The PM’s economic plan

Michael Reddell New Zealand economic performance, Productivity

I read the Prime Minister’s economics speech yesterday. I wasn’t impressed.  There is simply no sign that she cares one jot about New Zealand’s decades of underperformance or that she has any sort of analytical framework (herself or from her advisers) for even thinking about the issue.  It may be repetitious to say so –  as a reader this week suggested –  but the utter unseriousness about our ongoing relative decline really matters; perhaps not directly or much for many people my age or older, but for our kids, and their future kids.  Including for the question of whether the next generations even stay, rather than joining the million or so New Zealanders (net) who’ve left over recent decades.

She continues to perpetuate what are little more than lies

“…on key economic measures the Government is delivering”.

That would be the economy with no productivity growth, with foreign trade flat or falling as a share of GDP, and with houses that are increasingly unaffordable to younger generations.  Some delivery.

She runs a fairly conventional story about risks in the global economy, and keys off a line from the IMF Managing Director suggesting that “policymakers need to make greater efforts to prepare for the slowdown”, noting that “that is a message we are heeding”.

That’s why our economic plan includes the following key planks:

  • Doubling down on trade and broadening our trading base to protect our exporters and economy
  • Reform of skills and trade training to address long-term labour shortages and productivity gaps in the New Zealand economy, and to make sure we are prepared for ongoing automation and the future of work
  • Changes to tax to make the system fairer
  • Addressing our long-term infrastructure challenges
  • Transitioning to a sustainable carbon-neutral economy
  • And of course investment in wellbeing, because this is inextricably linked to our economic success too.

Not one of those strands really has anything much to do with coping with a cyclical downturn (getting onto the Reserve Bank to deal with interest rate lower bound might,or even arguably something around fiscal policy), but even if one takes them as the components of a longer-term economic strategy it is underwhelming at best.

Take trade, nothing the government is doing (and there is a page of it in the speech) is any different than the previous government was doing.  You might approve of that approach or not, but the point is that during the term of the previous government foreign trade fell as a share of GDP.  The latest Treasury forecasts, prepared on current government policy, didn’t suggest any reversal.

No one supposes that a capital gains tax is going to make any material difference to the productivity/efficiency of the New Zealand economy.  As the Prime Minister says, the goal there is “fairness” –  which might be a perfectly reasonable argument, but there is no credible story in which it makes us in aggregate materially better off as a country.

Despite its appearance in the list, there was nothing in the speech about those “long-term infrastructure challenges”.  Lots has been spent on infrastructure over the last 15 years – when productivity growth was feeble, tailing off to non-existence, so why should we (or her audience) think things will be different now.  And is there any sign of using the infrastructure we already have more efficiently –  eg congestion pricing in Auckland (and perhaps Wellington)?

As for the carbon-neutral economy, that might on some tellings be a worthy or even noble objective.  But the government’s own consultative document last year reported estimates that achieving that goal would cost anything between about 10 and 20 per cent of 2050 GDP.   Some people dispute those estimates, but I’ve not seen any credible story in which New Zealand’s aggressive pursuit of carbon-neutral would make us economically better off.

As for “investing in wellbeing”, I guess she has to include at least one reference to this vacuous project. But it, after all, involves a de-emphasis on economic performance, not lifting that performance.  In discussing wellbeing in her speech, she is openly complacent about GDP growth, rather than giving any sense that we really need to be doing a lot better (productivity etc) if many of the other aspirations society has are to be met.

Which brings us to skills, which gets 2.5 pages in the speech, apparently a prelude to whatever specific reforms are being announced next week.  Labour has long been keen on pushing the line that a significant part of lifting productivity in New Zealand involves lifting “skills”.  I guess it sounds good –  whether workers or firms, who is likely to object.

Except, of course, that OECD cross-country comparative data suggests that adult skills levels in New Zealand are already among the highest in the OECD.   I wrote about this in a post a couple of years ago, and here are some of the charts and text.

Here is how our adults scored on literacy.

oecd literacy 2

And numeracy

oecd numeracy

And on “Problem-solving in technology-rich environments”

oecd problem solving

Looking across the three measures, by my reckoning only Finland, Japan, and perhaps Sweden do better than New Zealand. Perhaps there is something very wrong with the way the survey is done, and it is badly mis-measuring things, but those aren’t usually the OECD’s vices. For the time being, I think we can take it as reasonably solid data. And the broad sweep of the cross-country results makes some sort of rough sense: typically the poorer countries are to the left of the charts (relatively less highly-skilled).

