National Party

Not being entirely straightforward

Michael Reddell Fiscal policy, National Party

No posts last week between some mix of the war news (including related economics and financial markets news) being more interesting, and Covid – in our house that is. Not being too sick, but not being entirely well either I wasn’t concentrating very hard for very long. Fortunately, the isolation is now half over and no one’s health is particularly concerning. So back to some domestic economics and policy.

The leader of the National Party yesterday gave what he billed as a “State of the Nation” speech. You can read it all here. It was, however, largely a tax speech. And – and I say this as someone who would really really like to be able to vote for National – it was pretty disappointing.

It wasn’t that I disagreed with any of the tax ideas – none of them very radical anyway. So when he committed to repealing “each of these new taxes implemented by Labour”

I was quite pleased. On Radio NZ this morning he also committed to getting rid of the “ute tax” as well, and I was pleased to hear that as well. One might debate the merits of some of these measures at the margin (eg I’d be happy to limit interest deductibility – for all businesses – to real interest, not nominal), but none of them really represented good tax policy, and they make the economy work less efficiently.

I was also quite keen on the idea of adjusting income tax thresholds to take account of inflation since 2017 (although would be rather keener if that included a commitment to legislate indexation of the thresholds as a permanent feature of the income tax system). That is simply fairly good tax policy.

So far, so positive, although do note that all these proposals involve turning back the policy clock to 2017. National was the government then, so no doubt they look back fondly on that time. But our structural economic performance (productivity growth, business investment etc) wasn’t much chop then – as Labour then used to point out, before becoming indifferent to such trifles when in office, and implementing policies – and running into circumstances – that are likely to have made things worse.

My concern is the fiscal and macroeconomic aspects of what National is saying – in Luxon’s speech yesterday, and (on the other hand) in every second parliamentary question for weeks.

Of all those tax promises listed above, only the one-off indexation of the income tax thresholds is costed, presumably because they are actively calling for the government to adopt this proposal in this year’s Budget.

National has been trying to make a thing of the size of the operating allowance ever since it was announced in December. But doing so isn’t entirely straight. Here a couple of paragraphs from my post at the time

To illustrate the practical implications, here is a chart from that post.

The simplest explanation is simply that when there is a lot more inflation, things cost a lot more – the same bundle of goods and services (or real transfer) cost more – and the way the government’s systems are set up, most of that “cost more” has to be met through the operating allowance. I thought it was a daft system when I worked at The Treasury, and I still think it is a daft system – presentationally – but it is the system and both National and Labour-led governments have used it. When inflation is very low (eg undershooting the target), operating allowances can be low without any great austerity, and when inflation is very high (eg overshooting the target, operating allowances can look (and be) very high without any great fiscal extravagance. As the graph shows, if the government keeps to the plans announced in December, government spending will be falling (modestly) as a share of GDP over the next few years.

And what has happened (and is forecast to happen to) the price level?

When the current government Budget, and appropriations, were decided, Treasury thought that the price level (CPI) by June 2023 would be 6 per cent higher than it was in June 2020. By HYEFU time – when they decided on the operating allowance – they thought the increase would be 11.9 per cent. We don’t have new Treasury forecasts, but the Reserve Bank’s MPC published forecasts recently (and recall that the Secretary to the Treasury sits on the MPC) and they expected a 12.7 per cent increase. It isn’t impossible that events of the last 10 days – including last week the biggest weekly rise in commodity prices in 50 years – will have pushed those numbers higher again.

Things will cost more. That is true of things you and I buy (a point Luxon has, fairly, been keen to stress) but it is also true of things the governments buys or spends money on.

A very large proportion of that $6 billion operating allowance will be required simply to keep real spending at the levels the government had in mind in last year’s Budget. It is a really big price level shock, at a time when – almost every year – nominal GDP is at record highs, so it is hardly surprising that the operating allowance is itself a record high. It tells one nothing about fiscal profligacy. I suspect Labour is already finding putting together this year’s Budget quite a bit harder than they planned in December – harder that is if they are going to stick to the $6 billion.

