Public opinion on Covid policy

I noticed over the weekend that the highly-regarded Pew Research Center had released the results of public opinion surveys undertaken in a range of advanced countries on various questions around Covid and Covid policy, and that New Zealand was included among the countries surveyed. Some of the results were totally unsurprising, some interesting even if unsurprising, and for a couple of questions I wasn’t quite sure what to make of the questions or answers.

This was the first set of results reported

New Zealand (closely followed by Taiwan) was the country in which the largest share of respondents reckoned that over the full course of the coronavirus outbreak the level of restrictions on public activity were “about right”. Of the remainder of the New Zealand respondents, opinion was fairly evenly split between those who say they’d have favoured fewer restrictions and those who claimed they’d have favoured more. That split was pretty even in Australia too. But I found a few things interesting: first that for all that one’s eye is first taken to the US results – the 26 per cent favouring fewer restrictions – and one thinks of the political polarisation in the US, actually the percentage favouring fewer restrictions was very similar not just in much of continental Europe but in Singapore. I don’t know anything about Greece, but Greek respondents are the only ones where a net balance favoured fewer restrictions over the course of the outbreak.

New Zealand wasn’t in previous surveys, but Pew also reports results for 10 countries where respondents rate their own country’s handling of Covid. The public has become less satisfied, but only in Japan, Spain and (by a narrow margin) France do more people now rate the handling “bad” than “good”. For what it is worth, in the current survey New Zealand respondents give a higher “good” rating to the New Zealand government’s handling than those in other countries, except Singapore.

The next question was about national unity/division

Of course, other things have happened in the last 17 months, and the greater division reported in the US is unlikely to be mostly about Covid itself. More generally I found the range of responses across countries quite surprising, and the New Zealand specific ones surprised me too. It is easy to see that the results are loosely correlated with how bad the Covid experience has been, and perhaps there is nothing more to it than that. But had I been one of those surveyed I’d either have said “not much difference” (it is astonishing how small those numbers are almost everywhere – Japan and Taiwan are exceptions to some extent) or “more divided” (there have been lots of conflicting interests, governments have spent billions and billions of public money, restrictions (still in place) affect some not others, and so on).

As it happens, there is quite a correlation between those who think their country is more divided and those who think the economy is in a bad way (and that gap is quite wide in New Zealand too).

And what of underlying political ideology (not sure whether this is self-identified or derived from answers to other questions)?

In quite a few countries there is no statistically significant difference, but (with Greece and the US as outliers) the responses for New Zealand seem fairly consistent with those for a range of other countries (and not just an anti-government reaction because there is a mix of left and right wing governments in the countries shown).

This was the question that really puzzled me. I simply can’t work out what I’d have answered.

Our economy is doing relatively well at present, but I don’t see that as reflecting anything about the strengths of our “economic system” – more a reflection of the elimination strategy (which caused deep initial losses, and then a bounceback) and of huge and continuing macro policy support, and that is a discretionary policy intervention not a feature of our economic system. And, of course, as you know I’m deeply negative on our economic policy and performance more broadly. That said, it was somewhat interesting that Australians were a bit more optimistic on this question than New Zealanders – and that the Japanese were quite so bleak on their responses.

At least in New Zealand’s case, there is probably some hint of what is going on in these responses. Those who think there should have been fewer restrictions are a lot more likely to answer negatively on the economic recovery, suggesting that those people may be emphasising ongoing border restrictions.

And how do respondents in the various countries say their life has changed as a result of Covid?

New Zealand respondents are mostly likely to say “not too much/not at all” – although a third still answer the other way (presumably some mix of people who would have travelled, people in directly affected industries, those who had hoped to buy a house, and harried public servants in places like the Ministry of Health and DPMC). On days when New World refuses to pack my groceries I might be tempted towards answering that way too. Even in New Zealand and Australia, the young are most likely to say that there has been quite an effect on their lives.

In some countries – but not New Zealand – those who are more pessimistic on the economy are more likely to say their lives have changed.

This was the final chart in the summary report. The New Zealand responses had me spluttering with incomprehension and astonishment.

As it happens, the New Zealand results do not stand out in response to this question, but these answers – globally and for New Zealand – seem like an extreme example of recency biases. Because – with extreme interventions and restrictions – health care systems in advanced countries did not get totally overrun this time, the public is confident that responses to any future pandemic – potentially with quite different characteristics – would also be just fine.

In the New Zealand case, for example, we went into the pandemic with a small number of ICU beds (per capita). It isn’t obvious that much has changed on that front. I’d have had no hesitation in answering “no confidence” on this question, whether for New Zealand or any other advanced country I’ve read about.

Anyway, it was an interesting set of results and nice to have New Zealand included in a consistently-compiled survey. And – as was my goal – I got through the post without offering any hint of my views on what New Zealand governments should be (or have been) doing this year or this week.

Fiscal policy in the wake of Covid

When the Reserve Bank and Treasury advertised a full-day workshop with the title “Fiscal and Monetary Policy in the wake of COVID”, I immediately signed up to attend. It sounded like a good idea for an event. After all, lots of tools were deployed, some new, some old, some deployed less than usual, some much more. And we’ve had a Budget, and projections from both agencies suggesting that the economy is now getting pretty close to operating at full capacity (albeit a capacity a little diminished by Covid restrictions).

It was just a shame about the execution. Notably, even though monetary policy has been the principal tool for macroeconomic cyclical stabilisation for decades – and not just since 1989 – here and abroad, there was not a single paper looking at the role of monetary policy, past, present or future. The Governor didn’t attend – which is fine – but nothing of substance was heard from any senior Bank figure. Orr’s deputy for macro policy, Christian (“The Future is Maori”) Hawkesby contented himself with opening remarks that had just some bonhomie and his recitation of a Treasury prayer (which, to add to the strangeness, seemed to appreciate “skilled workers” but not the rest of the public), but not a word of substance. There were a couple of technical papers from Reserve Bank researchers in the afternoon session, but one was little more than an early-stage in a research agenda on the distributional aspects of monetary policy (the paper itself couldn’t shed much light when the only asset in the model was bonds), and the other – on dual mandates – didn’t seem to offer any fresh insight.

So the stage was largely left to The Treasury, and particularly a series of three papers (complemented by a presentation from a US academic) that seemed dead-set on making the case for a bigger and more expansive role for fiscal policy and government debt in the new post-Covid world. Bureaucrats making the case for a bigger and more powerful bureau.