And when the OECD lines up the skills scores against the productivity data one of the largest gaps (lagging productivity) is for New Zealand   The cross-country scatter plots don’t show a tight relationship by any means, but they do tend to suggest that the skills and talents of our people aren’t what holds New Zealand back.

Sure, it looks as though our schools could usefully focus on teaching maths better, and no matter what the aggregate scores some individuals will almost always lag behind.  But as some sort of centrepiece of an “economic plan”  skills just isn’t an obvious place to start.   The Prime Minister and her advisers might find it more rewarding to start with areas in which New Zealand more visibly stands out: persistently low rates of business investment, persistently high real exchange rates, and persistently high (relative to other countries) real interest rates.  But I guess confronting some of those stylised facts might raise questions about economic policy over recent decades that they would rather avoid.

In the midst of her section on skills, these sentences caught my eye

Take the building sector for example. We know we need more tradies and they are just not coming through fast enough.

That’s absolutely no reflection of the people who are involved in the sector – far from it. What it is, is a damning statement that the system has been left to drift, to muddle through.

Perhaps, but count me a little unconvinced.  Here is Quarterly Employment Survey data on construction sector jobs as a share of total filled jobs, back to 1989.

construction jobs.png

There are roughly twice as many people employed in construction as there were in 2002, and the increase in the share of the total workforce is really huge.   I’m not convinced it is a particularly helpful sign that 9 per cent of our total workforce has to be employed just building houses and shops for each other, but it is what happens when policymakers have turbocharged population growth.  Perhaps more relevantly, the construction sector is highly cyclical –  globally –  and if I were counselling a young person about possible career options I’d be suggesting that a construction sector workforce as high as 9 per cent of the total isn’t that likely to last for long. But no doubt the Prime Minister sees things differently.

If there is any sign of a plan, it isn’t one that is going to do anything to lift our economic performance, in the short or longer-term.   All indications are that the Prime Minister doesn’t care.  More worrying is the possibility that neither do many of her audience –  comfortable successful business figures, mostly doing well out of an economy skewed increasingly inwards.

Someone needs to cut through the indifference of the political and economic establishment.  But it won’t be the Prime Minister’s party –  or her allies or the National Party.

61 thoughts on “The PM’s economic plan”

  1. Excellent analysis, however I think it would be more correct to say that our PM doesn’t understand this stuff rather than doesn’t care. I am sure that her goals for the financial well being of NZers are laudable. It is pretty obvious by the coalition’s performances & statements thus far, however they have not got a clue how to start achieving any of them. She is however the master of virtue signalling & presenting a knowledgeable facade. Unfortunately to many this is all that matters.

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    • I’d like to think you were right. I guess my take would be along the lines of if NZ productivity could be lifted with a snap of the finger to world-matching levels they’d be delighted of course, but even making inroads on closing that gap doesn’t matter enough any longer to even mention it, let alone sponsor serious efforts, involving expenditure of political capital, to get to the bottom of the issues and take action in response.

      (But I’m sure many of the other things she does seem to care about are worthy in their own right.)

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      • Jacinda Ardern is a liar. I cringe whenever she opens her mouth expecting another lie to spew out. Her election promises has so far been lies.

        No New Taxes election promise during the election was a complete lie. Auckland Regional fuel tax is a new tax. Ring fencing of property tax losses is a new tax. The 5 year Bright line test on property is a new tax. Now she wants a Capital Gains Tax on all business and property before the next election. What a liar.

        Kiwibuild is a big fat lie.

        1 billion trees to be planted is a fat lie

        Monorail on Dominion Road is a fat lie.

        Transparent government is a fat lie

        Banning oil and gas exploration was never on the election agenda and suddenly she throws it in. That is another fat lie.

        Not informing the public of her pregnancy during the election is another lie

        Calling lies, aspirational targets, just to fool the public is a fat lie.

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    • The problem resides in being a pure communist government which we are increasingly becoming. Jacinda Ardern and Grant Robertson has spent too much time reading Karl Marx. The problem with being fair to workers is that you strip the equity out of the entrepreneurs who create new businesses. Workers are not risk takers, therefore more wealth in this sector does not create more productive industries.