I’m not suggesting that when the $6 billion was announced in December there was no room for new government discretionary initiatives. I’m quite sure there was (as pretty much every government ever has done). And it is quite likely that adjusting the income tax thresholds – for that big price level shock – is at least as good a use as whatever Labour has been cooking up. But……as the graph shows, Labour’s spending plans for the next few years were hardly looking reckless.

Here it is also worth repeating that National has not offered costs, or funding ideas, for their other tax promises. For some it doesn’t matter – the “Light Rail Tax” is vapourware at present anyway – but we know that the 39 per cent rate is pulling in a lot more people than initially envisaged, and probably a fair amount of money. Unless National proposes to run larger deficits/smaller surpluses in the out-years than Labour is planning/forecasting, the money needs to come from somewhere – presumably lower (than otherwise) government spending.

National has for months been running the line that high government spending is to blame for much of the surge in domestic inflation. I’ve been quite sceptical (and critical) of that view, including in a couple of recent posts, here and here).

If were a serious line of attack – as distinct from something that looks a lot like rank opportunism – one might have supposed Luxon and his party would be identifying significant areas where they would cut government spending. But this all they had to say

I’m not a fan of any of those policies, although it is hard to conclude that either the water system or the health system are just fine as they are, and (at least as far as I’m aware) daft as the “underground tram” might be, little is yet being spent on it, so it isn’t an explanation for the inflation we are now seeing. There was reference to welfare dependency – and again I agree it is a real issue – but no concrete ideas for materially cutting those outlays.

So we seem to be left with:

  • claims that high inflation –  even high domestic inflation –  are substantially the responsibility of high government spending, but (a) no serious analysis in support of the proposition, and (b) no substantial or material proposals for cutting government spending now, and
  • for the future, tax cuts promises that, while individually sensible and perhaps even laudable, aren’t supported either by burgeoning projected surpluses or by even a hint as to what expenditure will be cut (bearing in mind that demographic pressures on spending are likely to rise, not fall).

At best, even in the shorter-term we are left with an Opposition that wants to run no smaller deficits than Labour (operating to the same operating allowance for the coming year), and – on the things actually announced yesterday –  smaller surpluses or larger deficits than Labour in the years to come.  And all this while standard macroeconomic forecasters will put MUCH more weight on deficit/surpluses (and changes in them) as an influence on aggregate demand –  something the Reserve Bank needs to respond to in setting monetary policy – than on the level of government spending in isolation.

Ideally, National would now use this as an opposition to pivot and move on, abandoning the “government spending explains inflation story”, shifting their inflation focus back onto the Reserve Bank’s failings (and the government responsible for holding them to account), and if they are serious about future tax cuts, start telling us how they plan to pay for those cuts.  A serious move on the NZS age –  a fairly prompt lift to 68 and life-expectancy indexation from there –  would be a good place to start (as distinct from National’s policy hitherto of doing nothing at all for another 15 years or so).

Finally, as I noted earlier the speech seemed to involve turning back the policy clock to 2017.  But productivity growth –  the foundation of longer-term improvements in material living standards – was nothing to write home about back then either.  One hopes –  probably against hope – that before long Messrs Luxon and Bridges might let us on on their thinking on how we might do rather better over the medium-term than simply turning back the clock to five years ago, how we might at last begin to close those yawning economywide productivity gaps between us and the rest of the advanced world.


Thinking Big still

Michael Reddell Auckland, National Party, New Zealand economic history, Uncategorized

Just before I went on holiday I wrote sceptically about the “five point economic plan” speech given by the then National leader Todd Muller.

We were promised then a series of major speeches fleshing out the framework Muller enunciated.  Among the five points was this

Delivering infrastructure had this promise

Before the end of this month, I will announce the biggest infrastructure package in this country’s history. It will include roads, rail, public transport, hospitals, schools and water.

My heart sank somewhat.  A new and different Think Big? But lets see the specifics.

Of the five points Muller had outlined, this seemed to be one where they were investing any hopes they might have of lifting New Zealand’s medium-term economic performance.

