Two years on

The weekend newspapers had several articles highlighting the second anniversary of the New Zealand First choice that led to the creation of the current government.  There was, for example, the double-page spread  in the Herald devoted to a not-at-all-searching interview with the Prime Minister and the Minister of Finance.  And there was another double-page article in the Dominion-Post looking at the government’s performance under a range of policy headings.  Since the government’s term is now two-thirds over –  likely to be in full campaign mode (say) nine months from now –  it seems not unreasonable to take a look at performance.

The Stuff political stuff divided up nine policy areas between them and wrote short reviews of the government’s performance in each of them.  On my reading, they tended towards a generous assessment.  All governments do stuff –  sometimes even just things in the works under a previous government – and where this government has done most (education notably) there isn’t a huge amount of evidence that there were real problems that needed fixing, or that their fixes were dealing with whatever real problems there were.

Take housing, for example, where the Stuff journalists summarise thus

Two years into the Government’s term, housing is far from Labour’s strong point, but it is not an area of total failure.

So house prices are still rising, rents are still rising (even in a low-interest rate world in which provision of rental housing could/should have been cheaper than ever) and there has been no legislation to free-up urban land markets, or to compel local authorities to operate a more liberal approach.   Set against that, a foreign buyers’ ban was largely irrelevant, and there is little reason to suppose that building a lot more state houses will increase the overall effective supply of housing (certainly won’t deal with the land issues).  For what was declared to be a “crisis” –  I’ll just settle for disgrace –  what has been done, or accomplished, is astonishingly little.  And it isn’t as if markets are pricing in better outcomes in future either.

But what really caught my eye was that there was no discussion of the government’s economic policy performance.  One might reasonably grant them a pass mark on fiscal stewardship –  but on anything beyond that the best reason why Stuff might have chosen to overlook this key area of policy is that there just isn’t much there at all.

Back when they were in Opposition we would, occasionally, here about the lack of any decent productivity growth, talk about growing export sectors, and so on.  Even today, the mantra of a “productive and sustainable” economy gets rolled out from time to time…..but with almost nothing to back it.

Actual productivity growth still languishes – running at no more than 0.5 per cent per annum, slower than in most other OECD countries. (It is fair to note here that there could be material revisions to a large number of macro series over the next couple of months, consequent on the census (and subsequent creative efforts) results, but there is no obvious reason to anticipate material improvements.)

There is no sign that the external orientation of the economy has strengthened (eg exports and imports as a share of GDP). no sign of robust business investment, and of course we all know that business confidence results are in the doldrums.  Interest rates have had to be cut further and the real exchange rate remains pretty high.

And what response has government policy made?   The government seems to have made quite a fuss about the new research and development tax credit. But they’ve produced no sustained analysis illustrating why this will make a great difference – and no sustained either looking at why firms didn’t regard higher rates of R&D spending here as offering attractive risk-adjusted returns.  And that really is about it.

And on the other hand, we have the government sitting idly by while the Reserve Bank Governor pursues his whim of making credit less readily available and more expensive, a halt to most new road-building even as the population continues to increase rapidly (and not, even, say, a congestion-pricing regime that might help reconcile the two), a ban on most oil and gas exploration, looming new regulatory restrictions around water.  Oh, and immigration policy –  for which there is no evidence of systematic economywide gains, in a country where (fixed) natural resources underpin prosperity –  is, if anything, becoming more liberal.

The government keeps telling us it has a plan.  I wrote here at the start of the year about an economics speech the Prime Minister gave, concluding

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. 

And then last month the government released something they did call an “Economic Plan” – in fact a thirty year one.  Notwithstanding all the glossy pictures and long lists of points, it sank without a trace, barely even reported at the time, even with a supporting op-ed from the Prime Minister herself (my take was here).

Once upon a time, I wondered (perhaps naively) if perhaps they –  upper reaches of the Labour Party – really did care.  They should.  After all, it is their traditional voters –  the poorer people, the working classes, the younger –  who suffer most from the decades-long failure of successive governments to improve New Zealand’s woefully poor productivity performance.    But all the evidence from their time in office is that any care is superficial at best.  Sure, they’d probably welcome a much better performing economy if it suddenly dawned fresh and shiny.  But they seem to have no real ideas, no compelling narrative, for how to markedly re-orient our economic performance, and they is no apparent interest in finding answers, or ensuring that our economic policy and analytical institutions are delivering them serious advice, grounded in the actual experience of New Zealand, on policy approaches that might really make a difference.

It is an utter abdication of responsibility.  No one made them run for office, no one forces them to stay in office, but when they take office they have responsibilities for the future prosperity of New Zealanders that they show no sign of taking at all seriously.

An academic economist left this comment on one of my weekend posts

With this in mind, I must confess that I always threaten to fail my Otago students if they don’t migrate to Austalia, because it shows they haven’t learnt anything from me; but the university doesn’t allow me to deliver on the threat. Still, most would be financially better off if they took this advice, and migrated to a place where better firms are located, and sought jobs there.

Sadly true.  And what a sad commentary on decades of policy failure here: Labour ministers currently hold all the key portfolios (Prime Minister, Minister of Financem Minister of Economic Development) and it is their failure now.