      It is a tall poppy syndrome that has infected our government. Spreading wealth too thinly means that no one has enough equity to grow new and innovative industries.

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      • Of course Jacinda will point her crooked finger at the last government and say that they did not do anything for 9 years but forget that John Key and Bill English had to deal with the mess of a recession that the RBNZ engineered decimating an entire building industry and the Risk Finance industry, the GFC and 2 major earthquakes. The fastest way is of course tourism and international students.Chuck 4 million tourists into NZ and 100k international students into Auckland and see what happens.

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  2. Michael,

    When our Cabinet and PM are as devoid of work life skills, commercial experience and even old fashioned ‘common sense’ as this grouping it’s unreasonable to expect anything substantive from them. It is superficial ‘feel good’ utopian ideology all the way down.

    All the way down.

    Perhaps in opposition National may take time to work on issues of substance. However, baring a handful of exceptions, they are as vacuous as their government colleagues.

    I don’t know who their finance spokesperson is, but it might be worth getting alongside them, or at the very least providing them with a briefing paper with suggestions around how the question of improved productivity may be addressed, with an explanation of why this is important.

    I’m new to following your blog, and you may well have already articulated your thoughts on this matter, but effecting change means convincing those with the ability to perform it, either now or later.

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      • Brendan, actually you can summarise Michaels entire productivity solution into one sentence.

        “Cut Immigration targets to 20,000.”

        In fact, the entire election propaganda by the Labour Party and NZFirst was based entirely on Michaels blogs or a version perpetuated by Bernard Hickey who definitely do read. They all do read and they used it against the National government.

        The Labour/NZFirst government started to face reality when they became the government.

        Our largest industries are Tourism and international students, $17 billion every 12 months of offshore cash injected directly into the domestic economy in many multiples. Our aging population is driving the fastest growing industry which is the health sector. 70% of the government tax revenue comes from PAYE and GST.

        Unfortunately the best service is always more people. AI robots in the service sector is still decades away. A $2 million robot still struggles to turn a round handle, open a door and step through it. Even our dumbest human 5 year old can easily open a round handle door.

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      • You know that is not a remotely accurate description of Labour’s policy going into the election
        https://croakingcassandra.com/2017/06/13/two-sides-of-the-same-coin/

        It is certainly true that I think our decades of large non-citizen immigration inflows have been the largest single policy mistake (although lots of other changes could make useful difference), but Labour’s policy did not propose to change those residence approvals numbers at all (altho it is true that under Andrew LIttle they tried to give the impression otherwise).

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      • Thanks Michael

        I read the document at the link you provided. Let’s assume that reducing immigration by the numbers suggested in your presentation is the beginning of a longer term solution. Given the short term loss in revenues and associated tax take, is that a politically viable option for any incoming Government?

        Will the general population accept a higher level of personal taxation to ‘get us through’ the period of declining tax revenues, (or borrowing) until there is equilibrium? What impact would these options have on the economy, and are they sustainable?

        If what you say is true, and I have no reason to doubt it, then it appears we have been masking a structural problem for several decades, and have now reached the point where the ‘cure’ is either politically or economically difficult, if not impossible.

        I would be interested in your analysis around the political practicality of implementing your ‘cure’.

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      • Brendan

        I have proposed phasing in reductions in residence approvals (perhaps over three years) so part of the answer is in gradualism. But it is also true that financial markets would be expected to react quite quickly even to a programme of cuts foreshadowed several years in advance. In other words, I would expect that we would see the exchange rate and long-term interest rates falling quite quickly, which would provide an immediate fillip to other sources of demand.

        I’d be surprised if it were necessary to do anything very dramatic to fiscal policy in the near-term. After all, the starting position is a fiscal surplus (quite a material one) and even if the budget were to move into a deficit on 1 or 2% per cent of GDP for a year or two, the Crown balance sheet would be well able to cope with that modest additional borrowing. ( i think the biggest obstacle would be squeals from various non-tradable sector business groups, who have until now relied heavily on immigrant labour.)