New leader Judith Collins started on the details with a speech given on Friday and some supporting documents.    This announcement had (a) some big headline numbers for spending over the next decade, (b) the “roads, rail, public transport” components for the North Island north of Tauranga, several of which are mainly about periods well beyond the next decade, and (c) some material on how they propose to replace the RMA, and to fast-track some of these projects in the meantime.  I think there had already also been a promise to build an expressway between Christchurch and Ashburton.

I don’t have any particular problem with building more and better roads where they make sense.  Same goes for rail within cities, again where such proposals make robust economic sense.  (I’m much more sceptical of things like cycleways, whether across the Waitemata Harbour or locally.)  And clearly congestion is a major issue in Auckland and –  for what is really a pretty-tiny city by international standards – to some extent in Wellington too.  Congestion has real economic and welfare costs.  National’s leader referred to one estimate of those costs in Auckland (presumably this one) at around $1 billion a year –  and since the study was done a few years ago, perhaps it would be reasonable to use a higher estimate now.

But we have tools that can deal with congestion.  Pricing.  It is a tool that seem to work when tried in other countries/cities.    Of course, simply pricing congestion doesn’t mean building no more roads ever, but it (among other things) helps give a better steer as to what the real price of congestion – and the value people put on avoiding it – and it deals with the congestion directly in the meantime.    Even the current government’s Minister of Transport has been on record suggesting that congestion pricing is “inevitable” at some point, just not now.

And what is National’s stance, to address what Collins calls a “congestion crisis”?

Looking further ahead, if we and Auckland Council ever look at congestion charges in the future, my Government will insist they are only ever revenue neutral, with other fuel taxes reduced to compensate.

“If we ever”….Not exactly a ringing endorsement, looking to shift the ground in the debate.  Perhaps congestion pricing isn’t easy electoral politics, but it is the direction we need to be heading.  It might actually make a material difference within five years, unlike (as far as I can see) most other things in the National plan.

Instead the focus seems to be a flinging around some big numbers, not being too bothered about how robust any analysis supporting the mooted projects is, and all with little or no sense of decent mental model of what has gone wrong with New Zealand’s economic performance,   And yet it is, supposedly, “the Plan that New Zealanders –  including Aucklanders –  have been waiting for, for generations”.

Pretty sure that last sentence isn’t true.  Collins, for example, talks up the “if onlys”, in her case around Sir Dove-Myer Robinson’s “rapid rail” proposal, that got lots of attention in Auckland in the early 70s.  We moved to Auckland about that time, but I was 10 and can’t claim to have given it huge attention.  But here’s the thing: the population of the Auckland urban area then was about 650000, the birth rate had been dropping for a decade, and the new government was just about to markedly tighten up on immigration access, a policy that carried through for the following 15+ years.  And even with all the New Zealand tendencies to boosterism, neither central nor local government was persuaded that Robinson’s scheme made economic sense.  Nor, most likely, did it.  Collins also talks up the City Rail Link project, the costs of which have escalated greatly since the government she was a part of first signed off on the project, which didn’t look very economic even then.

The promise seems to that this big infrastructure spend-up is going be pretty transformative in economic terms.  There are these quotes

This city is broken by congestion. Every Aucklander and every visitor to Auckland knows it. Congestion costs Aucklanders over $1 billion per year. That’s the strict economic loss. It represents lost production, lost productivity, lost opportunity.

But congestion is far worse than that. Congestion means unreliable journey times. It means frustration at sitting idle on the motorway. It means goods being delivered late to our ports. It means Mum being late to pick up the kids from rugby practice. It means a tradie only doing two, rather than four, cross-town trips per day. That’s fewer jobs for him; less income, and less economic activity.

I guess $1 billion per annum is supposed to sound like a big number.  In fact, it is about 1 per cent of Auckland’s GDP.   Fixing the problems is probably worth doing, but 1 per cent of GDP is tiny in the context of either Auckland’s gaping economic underperformance, let alone that of New Zealand as a whole (recall that the productivity leaders are more than 60 per cent ahead of us).

And yet, according to Collins, there are really huge gains on offer.

