I’d seen a few underwhelmed comments on the speech by Simon Bridges earlier in the week, “National’s economic plan for 2020”. But just possibly some of those critics had missed some real gems, that might signal an Opposition party really serious about addressing New Zealand’s longrunning economic failures. For anyone wanting the short version, there was nothing of that sort.
I was quite critical of Bridges’s speech to the National Party conference last July
But, for all the almost ritualised mentions in Simon Bridges’s speech of the importance of a strong economy (even the Prime Minister mouths those sorts of line from time to time), there was nothing – not a word – to suggest that he recognises that the biggest obstacle to higher material living standards (whether in the form of cancer care or other public or private goods and services) is the woeful productivity record that successive governments – led only by National and Labour – have presided over. There is plenty of talk about cyclical issues, but nothing about the structural failures, and nothing about what National might do that would conceivably make a real difference in reversing that performance.
Sure, it wasn’t primarily a speech about economics, but there has been nothing from Bridges or his colleagues elsewhere, and no hint of a recognition here, that much-improved productivity performance is the only sustainable path to much better material living standards. And not a hint of a recognition that these failures were already well apparent in the government in which he served (latterly as Minister of Economic Development) – and if you think politicians never make such acknowledgements then (and in fairness to Bridges) I should point out that in his brief speech at the start of the conference he did acknowledge that National hadn’t done that well on housing (“but we weren’t Phil Twyford”).
But I was a bit more positive about the economic policy discussion document released a month or so later.
Quite a few of things National is proposing look sensible. The general direction looks sensible. The rhetoric is better than it was – although, by itself, such rhetoric is cheap, and is the sort of thing most Oppositions for 25 years have eventually come round to saying. But the scale of the policy response they are talking about is simply incommensurate to the scale of the problem (much of the policy mix they are suggesting is carrying on a broad approach they adopted in government, and productivity growth was very disappointing then). For New Zealand average labour productivity to match that in top-tier OECD countries would require a 60 per cent lift from where we are. That is simply huge. Huge problems are rarely successfully answered with small changes (even a succession of them).
And so my challenge to National is along the lines of that the rhetoric is great, and I hope it reflects a shared sense that New Zealand’s long-term economic performance really is deeply disappointing, and has not sustainably improved – relative to other advanced countries – for any prolonged period for many decades now. As they say, that has real implications for us, our children and our grandchildren, for the material living standards – and public and private services – we can achieve for the population as a whole.
But if you are serious, and you really mean what you say – all those good quotes I posted earlier – you need to keep thinking harder, digging deeply, consulting broadly and testing and evaluating the proposals and analysis put to you. Great ambitions need to be matched by excellent analysis, courageous policy, and skilful management of the political challenges. Perhaps for many in the National caucus, winning the next election is all that matter, but I’d urge the party, and its members, not to focus on the small ambitions, but on the really big challenge that, successfully confronted, would so much transform New Zealand for the better, for almost all New Zealanders.
That was six months ago, The election is now only seven months away, and if the speech earlier this week wasn’t intended to set out too many details (specific tax rate changes etc), if there was any sign at all that they were serious about more than just gettingback into office, it should be showing through by now, reflecting some sort of integrated story – and telling that story – about what has gone wrong, what needs to be done quite differently, and how National under the leadership of Mr Bridges proposed to set about doing it. But no.
So what does he have to say?
It is pretty much all cyclical stuff.
The first page is pretty much a boilerplate recitation of the woes and challenges of the wider world, and there isn’t anything very much to disagree with. Then we get this
Our commodity prices are high and our terms of trade are near the best they have ever been. From our primary sector through to our technology and innovative sectors, New Zealand should be booming and the envy of the world.
Perhaps there is a small amount to such a story on a cyclical basis, but no one in their right mind would envy our structural performance, among advanced economies, at any time this century (arguably, for most of the previous half-century either).
I’m not going to disagree with much of the shorter-term stuff
Because Jacinda Ardern’s Government has failed to deliver on its promises, has piled on the tax, cost and red tape, made things more uncertain domestically at a time of global uncertainty, and as a result New Zealand has become a country of lost opportunities.
They [people] deserve a government that does what it says it will, that delivers with certainty and removes barriers and burdens like tax, cost and red tape.
But then it starts getting a bit odd.
We have slipped to the seventh lowest GDP per capita growth in the OECD. We are behind countries like Chile, Hungary, Poland, Latvia, Estonia, Lithuania, Spain and even Greece.
Which is a rather odd list to be anguished about, seeing as all those eight countries have lower per capita GDP than we do (Spain is very close). In conventional analysis of such things, one might reasonably expect (and hope) that poorer countries will grow faster than rich countries so that, over time, economic performance converges. Oh, and Greece was coming off the back of probably the most savage economic downturn in the advanced world in almost a century, so it would be a surprise – nay, a worry – if they did not eventually begin to limp back towards full employment.
So, really strange list of countries, but it is certainly a fair point that seventh lowest per capita GDP growth in the OECD is pretty bad. Unfortunately it has become par for the course. For the whole period since 1970, we’ve had the third lowest growth in real per capita GDP in the OECD (small sample of countries for which there is data for the whole period). There is complete data for the whole OECD membership since 1995, and over that period – after all the reforms we did, but also period presided over by both National and Labour governments – we were 11th worst (out of 36 OECD countries).