        Answering your politics question is hard, because we are thinking in the abstract – not taking account of the circumstances that led politicians to be willing to seriously consider my option. But I’d be selling the programme not just on boosting the tradables sector, but easing congestion, lowering house prices, and (eg) easing pressures on health and education systems. Ideally, one wouldn’t do the immigration cuts in isolation: I wrote a post when Ardern became labour leader on a package (incl some compensation elements) that a serious reforming leader might usefully consider.

        https://croakingcassandra.com/2017/08/03/a-fresher-approach-for-ordinary-new-zealanders/

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      • I have been struggling conceptually as to why we are hell bent on tax payer subsidising a dying Primary Industry sector ie cows and food production that has extremely low yield but enormous use of land and water resources and the associated pollution handling the enormous waste in unmanaged waste of 10 million cows and the generation of 50% of NZ carbon dioxide emissions plus methane gas on top of that which we were lucky the Paris Agreement left out.

        The reason is to keep population in the regions otherwise they will all end up in the cities. I think historically with a white only policy then it made sense to keep white settlers on disputed lands otherwise Maori would just retain ownership if there were no white settlers farming the land. But with Maori now in effective control in government and also in every political party, we should just allow nature and rural drift to run its natural course.

        No point subsiding China or the worlds food production at our own cost since we export 95% of our Primary Industry production.

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      • The “Fresher Approach” needs a Refresh

        “Deep cuts in taxes on business and capital income”

        USA – Trump Tax Cuts – didn’t work

        Chatter: 84% of US businesses didn’t change their capital investment or hiring plans following the USD $1½ trillion business tax cut (from 35% to 21%) that came into effect on January 1, 2018. Those corporate tax cuts were designed to spur business spending and job growth. That hasn’t happened

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      • More Refresher

        Why pussy-foot around

        I have advocated a temporary zero immigration policy. Turn the taps off altogether for 5 years. Sure it would turn some peoples plans upside down. The problem is no-one can provide evidence of the macro-benefits to NZ as a whole and any micro-benefits to the individual “citizen”

        The surprise is not one official authority has put their hand up to presents the benefits. Sure we get the usual soft-crap about diversity and multi-culture. Well, guess what – NZ now has just over 180 different ethnicities, mostly concentrated in and around Auckland. And guess what – it hasn’t produced the implied benefits

        In any business that’s the business decision that would be made – shut it down and re-assess

        How to put a business out of business
        I listened to a discussion about “Valentines” smorgasbord (all-you-can-eat) restaurants chain in NZ. There are only 4 left in NZ. The one in South Auckland was closed down pretty quick due to the enthusiastic patronage of the local Pacifika. Guess what decision the proprietors made. Yep – they sure did

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      • Frankly, Valentines closed because the food served just got routinely awful and stale and the patronage declined. Not sure why you would blame pacifica clientele?

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      • You speak from personal experience and observation.
        You personally went to the Manukau Valentines? Frequently?

        “Struggle in South Auckland to fight Pasifika obesity

        NZ government initiatives to improve health standards among South Auckland’s large Pasifika community have failed, despite efforts to fight high obesity and diabetes rates. Liquor stores, fast food chain restaurants and fried chicken take-aways are a common sight on the streets of South Auckland where communities are fighting to get healthy”

        65% of all Pasifika adults are obses
        https://www.radionz.co.nz/international/programmes/datelinepacific/audio/201850038/struggle-in-south-auckland-to-fight-pasifika-obesity

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      • Iconoclast, you can’t blame the patrons for being gluttons if the business fails when it has successfully attracted its targeted market? The business must have looked at the population demographics when it launched and would have known the market would be Pasifika. Each of these Valentines restaurants would have had at least $700k plus invested in fitout and furniture.

        If you can’t price correctly or cater correctly to your targeted patrons then it is really a business owner failure.

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  3. It’s hard to think of somebody with such a winning smile as a “liar”. Ardern is a communicator, not a thinker. Unfortunately her government’s policies on tax, industrial relations and gas exploration among other things are a serious deterrent to investment. Our overall GDP growth is petering out just before we stand to get whacked by the recession underway in the Eurozone and troubles in the Chinese economy. New Zealand has relied for far too long on mass immigration, much of it low-skilled, to boost apparent growth. This has created serious strain on infrastructure and services. The impact will be brought into stark relief as lay-offs get underway in many industries in coming months.

    We need therefore a population policy as the basis for economic planning. Labour “shortages” should be seized on as an opportunity to innovate by managing more effectively and developing new technology in areas like construction and horticulture for example. We live in a world of increasing automation and the rise of artificial intelligence where we will need fewer workers, not more. Time to cap New Zealand’s population at say five million allowing for natural increase and immigration by those with vital 21st century skills. Is anyone listening out there?