National’s approach to infrastructure is simple: Make decisions, get projects funded and commissioned, and then get them delivered, at least a couple of years before they are expected to be needed. That is the approach that transformed the economies of Asia from the 1960s.

Quite possibly, some east Asian cities/countries did infrastructure better than New Zealand has, but I’d be surprised if National can cite any authoritative development studies suggesting that the catch-up of that handful of successful east Asian economies was primarily about moving things/people more easily around their own countries.  They are typically regarded as outward-oriented, tradables-sector led, growth stories, perhaps with improving infrastructure going hand in glove with those flourishing outward-oriented opportunities.

But, as least as far as we can tell from this speech, or the framework one Muller gave, National’s policy approach is now primarily inward-looking?  That has long been the practical effect of the policy approach they (and Labour) have adopted over 25+ years, but it isn’t usually so blatantly put.

Collins went on.  Build these roads, rail etc and

Half of New Zealand lives in the Upper North Island region. We want a genuinely integrated region of 2.5 million New Zealanders. Our vision is to transform the four cities to be one economic powerhouse. We will unlock their potential so that the upper North Island becomes Australasia’s most dynamic region.

Recall that the expressway to Whangarei, complete with possible tunnel under the Brynderwyns, is –  even on this plan –  well over a decade away.  And recall that in the regional GDP per capita data, Northland has the lowest per capita GDP in the entire country, suggesting that if Whangarei has any part in some future “Australasia’s most dynamic region” it has a very very long way to come.      But even forget about the Whangarei bit of the fairytale for now, do the National caucus have any serious idea how far behind key bits of Australia productivity levels in New Zealand actually are (and Australia is no great OECD productivity success story)?   As a hint, that 1 per cent of GDP Collins talked about fixing won’t even begin to make a visible dent in the productivity gap –  a gap only likely to continue to widen for the next few years, even if Collins plan did eventually make some small helpful difference.

National –  like Labour really –  seems to have no idea at all what has gone wrong with the New Zealand economy, what has taken us from among the very richest and most productive countries on earth to be some slightly embarrassing laggard, increasingly unable to offer the best to our own people.   But they’ll just fling some more cash at things –  as Labour does, just a slightly different make-up – in the hope of getting elected, and the vague sense then the something must be done, and anything is something.

Here is the Collins approach to project evaluation

The economists will tell you we should build projects only when they’re needed. My sense from my time in politics is that you just want the government to get infrastructure projects built. You just want them done. And you want them done ahead of time.

My Government will be informed by processes like NZTA’s Benefit-Cost Ratio analysis, and by advice from the Infrastructure Commission. But we will not consider that analysis or that advice to be holy writ when making decisions about major transformational projects. Think about all of the Roads of National Significance the National Government built.

I don’t think Transmission Gully passed a decent cost-benefit test, even when it was going to be operational by now.

Now I’m not about to suggest that officials and appointees to government boards should be making the decisions, but any well-done cost-benefit analysis should be a key hurdle in any proposed commitment of large amounts of public money.  Perhaps there are reasonable arguments about methodology or about specific assumptions used in the calculations.  All that can and should be debated, but a project that cannot return a decently positive benefit-cost ratio is one the public should be very sceptical of.  Simply waving your hands and talking about “major transformational projects” should be no more acceptable now than ever.     And having projects in place “ahead of time” –  when few projections about the future, including about population, are that robust –  also has significant economic costs, even at today’s lower public sector discount rates.

One other questionable aspect of National’s plan is what they call “intergenerational funding”.  This is fancy language for borrowing, in this case off the core Crown accounts and having NZTA borrow instead.  As far as I can see there is almost nothing going for this particular approach –  one already indulged in by Labour, with Housing New Zealand now borrowing on-market.  It will be a (a bit) more costly than the central government borrowing itself, with no more likelihood the debt will be defaulted on, it is less transparent,  and unless the government is proposing to delegate all final decisions on projects to officials (which they –  rightly in my view –  show no sign of) there is no reason to think it will either tap new sources of capital (the NZ government not being debt-constrained) or introduce new disciplines on Crown capital spending.  There is, or can be, a place for government borrowing, but decisions on that are better taken, and managed, centrally.