First up – and clearly most important – was the Secretary to the Treasury. She spoke for 40 minutes, but then took no questions (and, in an amateur-hour effort, the text of her speech was then not available until more than a day later). The Secretary is still quite new to the country, to the job, and to national economic policy matters. Probably most non-government attendees (of whom there were many, in a well-attended event) had seen and heard little or nothing of her before. So it didn’t speak well of her that she wasn’t willing to engage, despite having made a barely-disguised (“I would stress that we are not making policy recommendations”) bid for quite an upending of the way macro management is done her, in ways that would just happen to favour her agency.

But what of the substance? It was a workmanlike effort (NB with a minor mistake in footnote 2) but hardly persuasive to anyone not already champing at the bit for fiscal policy to do well. For example, there was no serious discussion about the effectiveness of monetary policy. The Governor has previously told us he thinks monetary policy has been as effective as ever. The Secretary seems to disagree, but we can’t be sure – perhaps she just thinks fiscal policy is even better, but she doesn’t make that case either. Much in her case seems to rest on the effective lower bound on nominal interest rates but (a) as the next Treasury speaker acknowledged that is not some immoveable barrier, and (b) she offers no thoughts on the effectiveness or otherwise of things like the LSAP programme. Surely one starting point for thinking about the future might involve some careful diagnostic work reaching a thoughtful view on what roles the various elements of fiscal and monetary policy played in economic outcomes over the last 15 months. But neither she, nor anyone else on the day, attempted anything of that sort. Remarkably no one – from the Bank or Treasury – looked at the options and merits for removing – or greatly easing – the ELB so that at least ministers have effective choices in future severe downturns,

Quite a bit of Treasury’s thinking – or at least their marketing – seems to have been shaped by the success of the wage subsidy scheme. And it was a success – getting money out the door quickly, at a time when the government had just done the unprecedented and (a) shut the borders, and (b) simply compelled most people not to go to work, or do anything much else. It provided immediate income support, and probably had some beneficial effects beyond that (some smart person might attempt to model what difference it has made to outcomes not just last March/April but now). But it isn’t exactly a conventional event of the sort we can expect to see every cycle. And the primary consideration wasn’t really macroeconomic stabilisation at all – the whole point of the lockdowns was to aggressively (but temporarily) reduce activity, including economic activity – but income relief/support (as unemployment benefits have an incidental automatic stabiliser benefit, but aren’t primarily about macroeconomics). There are always going to be one-off events when the the government’s spending capabilities need to come into play – one can think of earthquakes (where fiscal measures and monetary policy will often tend to work in opposite directions, since earthquakes cause real disruptions and significant wealth losses, and but also generate a lot of fresh (reconstruction demand), plagues, wars, and so on. But it is seems like a category error to use such episodes as the basis for some sort of generalised play for more routine use of discretionary fiscal policy with cyclical stabilisation in view, when most recessions are quite different in character.

And even just thinking about the last 15 months or so, neither the Secretary nor her colleagues seemed to make any effort to unpick the effects of the wage subsidy scheme from the rest of the fiscal policy initiatives of the last year. One could easily imagine an alternative world in which the wage subsidy was used much as it was, but otherwise fiscal policy was kept much on the path it had been on at the start of last year, and at the same time the OCR was used more aggressively. How different would the outcomes for the economy have been, in aggregate and sectorally? The fiscal option involves the coercive use of state power, and politicians making discretionary choices playing favourites, while monetary policy adjusts relative prices and then let individuals make choices about how they (personally and individually) are placed to respond. And one thing that was striking about both the Secretary’s speech and the more technical discussion that followed from her colleague Oscar Parkyn is that in all their new enthusiasm for using fiscal policy more aggressively in downturns (and monetary policy less so) is that neither mentioned, even once, the exchange rate – typically a significant element in the adjustment mechanism in New Zealand recessions. New Zealand recessions often see sharp falls in international commodity prices (fortunately not this time) and the lower exchange rate acts as a buffer. But a much heavier routine reliance on fiscal policy will tend, all else equal, to hold up the exchange rate relatively more in downturns. It isn’t obvious – without a lot more analysis – that that would be a good thing.

The Secretary included this chart in her speech

It was apparently designed to show that fiscal policy in New Zealand has generally done sensible things. That might be generally true (although if so why change?), even setting aside the huge pressure loosening fiscal policy put on monetary conditions over 2005-2008, but it conveniently ignores where we are right now. This chart, which I’ve shown before, is from the recent Budget documents.

So with the output gap almost closed, the cyclically-adjusted primary balance (deficit) in 2021/22 year is expected to be almost as large as it was in 2019/20 (when the – sensible – big wage subsidy spending was concentrated. Extraordinarily, in a speech bidding for a more active role for fiscal policy in cyclical stabilisation she never mentioned this situation once – let alone engaged with why, from a macro policy perspective, such big deficits make sense now. As sceptic might suggest that this is the real world outcome when the Secretary’s textbook ideas get given some rope.

One could go on. The Treasury is clearly tantalised by the lower interest rates – although not now lower than pre-Covid – and the “appeal” of taking on more debt. But never once did we hear any serious examination of the typical real-world quality of the marginal additional public spending they had in mind (it wasn’t until the panel discussion late in the day that I heard a Treasury official – a temporary one, so perhaps not well-socialised – refer to the Auckland cycleway bridge). There was a paper reporting some model results suggesting, sensibly enough, that fiscal consolidation is most costly to GDP if done via taxes on capital income, but (symmetrically) there wasn’t a sense in the rest of the day that (say) Treasury was champing at the bit to lower company taxes. Rather they seem keen on public infrastructure – which often sounds good on paper, until we get to the concrete ideas. As it was, a discussant cast considerable doubt on one Treasury paper suggesting high payoffs to more government infrastructure spending.

We also never really heard any serious political economy discussion, or even a discussion of how we should think of the government balance sheet – is it a plaything for politicians or should it be best thought of as operating on behalf of citizens, each of whom have to make their own spending and borrowing choices. There wasn’t much about using coercion and compulsion rather than the indirect instruments of monetary policy. And, on the other hand, it was a little surprising that there wasn’t even a mention of MMT – so that in a floating exchange rate, the level of government debt isn’t really likely to be materially constrained by the market, which doesn’t mean that just any level of government debt is a socially good thing.

It was all a bit unsatisfactory really. Perhaps one could say it was just exploratory, and they are wanting to open the issues but (a) the speech was from the Secretary herself and (b) was making a case more than deeply and thoughtfully exploring the issues. We will have to see what more is in the papers they plan to release next week (a draft long-term fiscal statement and a draft insights briefing) but if the energy is with The Treasury at present, it isn’t really clear that they yet have the depth of analysis and engagement to support their enthusiasm.

