The media coverage of the outgoing Air New Zealand CEO Christopher Luxon’s political ambitions prompted me to dig out a post I wrote a year or so ago, inspired jointly by the Prime Minister and her Business Advisory Council (which Luxon chairs) and by an old article by Paul Krugman, “A country is not a company”. As he ponders what to do next, I hope Luxon takes the time to read Krugman’s piece. Of course, it is fair to note that the current crop of politicians – across all parties – is generally so unimpressive, accomplishing so little for New Zealanders, that I wouldn’t want to be thought of as suggesting that retired CEOs would be any worse than (say) crown prosecutors, political advisers or whatever.
Also yesterday, the latest quarterly national accounts data were released. The headline numbers seemed to be a touch higher than those who forecast these things in detail had expected, but not in a way that really changes the underlying picture: it has been a weak recovery (now eight or nine years into it) and whatever supported moderate growth appears to have been fading.
In that post from last year, I quoted a speech by the Prime Minister on the economy, including launching the Business Advisory Council. I wasn’t that impressed, but did quote some of her aspirations.
Yesterday morning the Prime Minister gave her promised speech on the economy. It was, frankly, astonishing how little there was there. There was some mention of the problems
Our overall objective is to build a productive, sustainable and inclusive economy.
On each score we have some way to go. When it comes to productivity, the OECD has said we are “well below leading OECD countries, restraining living standards and well-being”
We need to transition from growth dominated by population increase and housing speculation, to build an economy, that as I said, is genuinely productive, sustainable and inclusive.
First we want to grow and share more fairly New Zealand’s prosperity.
That means the gap between the highest and lowest income and wealth deciles reduces, real per capita income increases; the value and diversity of our exports grows and home ownership increases.
In particular we want to build our exports and have export led growth.
Which is all well and good, but there is nothing – nothing – in the speech about what the government proposes to do
Another year on, how are we doing?
On productivity, shockingly poorly. Recall that we start with labour productivity levels barely 60 per cent of those of the leading OECD countries (US and various northern European countries).
Here is a chart of labour productivity growth since just prior to the last recession. (As ever, I here average the two GDP measures and the two hours measures.)
The orange line is the average for the last five years.
Since the current government took office, total growth in labour productivity has been 0.2 per cent. But there is quarter to quarter noise, and as the chart illustrates whatever is going on was in place well before the current government took office. There is no sign this lot are doing anything that is producing new and better results, but since the start of 2012 total productivity growth has been not much more than 1 per cent. That is over seven years. It is a shockingly poor record.
What about that talk of “building exports and export-led growth”? No doubt the PM and her ministers are repeatedly fed lines about how successful New Zealand’s strategy of signing up preferential trade agreeements with all manner of countries has been. There are certainly lots of documents, but here is a chart showing exports and imports as a share of GDP, starting from the same point as the previous chart, just prior to the last recession.
The numbers bounce around a bit with fluctuations in commodity prices and in the exchange rate, but broadly speaking the share of our economy accounted for by foreign trade has been shrinking, not expanding. That isn’t a good sign (those with longer memories will recall that the previous government once had a specific goal of raising the export share to 40 per cent). There are much more important issues – than busy, busy trade agreements – that simply aren’t even being addressed, or (it seems) even recognised.
I don’t have a chart for it, but everyone recognises that nothing has yet been done that would make any material difference to the housing price disaster that successive waves of central and local governments have inflicted on us.
It isn’t clear that, on matters economic (which have real implications across numerous dimensions of “wellbeing”) this government is really any worse than its predecessor. But what a low bar that would be. Neither main party – or, as far as one can tell, any of the minor parties – seems interested in getting to grips with creating a climate that generates materially better economic outcomes. Easier, I suppose, to just pretend. That way, among other things, you don’t need top-notch economic advisers and institutions. But what a betrayal of New Zealanders.