So there were big numbers in the announcement, some big projects (which may or not be economic, may or may not ever happen even if National winds), but little or no sense of a credible economic model lying behind it, grounded in the specifics of New Zealand’s underperformance.  And if there is such a model at all, it just seems to be more of the same –  rapidly growing, but quite volatile, population – the strategy that has so comprehensively failed for the last few decades.      More and better roads aren’t going to materially change that.  Nor –  although it should be done as a matter of priority –  are the sorts of land use reforms that might make house prices more affordable. The new Leader of Opposition suggests a National government might do something there.  But we’ve heard that story before – whether from National in Opposition in 2008 or from Phil Twyford in Opposition in 2017.  Perhaps this time really would be different, but I’m certainly not counting on it.

National’s five-point plan

Michael Reddell National Party, New Zealand economic performance, pandemic

At the end of my post yesterday morning I noted briefly

Of course, if Labour’s approach is bad, at least (being the government) it is on the table.  It is now less than two months until voting starts and we have no idea what National’s approach might be, but no reason to suppose it would be materially different or better.

Within a couple of hours we had a plan from National, or at least what Todd Muller describes as “the framework for the party’s Plan to create more jobs and a better economy”.   Just like the Prime Minister, he has a five-point plan, outlined in a speech given in Christchurch yesterday.   If you want the potted version there is even a one-page graphic.

graphic nat

I was no more impressed than with Muller’s previous speech, although at least he has dropped the (historically ill-grounded) paeans to Michael Joseph Savage.   There still seems to be a great deal of me-too-ism about it: we’ll be just like Labour only more competent.   If he has values and a political philosophy, they seem to bear little or no relationship to those the National Party was built on.    It is the sort of speech any (losing) centrist Labour Party leader could have given.

It is explicitly an economic speech, but there was no obvious economic framework, no sign that he or his advisers had thought hard about what has ailed the New Zealand economy for a long time, about how National might fix it, and how that might tie together with the immediate recovery needs (having been accused by one commenter yesterday of being an “armchair theorist”, here was my post-Covid note on such issues).

Anyway, to step through the speech.  First, there was the flawed framing.

According to the Reserve Bank, New Zealand faces its worst economic downturn for 160 years. I don’t think the magnitude of that has yet sunk in to the public or the media. That’s partly because, these past few weeks, everyone has quite rightly been more preoccupied with the shambles at the border and in our quarantine centres. But, if the Reserve Bank is to be believed, ahead of us lies the greatest economic and jobs crisis that anyone in this room has ever known.

Even though the fall in the GDP in the month of April was absolutely huge –  could we have measured it, perhaps 40 per cent –  no one supposes that what lies ahead is worse than New Zealand’s experience of the Great Depression.   Most likely, what we face is something more like, perhaps a bit worse than, the severity of the late 80s and early 90s.  That’s quite bad enough.

And a scale of loss and dislocation that National, at least in this framework speech, appears to have no answer for.

Thus, we learn that they are quite happy with macro policy as it stands and don’t appear to think the Reserve Bank needs to be doing anything more (than the little they have done so far).  And we get rather florid rhetoric on fiscal policy, supported by (it appears) nothing.

Since the Fiscal Responsibility Act, the economic and political debate in New Zealand has tended to be on the quantity of borrowing or debt repayment each year. These remain critically important. Getting back to fiscal surplus and then paying down debt to 20 per cent of GDP is necessary, not least because New Zealand will inevitably confront another natural, economic or health disaster in the next couple of decades or beyond. But just as important is to focus on the quality of spending.

Labour forecasts net core debt will reach 53.6 per cent of GDP in 2024 under their policies. That’s an eye-wateringly high level. We will work hard to try to keep it lower than that, which would put New Zealand in a better position to recover. But of far greater longer-term importance is that Labour projects that under its policies, but with a far stronger economic environment than we face today, net core debt will still be as high as 42 per cent by 2034. That means Labour intends a mere 11 per cent reduction in net core debt, over a decade. At that rate, we will not get back to the safe 20 per cent mark until perhaps the mid-2050s.