And just finally, they arranged for an American professor, Eric Leeper, to speak, via Zoom, on monetary and fiscal issues. Leeper is pretty highly-regarded and has visited New Zealand previously. He is also very keen on a much greater use of fiscal policy and, it would appear, more debt (for various reasons including, he said. “the rise of the right” which didn’t seem quite relevant to New Zealand, let alone a good basis for official advice). Anyway, after the geeky bits of the presentation, he tried to make his case by reference to the Great Depression. He is clearly a big fan of Franklin Roosevelt, and was talking up the fiscal aspects of Roosevelt’s approach (while barely really mentioning the substantial monetary bits). But it was odd. Here he was talking to a New Zealand audience, championing the use of fiscal policy in the US Great Depression, but seemed quite oblivious to the fact that the US was one of the very last countries to get back to pre-Depression levels of output and unemployment. Here is the experience of the Anglo countries.

Those aren’t small differences. And as anyone who knows New Zealand economic history – or have read my past posts on it – New Zealand’s recovery from the Depression (back to pre-Depression levels by the time Labour took office) was barely at all about fiscal policy. The excellent quote from Keynes that our Minister of Finance of the time recorded in his diary, along the lines of: “if I were you I would no doubt seek to borrow, but if were your bankers I should be very reluctant to lend to you”.

When a half-baked loaf is finished cooking it can be a fine thing, but this loaf seems to need a lot more work before New Zealanders should be rushing to embrace a much more active role for fiscal policy or a lot more public debt. That includes a lot more work on what we reasonably can, and can’t, do with monetary policy.

UPDATE: A former RB colleague, now a lecturer at Sydney University, sent me a link to a paper he and a Reserve Bank researcher have written attempting to evaluate the impact of the New Zealand wage subsidy scheme. I haven’t yet read it, but it looks very interesting. Here is the end of their abstract

We then study the impact of a large-scale wage subsidy scheme implemented during the lockdown. The policy prevents job losses equivalent to 6.8% of steady state employment. Moreover, we find significant heterogeneity in its impact. The subsidy saves 17% of jobs for workers under the age of 30, but just 3% of jobs for those over 50. Nevertheless, our welfare analysis of fiscal alternatives shows that the young prefer increases in unemployment transfers as this enables greater consumption smoothing across employment states

Making sense of the national accounts

Doing so is more than usually challenging right now. We had the huge disruption of the draconian national lockdown last year, and some more limited sets of restrictions since then. Some of the economic aspects of that were impossible to measure accurately, although no doubt in many areas SNZ will continue to try valiantly to refine their estimates. Largely-closed borders continue and thanks to the ill-judged decision of politicians and bureaucrats to scrap departure cards a few years ago we are now flying quite blind around recent net migration estimates (SNZ use a model, but – like any model – their model struggles to cope with a dramatic regime shift). Some of the difficulties are amplified by New Zealand’s long-term underinvestment in good economic statistics – a choice of successive governments, sometimes aided and abetted by SNZ management.

New Zealand has two measures of quarterly GDP. The expenditure and production-based approaches are both trying to estimate the same thing (as will the forthcoming income measure) but data collection challenges mean that it isn’t for several years that the two series are more or less reconciled (and even then not always that well).

GDP long term

But if the two series are, eventually, more or less reconciled that isn’t much consolation now.

Here is the more recent period, this time per capita and indexed to 100 in 2016q3, the last date for which the current estimates of the two approaches are almost identical.

nz per capita

Over 4.5 years a gap of 3.7 per cent has opened up between the two series. And there is no good ex ante reason to prefer one estimate over the other.

In per capita terms – using the current SNZ official population estimate – that is the difference between 2.4 per cent and 6.2 per cent growth in real per capita GDP over the period shown. One of those numbers is not too bad, the other is pretty dire. For the Covid period – so since the last pre-Covid quarter in 2019q4 – it is the difference between a 0.9 per cent fall in real per capita GDP and a 0.7 per cent increase. I usually simply average the two approaches, so a best stab in the dark is probably that we are back to around pre-Covid levels, but really who knows.

And it is complicated by the fact that the population estimates themselves are a moveable feast. SNZ’s official estimate – using their 12/16 model-based rule. They estimate that the resident population has increased by 6500 over the year to March on account of immigration. But one of the few hard numbers we know is the number of people coming and going from New Zealand (in total, for whatever reason) and those numbers show a net outflow of 56446 people between 1 April 2020 and 31 March 2021. It is at least possible that as the 12/16 estimate converges to hard numbers (SNZ know with confidence what happened 16 months later) that we end up with a rather low contribution from net migration in the last 12 months or so?

A revision along those lines might sound like a good thing – if the resident population was smaller then given GDP average per capita real GDP was higher. But I doubt it is as simple as that because many of the components of the GDP estimates themselves will have been estimated, from sample surveys, that have behind them a view on the population. Revise down the population and it is likely that the subsequently-reported GDP estimates will also be a bit lower.

One of my favourite charts over the years has been on real GDP per hour worked. My normal approach is to use the two GDP estimate and the two estimates of hours (QES and HLFS), index all the series and simply use the average that results. Here is the chart for the last 10 years

real GDP phw June 21

The decade was mostly pretty bad, but who knows what has gone on in the last 12 months. Some of the apparent noise reflects differences in the two hours series: the HLFS estimates hours worked and the QES hours paid. Usually they are much the same thing, but not in the midst of a lockdown with a wage subsidy. But that was mostly a problem for the June and September quarters last year.

No one is going seriously argue that Covid has been good for productivity, so even if the latest estimate looks quite appealing it is unlikely to endure. Now, of course, you’ll recall the divergence in the two GDP measures, so I could show you are a chart with really big differences in the productivity estimates depending which GDP measure one uses.

Perhaps you think that the lift in productivity shown in the chart is mostly a compositional effect. When hours worked dropped it is often the lowest paid, lowest productivity hours that drop off first. But even there our two surveys report quite different things: QES hours in March were (seasonally adjusted) 1.8 per cent lower than they had been in December 2019, but HLFS hours were 1.4 per cent higher. There is, inevitably, noise in these series, but it does leave analysts somewhat at sea at present. And not even sure where the errors, and future revisions, might be. I’m pretty confident that labour productivity has not really increased by 2 per cent in the last 15-18 months, but what that means for the component estimates I don’t know.

I’ve sometimes shown comparison with Australia, especially for real GDP per hour worked.

Aus GDP 2

There is much, much less volatility than in the New Zealand estimates. Of course, it also seems unlikely that underlying productivity per (stratified) worker has stepped up through Covid, but…..hours worked in Australia are estimated to have been 3.4 per cent lower in the March quarter than in the December 2019 quarter, so there is a a somewhat plausible composition story there. In fact this is what happened in Australia in the 2008/09 recession.

aus 08

And as the labour market recovered, productivity fell back to trend.

Some of the measurement challenges are unavoidable, but it does look as if the (highly regarded) ABS is making a better fist of things than SNZ.