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    • Comrade Ardern is a communist thinker and idolises Karl Marx. She has a command and control style of government reminiscent of the traditional communist and nothing like modern communists like China who have adopted market capitalism.

      Ban oil and gas exploration

      Ban smoking in the car

      Steal the assets of wealthy people because it is unfair to workers

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  5. The most amusing part of the speech was the comment that the economy was trucking along at 3%.

    The ANZ Business Outlook ‘own activity’ index, adjusted for a centre-left government suggests quarterly GDP growth of 0.3-0.4%q/q and now the decline in our PMI for Services Index is also pointing to real GDP growth slowing to around 1.5%y/y with a two quarter lead.

    This accords with our (very limited) high frequency data – job advertisements, ANZ truckometer, auto sales – pointing to very subdued activity at recessionary levels on a per capita basis.

    Given our near record terms of trade, historically (by our standards) low real interest rates and a massive fiscal impulse (which is arguably smaller than the Treasury suggests owing to implementation difficulties), our growth performance remains lousy, and is getting worse.

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    • Well, all these Asians certainly solved the $10 billion leaky home problem that New Zealanders had. Kiwis sold out these pesky homes to unwary Asian buyers prepared to buy at auctions with no warranties, sight unseen. Problem solved.

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      • Not so much unwary Asian buyers as unconcerned. They were just looking for places to dump hot money. Plus most of these places were marketed by their countrymen, so not really a scam by Kiwi, more Asian on Asian.

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      • I did not say or indicate that anyone scammed anyone. The bottom line is, Kiwis got a free “$10 billion, Get out of Jail” card, courtesy of Asian buyers.

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  7. Rising diversity polarizes people by psychological outlook and re-orients party platforms. As countries ethnically change, green parties move to capture cosmopolitan liberals and the populist right targets conservatives and authoritarians.” While attitude liberalization did throw up cultural debates over religion, gay marriage and traditional values, these are on their way to becoming marginal in Europe as liberal attitudes attain mass acceptance. The legalization of drugs and the question of how best to address crime are live social issues, but neither promises the same radical transformation of society as ethnic change. Therefore it is ethno-demographic shifts which are rotating European societies away from a dominant left—right economic orientation to a globalist—nationalist cultural axis. The West is becoming less like homogeneous South Korea, where foreign policy and economic divisions dominate, and more like South Africa, where ethnicity is the main political division.
    Eric Kaufman – Whiteshift

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    • If I look at the individual profile of our Green Party, it is decidedly looking like the only remaining predominantly white political party left in NZ. Every other party looks Maori.

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      • Sure, other than Marama and a Muslim that pretends otherwise, Golriz, the rest of the team looks whiter than white and I think the support base is mainly white.

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      • Maori are 14% of NZ population and Asian is 11% and with only 8 MPs the Greens match the demographics. Not that it matters whatsoever otherwise how would Jewish Disraeli or half-American Churchill have ever been Prime Ministers in Britain.

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      • Race is obviously easy to identify but not important (or shouldn’t be) it’s all about culture and culture is, above all, a value system. There are few citizens or MPs that have a value system significantly out of line with the prevailing culture. That Chinese spy, the insane Marama Davidson probably but neither of them were elected and probably never would be; the public have more sense than they are generally given credit for.
        It’s about time we stopped thinking of people along racial lines. Who or what is a Maori? It may be 14% (or much less or much more depending on definition) of the population but the vast majority have values and (therefore) aims generally in line with the broader culture. We don’t really have a multicultural society, thank God.

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      • That was the original intent of NZFirst is to not have racist government policy that is Maori biased. However, Winston Peters becomes rather quiet with NZFirst primary policies and the NZFirst manifest has dropped considerably by the wayside. He does not walk the talk.

        I listened to an interview with one of the Maori Iwi leaders during Waitangi and the discussion centered around wonderful recognition of Maori as a sovereign nation with the NZ crown as a separate sovereign nation. The continuing recognition of the Treaty of Waitangi is just encouraging the separation of Maori from New Zealanders.