National does not regard Labour’s attitude as anything like prudent. It would leave an enormous debt, not so much to our children but to our grandchildren. And it would leave our children and grandchildren – and also ourselves – profoundly vulnerable were the global economic and strategic outlook anything other blissful for three successive decades. Covid-19, the trade war between the US and China and this city’s recent history all say that is not a safe bet.

There aren’t many specifics there but Muller is clear that National would be spending less (not necessarily a lot less, but less) than Labour, so that source of support for a faster demand recovery is apparently off the table.   He plays up the debt numbers but never mentions the large assets (NZSF) on the other side, which mean that even the peak debt numbers would last year have put us among the less indebted half of the OECD.  He never engages at all with the possibility that lower long-term interest rates might –  just might –  make a higher long-term debt ratio sensible.  And, of course, there is no hint of when he expects to get back to 20 per cent of GDP, or on what sort of path.

(To be clear, I am not a fan of high levels of public debt, but on a proper measure we’d peak at around 40 per cent of GDP even on this government’s numbers.  And like most rhetorical fiscal hawks in the current context, he offers no other path for a prompt return to full employment).

And then, of course, there is the question of how seriously to take the talk of future fiscal restraint. There was this, for example,

Let me tell you what that means in practice. In 2020/21 and 2021/22, my Government will not be scared of investing more in retraining, if we are confident it will genuinely improve productivity, lower unemployment, increase the tax take, reduce the cost of welfare and improve wellbeing over the following decade. My Government will not be scared of investing over the next decade more in the first 1000 days of life, if we are confident it will improve outcomes from the school system for a generation. Similarly, social housing and mental health. Nor will my Government be afraid of investing more in roads and public transport, if we are confident they will still be improving New Zealand’s productivity 50 or 100 years hence. And my Government will not be afraid to invest more in water storage or carbon-replacement technologies, if they will support higher living standards and greater wellbeing on an even longer timeframe.

It would be surprising if a public transport project now were boosting productivity 100 years hence, but you are left wondering what Muller wouldn’t be spending on.

Now, to be fair, he tells us there will be a series of major speeches outlining details of the five point plan.   But the gist –  what was in yesterday’s speech –  wasn’t encouraging,   Of their headings

Responsible Economic Management consisted of nothing but rhetoric.  We can probably all agree that quality of spending matters, but there is little in National’s track record suggesting they’ve done much better on that in the past (just different specific waste) and –  more importantly –  no clue as to why we’d think they’d better in future.  Labour has been spraying money at favoured entities in recent weeks, but which ones (specifically) is National opposing?

Delivering infrastructure had this promise

Before the end of this month, I will announce the biggest infrastructure package in this country’s history. It will include roads, rail, public transport, hospitals, schools and water.

My heart sank somewhat.  A new and different Think Big? But lets see the specifics.

Muller boasts of delivery, but wasn’t it the previous National government that put in place the contracting structure for Transmission Gully.  And I’m always a bit surprised at National using the Christchurch repair and rebuild process as a plus.

Reskilling and retraining our workers is flavour of the day (it was a big part of the PM’s speech the other day too), this time with rhetoric about capturing something called the “Creativity Wave” in the 2020s.    But from a party offering no more macro stimulus to demand (see above), uninterested in our high real exchange rate, and (previously) opposed to fees-free it all has the feel of rhetoric and displacing headline unemployment figures at present.   When there are jobs on offer, firms and individuals tend to invest in the skill development required.

A Greener, Smarter Future may be good political rhetoric, or the sort most Labour ministers could have delivered, but seems about as empty.   This section concludes thus

National’s vision is of a post-Covid economy that is greener, smarter and better than the one we had before.

Sounds fine, but what (specifically) is the government’s role in getting there, and what is National proposing to do to give us some hope of achieving all this environmental stuff while also reversing the decades-long decline in relative productivity?  Nothing was on offer in this speech.

And finally, there was

Building Stronger Communities.  I’m sure Muller is genuine about some of this, but what of this gratuitous line

Every community needs strong community institutions to maintain and enhance their social capital. Many of those institutions were damaged a generation ago, and I don’t believe they have been repaired.