We can be confident that the economy is in much better heart than it was last June, but – per official statistics anyway – that really is about all. Fortunately, we have business opinion surveys because perhaps more than usually we really rest on them for anything much of a sense of where the economy is right now. And for some things that matter longer-term, notably productivity, we really are just flying blind at present, backed perhaps by basic theory that whatever good shutting borders has done for public health (a real gain) it is almost certainly at least somewhat bad for productivity.

Immigration policy for New Zealand post-Covid

It must be quite a challenge for Rotary clubs to maintain a regular roster of speakers. Four years ago someone at the Wellington North Rotary Club had heard about my ideas on immigration policy and New Zealand’s lamentable economic performance and they invited me along to tell my story. The text I used then is here. A little while ago they invited me back and when we discussed what I might talk about I agreed to pick up where I’d left off in 2017 – at the very peak of the then immigration surge – and reflect on a better immigration policy for New Zealand as and when the borders eventually reopen (in the year to April, SNZ estimates a net outflow of about 9500 non-New Zealanders who’d been here for some substantial period of time.

So I spoke to them yesterday. One can’t cover everything – or even anything much in the depth the subject warrants – in 20-25 minutes, but for those interested my text is here.

Sadly, of course, the stylised facts of New Zealand’s economic underperformance haven’t changed for the better over the intervening four years. Productivity levels remain low and growth weak. Business investment has been pretty sluggish around low rates, and if anything the export/imports shares of GDP have probably fallen a bit more (even before Covid at least temporarily cut both further). Our real exchange rate stayed high, and if long-term real interest rates have fallen they were/are still well above those in almost all other advanced countries.

What has changed, for now anyway, is the substantially closed borders, which mean that it is very hard for most non-New Zealanders (Australians aside) to get in. No one envisages, or wants, current arrangements – or anything like them – to be permanent, but it does mean the conversation and debate starts from a rather different place than it might have a few years ago.

Perhaps what hasn’t changed so much is that much of the media debate – and apparently the political interest – seems to be on short-term visa holders. And almost every day now we hear stories from employers complaining about how hard it is to get staff, holding the border restrictions responsible.

It isn’t surprising that there has been some dislocation, disruption, and difficulty for some firms. After all, the borders were basically closed overnight, for public health reasons, and that disrupted a lot. That included typical sources of labour firms had become used to tapping, but it also included changes in the patterns of consumption demand (and the derived demand for labour). Add to the story, of course, the surprising pace of the overall economic rebound – spurred by huge fiscal deficits (not just last year when they were needed, but now when they aren’t) – which has led some economists to conclude that the economy and labour market are now operating at very close to full capacity. At full capacity you would hope it wasn’t always easy, or cheap, to find staff (on the other hand, it might be relatively easier for people to find jobs).

I don’t intend to make this a long post, but before running some quotes from my speech, I thought I’d include a couple of charts with some data that surprised me a bit when I dug it out. The first is the number people here on two of our main short-term work visa programmes – Essential Skills visas (a label that really should be in quote marks, or prefaced by “the so-called”) and Post Study Work visas.

visa 1

I knew the government had offered visa extensions in many cases, but if you’d asked I’d have guessed that total numbers would have dropped anyway as a reasonable number of people went back home. But, in fact, the numbers here – in these two most skills-focused categories – are almost the same as they were at the start of last year. And numbers on both visas are a lot higher than they were even five or six years ago.

Now, there have been material drops in the numbers here in a couple of other categories (both series quite seasonal).

visa 2

And those patterns are pretty much what I’d have expected. People have gone home as they’ve finished courses of study, or working holidays, and few/no new people have arrived. But on the working holiday front remember the counterpart – not too many New Zealand young people will have been heading off on their OEs over the last 15 months or so. The types of jobs (here) the two groups might have been looking for may have been a bit different – so some real mismatch issues in some places/roles – but it isn’t as if there are fewer potential workers overall.

As I noted in my speech – bearing in mind the rapid growth in short-term visa numbers in the run-up to Covid.

No doubt some firms have specific difficulties from the sudden dislocation. But there is something wrong with the story when it is seriously claimed – and this is the implication of what so many of these businesses are saying – that a low productivity economy, achieving underwhelming productivity growth, needs more and more immigrant workers each year just to function effectively.   Such a story might – just might – have a modicum of plausibility if this was a dynamic fast-growing economy where more and more firms were finding more and more opportunities to successfully compete on a world-stage.  But that is nothing like New Zealand’s story.  

And, as I’ve noted previously, most OECD countries are not only more productive than New Zealand they are also less reliant on migrant labour. Many business concerns reflect – understandably so – the (sometimes quite legitimate) perspective of a company, but economic policy management is about a country, and the two are quite different.

All that said, one of the points of my speech was to argue that the longer-term immigration settings, around residency approvals, matters far more to economic performance than the rules around limited period work visas. At 45000 residency grants a year, in 22 years the population will be heading for a million more than otherwise (by contrast, at peak there are about 100000 people here on Essential Skills and Post-Study work visas). If you believe in the enabling economic power of immigration, or think that in New Zealand’s case large-scale non-citizen immigration has been quite damaging economically, that is really where one should focus. Open borders people do – in principle, they’d allow (almost) anyone in, to stay. And so do I.

Here is the text from the last couple of pages of my speech on the way ahead

A couple of weeks ago the Minister of Immigration gave a speech foreshadowing changes to policy settings around immigration, apparently with a focus on the limited period visas.  There were no specifics, and there was no supporting analysis.   There are probably some sensible changes that could be made, but like their predecessors, this government seems all too fond of having officials and ministers decide who should be able to use migrant labour, where and when.  I’d rather go in the opposite direction and get officials out of things as much as possible. 

I would favour two main changes.  First, I would reverse the decision a few years ago to allow students to work while here. If you are here to study, study, don’t compete at the low end of the labour market.   And I would get governments out of approved lists, or even salary thresholds, and replace it all with a model in which any employer could hire a person on a temporary work visa but that visa would be

  • Subject to a fee, payable to the government (perhaps $20000 per annum or 20 per cent of the employee’s annual income, whichever is greater). That sets a clear and predictable test for whether non-New Zealand recruits are really required, and a genuine incentive on employers to search for and develop New Zealanders (especially for less well-paid positions).
  • Subject to a term limit (no individual could be here on one of these visas for more than three years, without at least a one year return home)

But despite the headlines these short-term work visas are still the second order issue.  Much more important is whether the government is willing to make any significant changes to the residency programme, or whether business as usual will shortly be resumed.

Neither the government nor the Opposition seen willing to engage on that issue.  And if the government deserves a little credit for very belatedly asking the Productivity Commission to report on the New Zealand immigration model, strangely they seem to be proposing to make policy before the Commission reports.

