reid, the reporter from Newsroom to tell her to start investigating Ross’ relationships/behaviour. My mouth dropped on that revelation – why didn’t they just take their own appropriate disciplinary employment action if they knew he was an obnoxious bully – why send the victims to a reporter instead? Melanie Reid explained that she’d been looking into this for nearly a year. Makes you think the Parliamentary arm wanted to keep him, whereas the party just didn’t know what to do. Bizarre.
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Thanks. That is quite a staggering observation, to use REid to attempt to solve their own party failings.
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Correction to my above – it was David Collings, the Howick Local Board chair who approached Melanie Reid, not Chris Simpson, the former National Party GM.
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Even with the Melanie Reid revelations it is no easy matter to remove a elected MP. The choice remains with JLR whether he resigns or he continues as an independent. If the women are not prepared to lodge police reports then there is no criminal offences to answer for and it is just a matter of he says and she says. Leak it and hope the scandal would force a resignation by JML. Almost worked unfortunately JML has chosen to continue as an independent to be a unhindered nuisance under parliamentary privilege.
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I followed your link to the terms of reference and think you may be overstating your concerns, These are the three purposes of the council
provide high-level free and frank advice to the Prime Minister on policies that directly affect business
harness the expertise of the private sector to inform government policy, and
build closer relationships between government and business.
Which seems harmless enough. The govt claims it is “” committed to building a productive, sustainable and inclusive economy, improving the wellbeing of New Zealanders “”. The Business Council is not being asked to reform our economy, nor to set standards for sustainability or inclusivity but it is anticipated to know something about productivity.
This weeks news has two messages. The danger of business (wealth) mingling with politics in a manner lacking transparency and the problem with politicians who have no experience in anything other than politics losing touch with reality. Lack of non-political experience may be the only similarity our prime minister and several other leading MPs have with JLR. The problem relates to all politicians being meddling busybodies who know what is best for other people. Most of us have family members with similar traits who we avoid and really skilled politicians learn how to disguise the fact.
I accept that the ‘knowing what is best for others’ applies to whoever posts comments.
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quote “The Business Council is not being asked to reform our economy, nor to set standards for sustainability or inclusivity but it is anticipated to know something about productivity”
That’s what the Productivity Commission is for
Is this council designed to neutralise the Productivity Commission
Michael could have been much less gentle
The Terms of reference are a mish-mash of words
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Yes, the TOR certainly have rather as watered-down look and feel to them, no doubt drafted by DPMC and MIBE rather than the PM#s office. They left me inclined to the cynical interpretation rather than the naive one, but either way there is still a void where an economic strategy should be – and nothing seems likely to change that in the next year (between politicians with no interest, senior officials with little competence/expertise, and the Council).
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Put my Joe-Six-Pack T-shirt on and read the terms of reference – it’s a political panacea to the business elites to get them into the tent
Productivity – close the immigration spigot
Wellbeing of NZer’s – close the immigration spigot
Sustainability – close the immigration spigot
Inclusivity – close the immigration spigot
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Productivity – immigrants if they have a PhD from a reputable institution. NZ to pay them to come here.
WellBeing of NZer’s – the terms of reference also calls them ‘Kiwis’; with fewer immigrants we have more infrastructure to share
Sustainability – without the immigrants who have arrived this century there would be no fossil fuel electricity generation in NZ.
Inclusivity – sadly this is where our immigration policy is failing us. By keeping wages low and encouraging short hour contracts and simultaneously increasing housing costs it has produced a strata of poverty in our society that is excluded and marginalized. Although in Auckland North Shore the wide mix of immigrants is generally thriving and inter-mingling the continual increase is noticeably tending to create ethnic enclaves. It would be wise to freeze immigration from countries which have sent too many (that includes mine).
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For the purpose of getting it on the record out there in the cloud
Howzabout compiling a list of 5 intellectual giants capable of first defining the problems then articulating possible solutions
A productivity tip from Albert Einstein. quote: “If I had an hour to solve a problem I’d spend 55 minutes thinking about the problem and five minutes thinking about solutions”
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The problem’s definition is in the terms of reference. “”The Coalition Government is committed to building a productive, sustainable and inclusive economy, improving the wellbeing of New Zealanders. It recognises that the business community are important partners in this challenge.””
Firstly do you agree with the problem’s definition? For example a globalist may decide the government should express concern about non New Zealanders too. Personally I think it is a reasonable definition of the problem but a business council is only a very small part of the solution. Discussing the problem would be interesting since we all have different ideas of ‘productive, sustainable and inclusive’ and their relative importance and how to measure them. Einstein was a physicist and they always resolve means of measuring before doing anything. For myself I’ve just realised I can’t define the word ‘economy’ without a dictionary.
Then it is not a matter for intellectual giants. Every country has much the same problem and has had it for a long time. So the solution is found by looking at solved similar problems – consider sport how do you win an olympic medal? Rarely with a brilliant innovation (Fosbury Flop was 1968) but with commitment, sacrifice, striving for small improvements and attention to detail. For team sports add teamwork.
It is a simple problem that just needs a clear explication and then the tough solution being sold to the public. It is the ‘intellectual giant’ approach that has given us: free first year tertiary rather than identifying what students actually learn at university that is eventually put to use. It has given us fix the employment crisis in house-building and teaching by instant immigrants rather than reviewing why we are losing builders and teachers and failing to train new ones. It has given us a plastic bag ban that left us with single use plastic milk bottles instead of making packaging returnable.