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    • The clamour for separate sovereignty is founded in some pretty basic (deliberate?) misunderstandings; the claim that sovereignty wasn’t ceded to the crown and that subsequent generations could just excuse them selves on that basis and the very nature of sovereignty itself.
      If you are born here you naturally are bound by the rights (to vote, and personal and property rights protection etc.) and obligations (to obey the law, pay taxes etc) under the common law. It’s not negotiable and applies to all regardless of genetic background.
      The highly dubious claim re what was understood and signed for is now irrelevant; it has been de facto accepted. If the intention was not to cede sovereignty then 180 years of compliance is a very strange way of showing it. The idea you can’t just go along accepting your rights and obligations then claim they no longer apply is absurd.
      From what I can gather there is only a very vague idea of what a split sovereignty would look like or what it would involve for the various parties involved. A tiered hierarchy based on ethnicity or perhaps nomber of generations of NZ ancestors, perhaps more recent immigrants would not get the vote or other rights? Where does someone such as myself with mixed ancestry fit in? Certainly no successful examples of such a scheme have been offered for; I suspect for one very good reason.
      The whole thing is ridiculous, unworkable and dangerous; the fact that it hasn’t been laughed out of existence is symptomatic of the near total lack of wisdom, courage and honesty in our representatives as exemplified by the “kindness and compassion” virtue signalling embarrassment in charge at the mo.

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      • Mixed ancestry is considered Maori, if you can identify your Iwi then you can register to vote on the Maori electorates. Anyway the name New Zealand will soon be dumped for the Maori preference Aoteroa. New Zealanders will no longer exist. Perhaps we will be called Aoteroans? You will be Maori. Not possible? Well Mt Roskill has pretty much been replaced by Puketepapa so it is definitely possible. White history is being wiped clean.

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      • GGS, you are quite correct. My brother is registered on the Maori roll although we look European and are culturally Kiwi with a bit more of a Maori flavour perhaps as is typical in the North. He does have a contrarian streak.
        Yours is a good solution – we’re all Maori that are born here regardless of DNA or cultural lineage.

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  8. Thank you for the link to the Prime Minister’s speech. While sharing many of your concerns you are being hard on Ms Ardern. She does not want anything controversial from a speech like this; nothing that might provide a radical headline. Assume that in private the longterm wellbeing of New Zealanders is the only subject pondered by her government and that they are planning new politically brave policies then this was not the forum to announce them.

    If we consider it a summary of all that is neither original nor contentious that the government is pondering and then do as she has suggested in the past and ‘read between the lines’ in a charitable way then it does raise some interesting issues.

    The introduction talks about the fires in Tasman which as she says is not an issue relevent to an economic speech. Take this exert: “”So many who I met yesterday were volunteers. One of the coordinators of the many helicopters hauling water over the fire for eleven hours at a time was from Feilding and had travelled through the night to get there. He also happened to be colleagues with my first cousin – it was a true New Zealand moment.””
    This clearly aligns with many of SoreThumb’s worries about the sharing of a common culture and the concept of being a New Zealander. As immigrants we have visited Tasman as tourists but have no family or friends living there. So for the last few days I have just skipped past the long articles in the newspaper; it is not that I am unfeeling but unlike the Prime Minister I have no connection. Many immigrants will be volunteering but possibly not as many nor as enthusiastically as those who identify closely with Tasman and New Zealand. This has rammifications if NZ experiences a significant recession or natural disaster; those who are tied to NZ will stay and battle on; but those with ties to other countries will consider leaving and take their investments with them. Immigrants in small numbers tend (like myself) to boast about their NZ citizenship but in greater numbers we get identity politics – the multi-culturalism that separates us into groups with disparate political aims. I think Jacinda may be realising this now. Particularly as an ex-policy advisor to Tony Blair in London does she have some loyalty to the UK? As an English born New Zealander I hope not a shred; her job is to serve New Zealanders and only help the UK if it is advantageous to us.

    From the section on education and training: “”Businesses are facing a constant struggle finding the people with the right skills at the right time to do the jobs that need to be done. ……. In the past our economy has been too reliant on buying skills through immigration. Immigration is vital, but we need to get the balance right. “”
    This also shows some sense of reality. It is a polite way of saying the policy of ‘skilled immigration’ that has been in place for decades has been a failure. Despite or maybe because of the massive bureaucracy involved in the Dept of Immigration we have been taking in too many Bakers and Chefs and Retail Managers mostly with lesser skilled families. Realising civil servants simply cannot identify ‘skill’ will be a great move forward.

    Her remarks about the failure of polytechnics is significant. If she looks to countries such as Germany and Switzerland which have success in vocational training she may finally bite the bullet, sack all members of advisor boards with academic degrees and listen to our small businesses. Serious vocational training has to start at school; just copy Switzerland and let the academics howl.