What should they be doing?

First, we need to explicitly recognise that the residency programme (the driver of medium-term policy-led population growth) itself comprises several different types of people. 

It includes people we are never going to restrict.  If your daughter does an OE in London and finds a British man to marry, he’ll be entitled to move here permanently.  No one would want to restrict those numbers, and there is no quantitative limit. 

It includes those we take in as refugees.  There is no economic motive for the refugee quota, it is all about humanitarianism.  

But the bulk of the programme is purely discretionary.  And the numbers involved have borne no relationship to the rather limited (highly productive) economic opportunities here.

There are all sorts of myths about migrants to New Zealand.  By international standards the skill levels mostly aren’t too bad – being a distant island means you really only get in legally, and it is an economics (rather than family) driven programme.  But the skill levels aren’t spectacular.  And why would they be?  Much as New Zealand is a pleasant enough, and peaceful, place to live it is (a) remote, and (b) now not very prosperous, and (c) small.   The smartest and most ambitious and most driven of the potential migrants are much more likely to go to other migration-welcoming countries if they can get in.  A country whose own people leave en masse isn’t a great advert for abundant economic opportunities.

And we aren’t even ruthless about demanding highly-skilled people.  We run specific programmes for people from Pacific countries who don’t have the skills/education to qualify as skilled migrants.  And we give extra points to people who are willing to live outside the main centres, even though the main centres are where most of the economic opportunities and higher paying jobs are.  We structure the system to subsidise NZ universities, by favouring applicants with NZ degrees and work experience even though NZ universities are nowhere near best in the world, and NZ’s economy is a low productivity beast.   And so on.  There is talk from time to time about attracting the best tech people, but why would they come here – small, remote, not very wealthy, no great universities, no relevant centres of expertise or funding, and so on? 

And so we bring in lots of pretty-average people, adding nothing systematically to NZers’ prospects   There is nothing wrong with being “pretty average” – that’s most people – but it isn’t going to do anything to transform our productivity performance.  Hasn’t so far, and no reason to suppose it will any decade soon.

New Zealand’s economy could do such much better.  But all the signs are that it probably can’t match the best with a population that is growing rapidly – much more rapidly than the productivity frontier countries.  Distance hasn’t been defeated and if anything may have become more important.  There is lots of wishful thinking around the New Zealand debate, but any serious confrontation with the stylised facts of New Zealand’s experience, augmented with the experience of other former settler societies, is that large-scale immigration just hasn’t helped for a long time.  You might think the US is an exception, but it isn’t really.  It was – like us – one of the handful of richest countries in the world 100 years ago, and despite having had much more rapid population growth than European countries (and no ravages of war or communism) the gaps have narrowed.     Denmark is probably the standout performer today.  

If political parties were serious about reversing the decades of relative productivity decline – and there is no sign of it – there is a variety of things mutually reinforcing things that should be done, which together would prompt much more business investment and a more outward-oriented economy: 

  • We should take a much more open approach to foreign investment – I’d remove all controls in respect of investors from OECD countries.
  • We should be lowering the tax rate on business investment – our company tax rate (which matters a lot for foreign investors) is in the upper part of the OECD range, and what you tax you get less of.
  • We need to free up land use, within our cities and across the country.

One could list other things (GE issues for example).

But most importantly, we need to end the delusion – for that is what it is – that a very remote country, which lots of its own people leave, which has fallen steadily behind an increasing number of other countries, and where foreign trade is shrinking as a share of GDP, is a sensible place for government policy to promote large scale immigration.  It wouldn’t make sense for Taihape; it doesn’t make sense for New Zealand.    Immigration policy is one of the largest structural policy interventions in our economy.    And now – before we reopen the borders – is the time to act.

So let’s not go back to granting huge numbers of residency permits.  Cut out the Pacific quotas – no reason to favour people from those countries any more than those from (say) Britain and Ireland (that we once favoured), and cut back the total approvals to, say, 5000 to 10000 really highly-skilled people (if we can find them) with no preferences given to NZ qualifications and experience, simply looking for the best and most energetic.  Add in refugees and the spouses/partners of New Zealanders, and you’d be looking at an overall number of residency approvals each year of 10000 to 15000.  In per capita terms that would be a similar rate to the US. 

Successful countries make their economic success primarily with and for their own people.  We can again do it here. We have talented and fairly well-educated people, we have reasonably open markets, we have a history of innovation, but distance really works against us and we will mostly prosper by doing better and smarter with (and investing more heavily in) the natural resources we have – things that really are location-specific.  Lots of other bright ideas are, and will be, dreamed up by people here.  But if those ideas work well, they’ll typically be much more valuable abroad.   You may not like it – neither do I really – but it is what experience shows.  We’d be foolish to simply start up the same old model and expect better results in future.

Colonial constructs

A couple of weeks ago the Sunday Star Times had a full page article – in a Money supplement, self-described as offering “Intelligent Money News, Tips and Insight – by Jade Kake headed Debt as we know it is a colonial construct (the online version runs under the title “Maori have colonisers to blame for concept of individual debt”.) The column ends even more starkly: “Debt is a colonial construct”, observing that “the implications of which continue to be felt in the colonies”.

As it happens, Ms Kake herself could probably be described – without animus – as something of a “colonial construct”. When I looked her up it turned out she was Australian (born, bred, and educated), of parents who themselves had been born in New Zealand and the Netherlands respectively. Lots to celebrate there one might have thought, and certainly it would have been inconceivable – impossible really – prior to, say, 1769. These islands and the descendants of their first settlers had been almost entirely cut off from the rest of the world- whether people-to-people movements, trade or technologies. And one of those missing “technologies” was credit – or debt.

There doesn’t seem to be any real debate about that. Ms Kake states it herself, and when I looked up some books on the pre-contact Maori economy they all made more or less the same point. There was some gift-exchange elements, but nothing at all resembling credit/debt as it had been known for some time – rather a long time in some places – in much of the rest of the world. A few years ago there was a book by the American sociologist David Graeber called Debt: The First 5000 Years. and I’ve written here about debt jubilees from thousands of years ago But that innovation, and evolution, had completely passed this part of the world by. Consistent with the absence of so many technologies and trade here, material living standards were very low.

“Colonial” is one those ill-defined words. Sometimes it means lots of permanent settlers from abroad, and sometimes just a period of control and government by a foreign power. In New Zealand, of course, it involved both, although the control by the foreign power was very short-lived. But, as people sometimes point out, even if these islands had never fallen to any foreign power, or if there had been little or no foreign settlement, many of the technologies would still have found their way here. Credit/debt is surely one of those sets of technologies. And that is a good thing.