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I don#t think it is a matter of intellectual giants. I have argued for some years that the situation calls for a serious contest of competing narratives, from people with the interest, expertise, and specific NZ knowledge to have developed serious stories. I have one. Paul Conway at the Productivity Commission has another (some overlap with mine, but some key differences). There are one or two really able people at Treasury who have thought about the issue. With the right incentives others might develop their own stories more fully.
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Unfortunately my narrative says both your narratives are seriously flawed.
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Re: “…if we want to talk “inclusion” there is no sign of a structural fix to the housing or urban land supply market…”
Housing prices and rents that inflate above building costs, in places where there are employment opportunities, is like a labour permit system where the permit price of entering a city-based labour market inflates faster than wages. This ‘permit’ costs workers and business billions if not trillions of dollars -far larger than any other cartel, monopoly or rort in the economy.
Even worse than the productivity costs, excessive housing costs increase inequality. The wider public are concerned about such housing issues, commonly discussing the problems of increased homelessness, generation rent and the housing crisis in general. Polling in New Zealand shows that housing is the number one public concern.
Maybe NZ should stop talking about do something and actually do something about the damaging problem of housing inflating above costs in places of opportunity.
https://iea.org.uk/our-terrible-planning-system-causes-untold-damage-to-labour-mobility-and-productivity/
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Most of those employment opportunities are in cities. Cities are defined as ‘places where there is an absence of space between people’.
New housing in cities can be constructed upwards or outwards.
To make it easier to build houses upwards at their true cost of production -a number of things need to happen.
1. Unnecessary planning restrictions that provide few benefits at huge opportunity cost need to be removed -such as the ridiculous ‘billion dollar viewshaft’ in Auckland providing a brief glimpse of Mt Eden from a motorway.
2. For planning restrictions that represent genuine externalities or nuisances then a system should be in place where neighbours can renegotiate these rules so they can best balance externality costs against developmental gain. Something like this;
View at Medium.com
For a city to build out
1. Again unnecessary planning restrictions need to removed
2. There needs to be infrastructure financing and charges so that the beneficiaries pay the full cost. So road de-congestion charges may be necessary, for instance.
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Brendon: are you allowed to define the word city as ‘places where there is an absence of space between people’? That is reminiscent of the black hole of Calcutta or Dante’s Inferno or Britomark Auckland in the rush hour. However you usually seem to be motivated by a benelovent attitude to the entire population; there is no adequate reason for the housing shambles in Auckland. The best explanation I’ve read is ‘9 years of a govt that did nothing and now a govt that does things in a half-baked fashion’.
Everyone makes mistakes and that includes governments but making the same mistake multiple times is not forgiveable; Auckland has had housing crises in the past.
Specific to your comments: well they are rather obvious but somehow the govt still needs telling. I’ve no expertise but are view shafts really that significant? Removing them would be yet another arbitrary change leaving a small number of big winners and potentially large number of small losers. For building out congestion/de-congestion charges are needed (leave out the ‘may’) and developing the software should be high priority – who knows the population may decrease and they won’t be needed but we are unwise to delay.
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There are only two people here who seem to question “Auckland’s view shafts”
Both are newcomers to NZ. Both question the longevity of our view shafts
I am not an activist. I have never marched in support of any cause
If there was ever a move to sacrifice them I would march
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I am with those newcomers who question the view shafts. I am not an Auckland but am pretty sure I would take the same approach if such restrictions – of such far-reaching effect – existed in Wellington.
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I am not new to NZ and as a child I lived in Auckland. There is no way one viewshaft from the North Shore motorway where the toll booths used to be is worth the opportunity cost of billion dollars worth of missing building development around the CBD.
‘Cities being the absence of space between people’ is a quote from Edward Glaeser. It is a simple description. Sure some cities could be hell holes, slums… but I think it is helpful to define what cities are.
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Geoff Cooper the economist author of paper on the billion dollar viewshaft is identified as a kiwi in this article back in 2015.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11383759
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The better viewshaft is the one from the motorway where you see Rangitoto. Pretty iconic. But not worth sacrificing, say, Pukekohe’s arable land to make up for the lost development.
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Under the old Auckland district plans, these 40 million sqm Unitary Plan Viewshafts were called Volcanic Sensitive Zones. I think the old district plan planners had the correct definition. It did not dawn on me to make the connection between volcanos and viewshafts until I read that the Aucklands volcanic lava underneath the earth crust is of a similar easy flow type as Hawaii, which means once there is an eruption or even the lack of a eruption, the lava flow covers a vast area. Initially, I had thought that it did not make sense to have Viewshatfs when we have a shortage of accomodation and highrise is the only real solution. But with Auckland being in a vast volcanic field with 57 volcanos it has slowly dawned on me that this is not some wishful cosmestics by idiotic planners but practical and forward planning by geotechnical engineers. You do not want any high density high rise development in the path of a lava flow. It is unstoppable. It is cheaper to replace one of these old $25k Mt Roskill ex state houses than to replace a $1 billion high rise development in a lava flow damage.
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Are there any stats that show job growth by income level? For example in tourism and hospitality real wages fell 24.5% between 1979 and 2006?
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Unfortunately when migrant labour became available at minimum pay or less, local kiwis that demand a 40% premium wage above unemployment benefits became unemployable.
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Some good work was done around the time of the Knowledge Wave towards developing an economic strategy. There was one particular paper done by BCG and Deutsche Bank on attracting foreign direct investment that I found very good (I worked for BCG then but not in NZ and was not involved in the paper). Sadly, nothing much seems to have come of the goodwill the Knowledge Wave unleashed.
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Economist is blowing Australia’s trumpet. [I can’t get past first paragraph]
https://www.economist.com/leaders/2018/10/27/what-the-world-can-learn-from-australia
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