And on productivity growth – real GDP per hour worked – the only secure underpinning for long-term improvements in living standards, we’ve been 7th worst in the entire OECD over that whole period since 1995.
We’ve been doing poorly, mostly drifting backwards, relative to other advanced countries for a long time. And if one year’s growth – thrown around by all sorts of things, including measurement challenges (who knows how our latest annual growth rate will finally be measured, or ranked against those of other countries, when all revisions are in several years hence) makes for short-term political headlines, it is mostly a distraction from the real long-term failures. A deliberate one one might suggest.
I couldn’t exactly replicate the Bridges claim that we were 7th worst in per capita growth – I’m sure it is so on some or other series, but the ones I happened to check gave slightly different results. I’m assuming he was using annual data, for which the most recent numbers are of course 2018 – quite a lot (good and ill) has happened since then. I also checked the OECD quarterly seasonally adjusted per capita data, and as happens can offer a factoid Bridges might like: in the two years to September 2019 (latest official data, and covering the full period of this government) New Zealand’s per capita GDP growth shows as being 11th worst in the OECD, while for the previous three years (final term of the National government) we were 14th best – ie actually better than the median OECD country.
But…..productivity. Have I mentioned productivity? (Bridges didn’t) Over that whole five year period, our labour productivity was fifth worst in the OECD. That was National’s failure, and it is Labour’s failure. It would now take a 67 per cent lift in average New Zealand labour productivity to match average productivity in the leading OECD group (a bunch of north European countries and the US).
Now, in fairness to Bridges, there is one vestigial reference to such gaps
In comparison, if our GDP per capita were as good as Australia’s, the average Kiwi would be 35 per cent richer.
By my reckoning that is more like the productivity gap than the GDP per capita gap, but either way it is a big number. No narrower now that it was – wider on the productivity measure – before the last recession.
Bridges goes on
That doesn’t happen by accident, it doesn’t take a country the size of Australia to achieve it. It happens when you have a strong economy focussed on you. Led by a competent government with a track record of delivering.
As Economic Development Minister and Associate Finance Minister, I saw how real this is.
Except that the gaps didn’t narrow then either, and all he goes on to enumerate is a series of either modest cyclical points or wholly rhetorical ones
It’s about getting up in the morning and seeing New Zealand ambitious and confident about itself again.
National’s focus is simple and resolute.
- We will keep taxes and red tape low and grow incomes to help with your cost of living
- We will be responsible managers of the economy
- We will focus on growing the economy for all
- We will invest more in core public services like health and education
- Finally, we will create more jobs and opportunities for all New Zealanders
Except for the first half of item 1, Labour could – probably did – trot out exactly the same list in 2017.
He then gets a little more specific
To do this, today I am announcing five key measures that I want the sixth National Government’s first term to be measured by. They are things that matter to Kiwis because they impact us in our everyday lives.
- New Zealand’s economic growth is back to at least three per cent per annum.
- New Zealand’s growth rate per person is in the top half of the OECD
- We are reducing the after-tax income gap with Australia
- More New Zealanders feel they can reach their potential at home, rather than overseas
- We have revived business confidence so that businesses feel like they can take more risks and create opportunities for you and your family
Nothing very wrong with that I guess, but not much ambition either – nothing about the level of GDP for example. Nothing about productivity, and – re the final point – business investment was really rather subdued under the previous government as well.
How will this be done?
Over the next few months I will be announcing our comprehensive Economic Plan.
The five major planks to it are five packages on:
- Tax relief
- Regulation reduction
- Small Business
Details to come, to be sure, but it is hard to believe it will amount to much, beyond a bit of political product differentiation, and (no doubt) a few useful steps at the margin. If you plan to spend more, and keep the budget more or less in balance, for example, there is hardly room for game-changing tax reform. And if I really quite like this
We have already promised to cut red tape and regulation. We will light a regulations bonfire in our first six months of government, and cut two regulations for every new one we create.
it isn’t much different to what National always says in Opposition, which never amounts to very much in government. Why will this time be different? Did Bridges have a reputation as a reforming liberaliser when he was a Cabinet minister?
The speech goes on with some soft-soap stuff that I won’t trouble you with. And then we get to the conclusion
National’s view is that the 2020s should be New Zealand’s decade.
Which sounds good, but there is nothing in the speech suggesting thought, ideas, plans, ambition commensurate with the scale of that challenge. It is really just a promise to manage a bit more compentently – not an unworthy goal necessarily, but just part of keeping our ongoing relative decline tidy. Ours kids deserve better.
Then there is this sentenc. I read it first yesterday and read it again today and it still makes no sense – or, most generously, just repeats itself in saying nothing.
Our ambition as a country can never be too great for what we need to achieve.
The decades of economic failure just keep on mounting up, on watches overseen by both National and Labour. The scale of the failure – the extent to which relative material living standards here have slipped away – is huge. But while Bridges – just like Ardern, or Key, or Clark, or Shipley – might like to leave the impression they might finally be the one to wave a magic wand, all the evidence is that they (a) they don’t really care, and (b) have no serious ideas about what went wrong and no serious interest in knowing, or doing, what it might take to really turn this country’s economic future around.
If, perhaps, none of that is a surprise, I suppose we should simply be “grateful” that Bridges’s speech, just a few months out from the election, makes that indifference utterly clear.