Ms Kake is, of course, less sure (to put it mildly). But even she doesn’t really seem able to make up her mind. On the one hand she laments the arrival of the first bank in New Zealand (an ANZ forerunner) – but interestingly doesn’t mention our first very early quasi central bank, the Colonial Bank of Issue – but by the end of her column she is lamenting what she sees as evidence that it can be a bit harder to get credit if you are “visibly Maori”. If the latter is true it is, of course, unfortunate, but then we are left thinking that really credit/debt isn’t so bad after all. It depends – on what is used for, the reasons it is taken on, the conditions applied etc etc. Hitler’s regime borrowed in World War Two, but so did our side to defeat him. But when private parties take on debt, and do so not under duress, it is generally enabling and empowering.

Could one envisage a modern technologically-advanced world without debt? One could (and I briefly did here, in a debate a couple of decades ago with a visiting monetary reformer), but they’ve tended to go hand in hand. And no doubt Ms Kake would tar arms-length equity investment – also unknown here in centuries gone by – as another “colonial construct”. One might – as I do – wish there was much less household debt (because governments fixed the land supply regulatory disaster and got house/land prices a long way down), without having any particular qualms at all about young couples being able to borrow to buy a first house (rather than, say, generally wait until they were 50+ to buy a house outright). Much the same goes for business credit. Credit/debt is a sophisticated device enabling risk-taking, enabling smoothing of consumption, and so on. Financial development tends to go hand in hand with more intensive economic development and much higher material standards of living – not necessarily causally, although there are probably causal aspects (long-distance trade tends to rely on credit, on trust).

It is simply silly to say the debt is a “colonial construct” – it was simply one of the many things (institutions, cultures, technologies) that residents of these islands got access to when these remote islands finally opened, so late, to the wider world. There was – and is – nothing particular British – or even Dutch or northern European – about debt, technology itself transferred to, refined in etc, those parts of the world from elsewhere well before anyone settled here.

There has been a bit of debate over the weekend about the legacy of colonisation in New Zealand, prompted by some remarks by National’s education spokesman suggesting that in his view colonisation had, “on balance” been beneficial for Maori. One might debate aspects of his framing, and I don’t want to launch into an extensive debate here (a couple of pieces of mine that might be relevant are here and here). But, equally, the state of economic development and material living standards tend to speak for themselves about at least some aspects of such a question.

There is a big academic literature on the influence on imperial government, colonial settlement etc on the level of (say) real GDP per capita of different countries, and I’m not going to attempt to summarise it here. My own take is that the effects of imperial rule are not that large, but those associated with colonial settlement often have been. British settlers to (say) New Zealand and Australia in the 19th century brought with them many of the aspects – legal systems, culture, education or whatever – that had then made Britain the country with the most advanced economy and highest incomes.

Here is the IMF’s estimates of real GDP per capita this year for a variety of Pacific countries.

IMF real GDP

All of these lands were governed for a time in the 19th or 20th centuries by countries from outside. Two had large scale settlement – complete with the attendant, often embodied, “institutions” broadly defined – from places that were among the very richest and most productive on earth. It shouldn’t really be a surprise that the inhabitants of those two countries now – and not just the descendants of the settlers but the descendants of the earlier inhabitants (categories now often quite mixed) – have by far the highest material living standards of any of the countries in this region (all of which had previously been largely cut-off from the technologies of the rest of the world). Of the other countries on the chart it probably isn’t a coincidence that Palau and Fiji had the largest degree of settlement of peoples from outside the region. (As far as I can see the French territories – French Polynesia and New Caledonia – would come between Palau and New Zealand on the chart, but their stories are complicated by the ongoing ties to – and subsidies from – France.)

My best guess is that if, somehow, these islands had not been settled by outsiders but had simply been governed from outside for 100 years or so – as with most of these other Pacific states – real GDP per capita here might be similar to that in Samoa. They have computers, they have phones, they have credit. But they do not have an advanced economy offering high material living standards for their people (many of whom prefer to migrate to New Zealand). There might be reasons to debate this view, but even if these islands somehow generated per capita incomes twice those of Samoa they’d still be very low by advanced country (or modern New Zealand/Australia) standards.

Material living standards aren’t everything by any means. But they do seem to count for quite a lot.

Participating in the labour market

Yesterday morning I was skimming through the online database for the OECD’s recently-released latest Economic Outlook when I noticed that their table for the labour force participation rate was for ages 15-74. Often tables and charts for the “working age population” are done for ages 15-64 but as a growing proportion of those 65 and over have continued working the 15-64 numbers have become increasingly unrepresentative. So I downloaded the data and had a quick look, resulting in this tweet. (2019 because last year’s numbers were thrown around for every country and aren’t necessarily that representative.)

I was a little surprised – not that we were towards the right-hand end of the chart, but that New Zealand was now highest.

But there I might have left it, except that Stuff’s Susan Edmunds got in touch. We had a bit of a chat, and she produced this article. The headline suggests that high house prices might be the explanation (but as I’d noted to the journalist a variety of factors will have affected a range of different demographics).

It is worth stressing here that a high participation rate is neither good nor bad in its own right. It depends. I’m not in the labour force these days, and since I’m fine with that and I’m not a burden on the taxpayer it isn’t really a matter for anyone other than me and my family. My mother was in the labour force for perhaps only two or three years of the 60 years between her wedding and her death. On the other hand, if people are deterred from working by very high effective marginal tax rates or by “overly-generous” welfare provision or highly inflexible labour markets that might be more of an issue. And in wars, states sometimes compel people into the labour force – there might be reasons of state for that, but it is hardly a first-best state of affairs.

But I was still a bit puzzled so dug about a bit more data. First, this chart showing (since 1986 when our HLFS began) the 15-74 participation rate for New Zealand relative to (a) the median OECD country, and (b) the highest participation rate of any country in each year.

OECD partic rates since 86

(Technical note: it is only since 2002 that there is complete data for all today’s OECD countries. Using a fixed sample of the countries for which there is data for the entire period takes out much of the dip in the median after 1990, but converges back to the orange line in the last half dozen years.)

So we now have the highest 15-74 participation rate of any OECD country, but that is quite a new thing. Over the entire period our participation rate has been at or above the median (which was probably my impression), but the closing of the gap is striking. Note that back in 1986, the universal age pension (NZS) was paid from age 60, so from that change alone it is not surprising that our participation rate is now materially higher than it was 35 years ago (in 1986 32 per cent of 60-64 year olds were in the labour force, while about 74 per cent are now).

But where does this highest participation rate show up once we dig a bit deeper, by age and by sex?

It turns out that it is nowhere in particular. For not one of the age/sex breakdowns I looked at did New Zealand score highest in 2019.