 

16 thoughts on “Two years on

  1. We should start firstly that Jacinda Ardern’s Labour government lost the Rugby World Cup. The 2 rugby World Cup wins were won under a National government.

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      • Well we better look at a change soon to a National government otherwise Team NZ would also lose the Americas Cup. Winning comes from confidence and under Labour’s leadership confidence has taken a deep dive. The current atmosphere of confusion and defeat is like the thick black smoke of the burning Sky City convention centre, it gets into everything.

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  2. Apart from the ineffectual R&D tax credit the only economic development policy the coalition has implemented is New Zealand First’s re-election pork barrel dished out by Shane Jones amid pompous bluster and dubious threats. Elsewhere they have moved to stifle the economy most notably with the oil and gas exploration ban and now the rushed proposals on freshwater and the zero carbon bill. Their major initiatives on housing and light rail have been a fiasco. By any objective measure this government has been a disaster for New Zealand but they will probably be comfortably re-elected. Australia beckons for the young and talented.

    Liked by 4 people

  3. It is incredibly frustrating that they and Ardern had quite a lot of political capital, and I would much prefer that they had spent it on trying to push through some big reforms. Perhaps aim for RMA + immigration in the first term, then TTE in the second term.

    I don’t what political scientists explain it, but it does look like doing nothing has been an effective strategy for winning elections in NZ. Perhaps Labour are looking at the polls, thinking they can win another election and patting themselves on the back for great leadership.

    Liked by 1 person

    • Labour should not have been in government. They do have the greatest liar in Jacinda Ardern and she has managed to cobble together one of the most corrupt NZ governments ever. But she does struggle to get any real control flanked by Angry Andy, Stutter Kevin, Well being Robertson and Mahutu Orr.

      Liked by 1 person

      • Angry Andy now wants to corrode the independence of the Justice Department by using it to police political debate. NZ is fast becoming a communist fascist police controlled country where the government seeks to push its own political agenda.

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      • This Labour led government has misled the public with the most lies ever and have dished out so much cash to mates and buddies with government bias agendas it must be one of the most corrupt NZ governments ever.

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  4. It is noteworthy that you, as an independent economics focused commentator, have such a different take on the government’s performance than that of ‘stuff’.
    Readers have to draw the conclusion that such different opinions come either from ignorance of what is actuality being done, rather than promised or from political bias.
    As a regular reader of Croaking Cassandra I believe that ‘stuff’ does not come out well of the comparison.

    Liked by 2 people

  5. The silent problem

    As we watch the passing parade of weekly events resulting in congestion and motor vehicle accidents and gridlock bringing the city to a grinding halt

    Mobility of labour. As property prices and rents rise, the low paid and paupers are increasingly unable to travel to jobs outside a reasonable range. They become trapped.

    The essentials of living – food, shelter, energy (petrol and electricity) are ridiculously priced due to government intervention which in turn are exacerbated by immigration

    Nearly every problem suffered by the low-socio-economic class is impacted unreasonably by unfettered immigration with no way of escaping.

    Go to South Auckland where we increasingly see 20 people per house, rentals or state-house

    Liked by 3 people

  6. Six years on

    An example of the inability to think is in the Tiwai Point furore

    In 2013 the National led government told RIO, here’s $30 million. that’s it. No more. It will cost approximately $200 million to connect the Manapouri feed into the national grid and increase the capacity of the Cook Strait cable

    That was in 2013

    What has the government done about that $200 million task. To the best of my knowledge – nothing – we appear to be back at 2013 and frothing at the mouth. RIO know this.

    National were too busy privatising 49% of the power industry they didn’t want to jeopardise the IPOs

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  7. Labour seems extremely gun shy. As if they fear any significant spending change would become a target for National. That is probably true, but if Labour were bold about it, any criticism from National could end up backfiring on them.

    I can’t see National coming up with a credible alternative. The only thing they will promise is more roading and lower taxes. Based on how they let essential services run down and housing and immigration run away, if they return to power things will get worse, not better.

    I think the biggest problem for Labour has been promising things they never thought they would have to deliver, because they definitely didn’t think they would win the election. The main problem is the fiscal constraints, because they could have achieved a lot more toward their goals if they had spent more.

    The other thing that might be motivating them is fear of a crisis of the same or worse than 2008. How likely is that?

    Liked by 1 person

    • I think the doing nothing is the nature of MMP consensus type governments. National relied on the Maori Party and Act which meant that it did not have the numbers to make dramatic changes and similarly Labour is hamstrung by NZFirst and Greens.

      I have been looking at a 6 site development in Otahuhu but have to lodge a Resource Management consent application which equates to a wait time anywhere from a year to 5 years. My 3 site subdivision in Mt Roskill took 2 years for RMA approval. National wants to amend the RMA but unfortunately no other party wants any changes.

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      • Both parties should have invested in speeding up the consent process. Central government should probably be covering the liability costs if we want things to move.

        I’m wary of changes to the RMA in case it turns into the next ‘leaky homes’ disaster.

        Liked by 1 person

      • The RMA is a land use legislation and has got nothing at all to do with Leaky homes. Thats a government and council specified building standards problem. Building consents currently takes about 3 months which is no too bad.

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