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    • You are more generous than I would be. My criticism isn’t so much that there were no new measures in the speech, as that the overall tone of the speech is complacent – how well our economy is doing, how attuned their “economic plan” is.

      I did notice the passing reference to immigration. Based on policy reforms (or lack) to date, I put that down as a grace note to keep various constituencies happy (NZF voters and the business community).

      As for polytechs, all with be revealed shortly. I supposed my bias tends to be that when the profitable opporunities exist individuals and firms will invest in serious training and human capital development.

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      • I like to think Jacinda or her speech writer reads your posts. If so using the adjective ‘vacuous’ is likely to put them off. I think they might reluctantly admit to a ‘Complacent tone’.
        I would love to pursue that ‘true New Zealand moment’ with her. Will they continue or will we have ‘true Maori NZ moments’, ‘true Indian NZ moments’, ‘True Filipino NZ moments’, etc. It has something to do with numbers of immigrants sharing the same origin and something to do with modern media; in the past (say 16 years ago when I arrived) we all watched the same TV news and read the same newspapers – now I have family who follow PNG blogs but never read a newspaper, the only TV they watch is NetFlix. With handheld devices with embedded translation it is quite possible to live in a city but be as isolated as a Victorian Irish Catholic village in a remote rural area.

        In Jacinda’s speech she said “” Immigration is vital, but we need to get the balance right.”” The obvious question is why is it vital? I once met a European who worked in North Korea supporting their air traffic control software so everywhere has some immigration. If she means ‘vital’ as similar to a car having an accelerator then getting the balance right is apprpriate use of a brake.

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      • When Ardern first became leader I was open to the possibility she might be better. That was partly why I wrote the post I did here
        https://croakingcassandra.com/2017/08/03/a-fresher-approach-for-ordinary-new-zealanders/
        and I even welcomed the occasional references to productivity during the campaign. But 18 months in there is no sign that a better-performing economy is any sort of interest or policy priority, so I’ve given up on both main parties under anything like current or recent past leadership.

        On immigration, I didn’t think much of where Labour got to under Andrew Little (mostly they wanted to seem as though they were doing something significant – to staunch a loss of votes to NZF no doubt – without actually changing much of substance). But a few weeks after Ardern became leader a journalist very close to the party told me that she had made a conscious choice to downplay or ignore the policy adopted under Little. It wasn’t consistent with her brand or, as far as one can tell, her ideology.

        Mostly (I think) i’ve kept the “vacuous” description for the Treasury-inspired living standards framework, wellbeing budget, and the distinctive Ardern emphasis on kindness (a considerable virtue in individuals, but almost totally empty when applied to policy frameworks for the whole economy/society).

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      • You are too kind

        IMO New Zealand dodged a bullet the day Andrew Little stepped down – his steps as Justice Minister are a taster of what might have been

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  9. I think there are a bunch of spatial economic reforms our cities could undertake which would increase productivity, decrease inequality and help New Zealand adapt its transport system to meet climate change goals. Interestingly the ‘politics’ of these sort of reforms is getting some traction with the UK Conservative party.
    View at Medium.com

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    • If we struggle with billion dollar budget blowouts and 2 year delays to build rail from city central to Mt Eden which is still an easy walking distance, how do we follow Japan?

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      • Read the history of Japanese rail. It was successful because it wasn’t subsidized and it needed to rely on commercial nous…

        My bet is that the closer we move to the Japanese model the more success we will have.

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      • Japan has 123 million people. We have 4.5 million people and less every time Statistics NZ revises their population numbers downwards. Rather difficult to build a commercial nuos for our large transport planning that does not resolve how people get to the Railway station. Those Lime scooters and Electric bicycles are certainly a more viable alternative if they don’t lockup when running down a hill.

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    • The concept that a city such as Dunedin with a population that has hardly varied for a century could be modified to increase productivity, decrease inequality and help New Zealand adapt its transport system to meet climate change goals presumably means high density housing interconnected by efficient public transport. I’m not sure where inequality is decreased since my experience of London and New York and Glasgow is of high density combined with extremes of wealth and poverty; certainly seemed to be more unequal than say Dunedin. However a worthy goal that could be achieved fairly inexpensively with appropriate rating and encouraging developers rather than putting obstacles in their way.