Here are the young people, aged 15-24

15-24

Well above the medians but also quite a bit below the highest participation rates, whether for men or women.

This chart, for what is often referred to as “prime [working] age” people (25-54) took me a bit by surprise.

prime age

Not only are the New Zealand numbers not that near the maximum but for women of this age New Zealand was the median country in 2019. So much – it would appear – for the high house price story (at least as it is often applied, with both parents “having” to work even though they might prefer one to take more time out). Of course, house prices are high in some other OECD countries as well, but hardly any have quite the price/income ratios of New Zealand.

The next age group is the last before NZS eligibility now kicks in.

55-64

Here both male and female participation rates are well in excess of OECD medians, and not far off the highest rates (Japan for men, Sweden for women).

What about the 65-69 age group?

65-69

Again, well above the OECD medians for both men and women. but with a few countries higher than us especially for men.

And finally, the entire 65+ age group.

65+ partic

With much the same picture.

So standing back (and assuming the OECD did the 15-74 calculations correctly) we end up with the highest overall labour force participation rate for this working age band not by having spectacularly high participation rates for any particular age or sex sub-category, but from being well above the median in almost all categories, and at the median in a single sub-category (women 25-54).

(Note too that these are participation rates rather than employment rates – simply because that was the OECD table I started with – but note that New Zealand unemployment rates are typically below average among OECD countries.)

What should we take from all this? There are no doubt people who have dug into some of this stuff in more depth than I have here, but a few things strike me:

  • There is no single cause, factor or policy that explains New Zealand’s current participation rate being the highest in the OECD,
  • The high house price story seems unlikely to be that compelling, at least yet. For example, our working age participation rates are not particularly high (especially not for women), and today’s 65+ generation were already at least in their mid-30s 30 years ago (which is when real house prices really began to take off),
  • Our NZS regime is relatively supportive to labour force participation (since there is no income-testing or abatement), but as other countries raise their state pension ages, the income effect will tend to dampen labour force participation here among the 65+ age group, relative to some other OECD countries,
  • Much as I am not a fan of our high (absolute) rate of people receiving working age welfare benefits, or of the fact that our minimum wage is now high relative to median wages in New Zealand, it is only fair to note that our labour force participation rates are at or (mostly) above those in most OECD countries for every demographic shown here.

In the original tweet (above) I contrasted the high rate of labour force participation in New Zealand with the dreadful record on average labour productivity. In 2019 it would have taken a 68 per cent lift in average New Zealand real GDP per hour worked to have matched the leading bunch in the OECD (the US and some northern European countries). But by putting in more labour inputs (some mix of being employed and hours per job) we keep rather closer to the first world on average per capita incomes. The comparisons with the UK – not one of the highest productivity countries – is illustrative. UK average labour productivity is about 40 per cent higher than that of New Zealand, but UK real GDP per capita is only about 10 per cent higher than that here (both on OECD estimates). The UK does not have a low participation rate, but their participation rate (see first chart) is far lower than New Zealand’s (as are average hours worked per capita).

Sometimes the story is portrayed as one of employed New Zealanders working long hours. There is something to that story – working hours per worker in New Zealand tend to be in the upper quartile for advanced countries (only Lithuania was higher in 2019 among OECD countries – although Singapore, Korea and Taiwan are all materially higher). Some of that, in turn, doesn’t reflect long hours each week, but shorter annual leave entitlements than in many European countries. But equally important is long hours over a lifetime – our young people and our old people are simply more likely to be in the labour force than in the rest of the OECD, for a mix of reasons that can’t simply be dismissed as “good” or “bad”.

To the extent those reasons are “good” just think of the per capita incomes that could be sustained here if policies were ever adopted that once again delivered average productivity getting even close to the leading bunch in the OECD.

The PRC and all that

In recent days, there has been quite a bit of coverage of issues around the New Zealand’s government’s approach to the PRC.

There was, for example, last week’s trailer for the Australian 60 Minutes piece on New Zealand and China, which excited a great deal of scorn (and coverage) for what was, after all, a teaser to get people to watch a longer programme. It wasn’t clear what riled people more – the (not new but) clever play on words suggestion about “New Xi-land”, quotes from Mike Hosking, or what but the “elite” reaction was quite remarkably hostile.

As it turned out the actual 60 Minutes programme (you can watch it here) as something of a damp squib. Sure there was the nauseating spectacle of Michael Barnett, Executive Director of the Auckland Chamber of Commerce, talking of being “friends with benefits” with the PRC (complete with the “nudge, nudge, wink, wink” nuance), and openly asserting that whatever the PRC did on the human rights was really its concern only, and not something for anyone else to worry about. Presumably he believes what he is saying, but not the harshest critic of the Jacinda Ardern or Judith Collins would suggest they held that view. And from the Australian perspective, the programme makers seemed to start with the line that the Australian economy was paying a high price for their government’s stand, while New Zealand was prospering…..but with not a shred of evidence examined for those claims. At a macro level, the two economies look very similar right now, with unemployment rates post-Covid now back down not too far from late 2019 levels (Australia possibly a touch closer than New Zealand). And some of the programme even seemed quite sympathetic to the common, but fallacious, view that somehow New Zealand is less able to take a stand, due to size or other unpersuasive reasons. There was, of course, the clip of the 60 Minutes journalist asking Ardern whether she ever held back in making comments on China because of fears about trade. She again claimed that she never did – and surely no one serious in Australia, New Zealand, or China believes her – but 60 Minutes made no effort to unpick that claim either (which, as I noted in a post recently, if true must then mean she is really almost entirely indifferent to, and has feel no serious moral unease about, what China does – and I don’t believe that either). There was nothing about the New Zealand government’s reluctance to call out PRC attempted economic coercion of Australia, nothing about its refusal to criticise the PRC for the arbitrary detention and recent secret trial of an Australian citizen. And, of course, nothing about how weak both main parties here are on issues like political donations or CCP-connected political figures.

Of somewhat more importance was the political theatre in Queenstown yesterday, culminating in a long and wordy communique, in which Scott Morrison and Jacinda Ardern were falling over themselves to suggest that there was no real difference between them when it came to China. Both had their reasons no doubt.

Here is what they had to say.

First, on “coercion”

37. The Prime Ministers affirmed their strong support for open rules-based trade that is based on market principles. They expressed concern over harmful economic coercion and agreed to work with partners to tackle security and economic challenges.

39. The Prime Ministers reiterated their shared commitment to support an Indo-Pacific region of sovereign, resilient and prosperous states, with robust regional institutions and strong respect for international rules and norms, and where sovereign states can pursue their interests free from coercion.