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      • The city productivity analysis really refers to growing urban areas and whether all those new people can interact with each at the most interactive times (peak times) because economic theory indicates that is where agglomeration productivity gains can be had.

        So in NZ this productivity thesis is most relevant to Auckland which has a population similar to Birmingham of around 1.5m. Or to Greater Christchurch which over the next 30 odd years could grow from 0.5m to 0.75m.

        But it is also relevant to the golden triangle urban areas in Waikato and Bay of Plenty.

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      • Yes agglomeration economics has been around for quite a while Bob. Social media if anything has increased agglomeration effects. There are multiple new ways to communicate. This seems to added to the strength of face to face interactions not replaced them.
        For example if I met you Bob I am sure we could have a more nuanced discussion compared to communicating via the internet.

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      • Brendon: the theory may be right on average (does apply too well to Auckland for example) but it runs into another unnamed theory – when too many people are pressed close together live becomes hellish which may be why really successful countries do not have a single large agglomeration but numerous cities/towns/villages of various sizes; for example Bavaria and Switzerland.
        I understand the idea behind agglomeration with the ease of interactions when more people are closer together but nuanced communication is a rare interaction. Needing a piece of steel and then advice on how to cut it and then hire of tools to do the cutting is more like a productivity interaction. Dealing with lawyers and civil servants may be nuanced but is rarely productive. In my experience (limited) successful small businessmen start in inner suburbs and as they succeed they leave their business in place as long as possible but spend their success on large homes in the out suburbs and on lifestyle blocks – they then tolerate the congestion going to work in their large cars.

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      • Bob agglomeration can be thought of as the economic force which attracts people together.

        Clearly though agglomeration is not a one-way street or all of humanity would be living in one giant city.

        There are economic forces which also repel people. Congestion, increasing land costs, noise, pollution….

        Again though these repelling economic forces are not dominant or else we would all live in lifestyle blocks….

        Every person and business makes choices on where to locate themselves on the living/doing business together or apart scale.

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      • Birmingham has 1.5 million people on a City area of 268skm and total Urban area of 600skm. Auckland has 1.5 million people stretched over 5000 skm Greater Auckland and with a 1600 Urban area. City area around the CBD harbour is 500skm.

        Not too sure how Birmingham is even remotely comparable as a city to Auckland.

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      • The New Zealand Disease

        Don’t do anything today that can be done tomorrow

        1. Ten years to implement AML legislation
        2. CroakingCassandra advocates gradualism on immigration in 2019 when its been a problem for 9 years
        3. Deposit insurance – most advanced countries have it – nope – not NZ – will eventually
        4. NZ terrified of controlling immigration

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      • 70 years a problem (with a short Kirk-Rowling-Muldoon interlude) – not so much because of the people themselves, as from the lack of highly productive new opportunities here

        https://croakingcassandra.com/2016/10/26/a-victoria-university-professor-on-new-zealand-immigration/

        I wouldn’t be unhappy if much lower rates of non-citizen immigration was put in place overnight. But in the current political climate that is really magical thinking, so I proffer a phased transition – unsuccessfully so far – as one way to encourage the nervous but tantalised to think about taking a risk. If the “end of the world” happens when immigration is cut a bit, they can always reconsider.

        Major policy changes have to acquire enough general acquiesecence to survive changes of government.

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  10. Reblogged this on The Inquiring Mind and commented:
    Following Adam’s recent post on Ardern’s recent speech on the economy, this reasoned and informed commentary by Michael Reddell is well worth reading thoroughly.

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  11. Re your actual post Michael – I think you right on the money about the construction jobs. With building consents down a staggering 40% in Australia you would imagine a lot of the tradies may be returning home soon. I think most Kiwis don’t qualify for the dole in Aussie?

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    • Fortunately kiwis can return to NZ and bludge on the dole. The NZ economy is clearly a target in the sights of the Chinese government courtesy of the GCSB and the Jacinda Ardern government taking a hands off approach.

      Jacinda Ardern has been cold shouldered from any official China state visit last year and this year is not looking any good either as the Huawei ban slaps China’s face.

      The number of Chinese students enrolling for courses fallen declined.

      A major Tourist summit has been cancelled by Chinese authorities.

      I notice they haven’t stopped buying milk/meat or other produce. They must realise we actually heavily subsidise their eating habits at our cost which is to their advantage.

      https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12202902

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