Those references to coercion were new (weren’t in last year’s communique) but notice how weak they are. The first reference (para 37) is not even in the “Indo-Pacific and Global security” section, and neither reference explicitly names the range of steps the PRC has taken against Australia. Since we can reasonably expect that Australia would have welcomed strong and explicit support, we can only assume that New Zealand wasn’t up for it. That reflects very poorly on the New Zealand government – most especially in a joint communique with the Australians. Senior figures in the US Adminstration have made (much) stronger statements than that, specifically about the Australian situation.

Then there was the South China Sea

42. The Prime Ministers expressed serious concern over developments in the South China Sea, including the continued militarisation of disputed features and an intensification of destabilising activities at sea. The Prime Ministers further underscored the importance of freedom of navigation and overflight. They emphasised that maritime zones must accord with the United Nations Convention on the Law of the Sea (UNCLOS) and called on all parties to respect and implement decisions rendered through UNCLOS dispute settlement mechanisms. The Prime Ministers reiterated the importance of the South China Sea Code of Conduct being consistent with international law, particularly UNCLOS; not prejudicing the rights and interests of third parties; and supporting existing, inclusive regional architecture.

Which seemed quite good. I hadn’t heard Ardern or Mahuta say anything at all about the South China Sea – it certainly wasn’t in the list of issues they mentioned in their respective recent China speeches – but it turns out most of this language was also in the previous communique from 15 months ago, with just a couple of (useful) modifications. And – read it again – note that the PRC is not even named. It is good to see, but you get the impression that it was one of those issues that mattered to the Australians and in putting together communiques there has to be some given and take (I’m assuming Ardern’s side is the one keen on the strange “circular economy” paragraph that also survives from one year to another).

Then we got a paragraph that was not there at all last year

43. The Prime Ministers expressed deep concern over developments that limit the rights and freedoms of the people of Hong Kong and undermine the high degree of autonomy China guaranteed Hong Kong until 2047 under the Sino-British Joint Declaration. The Prime Ministers also expressed grave concerns about the human rights situation in the Xinjiang Uyghur Autonomous Region and called upon China to respect the human rights of the Uyghur people and other Muslim minorities and to grant the United Nations and other independent observers meaningful and unfettered access to the region.

I suppose it is good stuff as far as it goes, which is not very far. On Hong Kong, for example, there is no denunciation of the growing number of political prisoners or – in this week of Tiananmen Square remembrance – of the heavy punishments people of Hong Kong are threatened with if they seek to participate in (long-established) vigils). And as for the Uighur comments, they are less pointed that the recent resolution of the New Zealand Parliament which – if it did not name China – did refer to “severe human rights abuses”.

It is also interesting that in the next two paragraphs the two leaders could call out Myanmar much more directly

They condemned the violence being perpetrated against the people of Myanmar and called on the military regime to exercise restraint, refrain from further violence, release all those arbitrarily detained, and engage in dialogue.

Which is good stuff, but might almost equally be said of China….except the thought would never cross Ardern’s mind (perhaps the Australians would not have been keen either).

And what is missing completely is also interesting – no mention of PRC threats to Taiwan, military incursions etc, and not even (that I could see) a mention of the desirability of Taiwan participating in the WHO.

Oh, and there was also this

41. The Prime Ministers agreed to continue working collaboratively, bilaterally, and with our partners in the Indo-Pacific region, to uphold sovereignty in an era of increasing strategic competition. The Prime Ministers reaffirmed their resolve and shared respective approaches to countering foreign interference and agreed the importance of building resilience across all sectors of society, including in education, infrastructure, research, electoral processes, media and communities.

But that is just boilerplate communique-speak, with no substance whatever. It covers over the fact that the New Zealand government has been reluctant to even speak of foreign interference/influence risks – seen most recently in the belated emergence of news of the secret National/Labour deal to clear about the headline risks around Jian Yang and Raymond Huo, while neither party leader will even front with the public on the issue.

The different stance between New Zealand and the 13 western countries (not the Five Eyes) on the WHO study on Covid origins was also quietly swept under the carpet.

So for all the bonhomie and smooth words, it didn’t really amount to much. As I noted earlier, it suited both sides now to paper over the cracks and pretend to a commonality of view. There is a line afoot that only the PRC itself benefits from divergence between western countries (or specifically New Zealand and Australia) on these issues, but that is an argument for more substantive alignment, not for pretending to a commonality that just doesn’t exist. Read the speeches (Ardern, Mahuta), watch the interviews (eg O’Connor): this is a government that simply has no stomach to seriously call out the PRC. Perhaps Damien O’Connor’s respect was “a mistake” – as he now concedes – but it was a slip of the tongue only in that he shouldn’t have said it publicly, not that the idea had never previously occurred to him and a word he’d never previously thought of slipped out. Or repeated references from senior ministers to “respecting” the PRC. Decent people don’t treat with respect regimes responsible for (at least) “severe human rights abuses”.

The appropriate benchmark here is not what Australia says or does (although the consensus across Australian politics is clearly in a quite different place to that in New Zealand – see the recent speech from the ALP’s Penny Wong) but on what is right and proper. There are areas where Australia itself isn’t as strong as it could be – one could think of parliamentary resolutions, autonomous sanctions regimes, the Winter Olympics, and so on.

But the New Zealand government’s stance continues to fall a long way short. Why will the Prime Minister not explain why her government scrapped the Autonomous Sanctions bill that had sat on Parliament’s order paper for several years, with no replacement? Why does her government continue to claim that she will be guided by the UN on “genocide” declarations re the Uighurs, when she knows that China is a veto-carrying permanent member of the UN Security Council. Why does she never speak openly about the South China Sea (an evolving and worsening situation, currently directly threatening the Philippines)? Why is she never willing to highlight threats to Taiwan? Why will she not front up about the Jian Yang/Raymond Huo deal? Why does her party keep recruiting ethnic Chinese candidates with strong United Front ties? Why will she do nothing serious about reforming electoral donations laws (even as multiple court cases and SFO investigations are underway)? Why was she so loathe to comment at the time of the break-ins to Anne-Marie Brady’s house and office (let alone when other NZ universities sought to have Brady silenced)? Why is she not willing to speak out about the Winter Olympics – does she really think the Olympics should be held in a country responsible for “severe human rights abuses”? Why is she not taking any lead to get PRC/CCP-funded and recruited/screened people out of our schools, instead funding Chinese language learning properly ourselves? And so on.

I was going to include in this post some thoughts on, and responses to, a new article in the Victoria University publications Policy Quarterly by Anne-Marie Brady on the New Zealand government’s approach to the PRC. It is a very generous treatment, about the “significant progress” she claims has been made under the Ardern governments of the last four years. I didn’t find it very convincing at all, but I guess it must have been welcomed in the Beehive and in MFAT.