Another opportunity for Muller to have a go at the reforms instituted by the 4th Labour government and by his own mentor and former boss Jim Bolger?  So the decline of churches, sport clubs, Scouts and Guides, marriage and so on is down the evil reforms of the 80s and 90s is it?  If so, which of those reforms does he think specifically contributed and which is he proposing to undo?    Of course, the answer to the latter question is “none of them”.  It is just shallow opportunistic political rhetoric.

I don’t really disagree with Muller that

our opponent doesn’t believe in having a plan, hasn’t delivered on her promises, and has a track record of failure across the board.

But when he claims

Ladies and Gentlemen, in the end, I have a very simple message for you and all New Zealanders this election campaign: National has a plan to rebuild our communities and our economy, to get Kiwis back to work and to deal with the economic and jobs crisis.

There was nothing at all in the speech to lead any reasonable observer to think it was so.   Perhaps those future “major speeches” will give us something concrete, as part of a serious well-thought-out strategy that links the immediate challenges with the longer-term deep-seated problems in the New Zealand economy.  But on what we’ve seen so far, I wouldn’t be optimistic about that.

 

Me too

Michael Reddell National Party, New Zealand economic history

No, not that one.  This one is the  apparent desperate desire of the new leader of the National Party to align himself with the aims and ambitions of the current government.   It was all there in his speech on Sunday (complete with his desire to suggest that he had really become what they call in the US a “cafeteria Catholic”, and that his faith would make no difference to any government he led).

I saw a National-aligned commentator this morning commenting sceptically

Perhaps, but I don’t think that even in those sorts of circumstances opposition parties used that sort of approach in New Zealand towards the end of three term governments.  I was never a John Key fan, and there were a few issues where he actively chose to adopt questionable policies adopted under the Clark government, but even Key promised more (even if he never delivered) than just to be a more competent executor of Labour’s agenda.  I went back yesterday and read a few of those 2008 speeches just to check. (And the 2008 campaign took place amid a  severe recession and global financial crisis, both deepening by the day.)

Who knows, perhaps it will win a few votes.  Perhaps, but if you believe the stuff Labour, New Zealand First, and the Greens say they want to do, why not vote for them?   After all, if execution has not exactly been a hallmark of the government –  and Muller, of course, makes some entirely fair points there – why not vote for people who really believe it, rather than the pale imitations who just want office (or, in some cases, may just be in the wrong party).  After all, there is such a thing as learning-by-doing and some ministers at least are likely to improve with time.   Muller himself has no ministerial experience (as a reminder, a country is not a company), and his deputy was a fairly junior minister at the end of the previous National government where she was not regarded well by officials and as Minister of Education managed to deliver a speech as wordy and hard to read as a piece of legislation.

Setting aside the heartwarming biographical bits, the speech seemed to be a mix of spin, historical errors, and an utter lack of any ambition or promise.

There was, for example, the laughable description of the wage subsidy scheme as “bipartisan”.  I guess New Zealand First and Labour make up the coalition Cabinet, so perhaps that really is bipartisan, but just because you supported an initiative the government took doesn’t make it a “bipartisan” one.  It is doubly strange because a few lines later he notes that we can’t “freeze-frame our economy, with never-ending and unaffordable wage subsidy schemes”.   Were they “unaffordable” or bipartisan” or both?

Muller is clearly keen on selling the merits of the Key-English government, and I know it is a commonplace to say they “got us through” the “global financial crisis” as if (a) there was much specific to get through (the crisis itself was mostly other countries’ problems, and (b) it had not taken 10 years –  10 years –  for the unemployment rate to get back to pre-recession full employment levels.   Might not be a very promising line for suggesting National is well-placed to handle this recession/recovery better.

There was the strange claim too that the previous National government did not raise taxes.  Even if you allow for the GST/income tax switch as roughly neutral, this was the government that raised effective corporate tax rates, imposed a brightline test (and thus tax) on housing, dramatically increased tobacco taxes, increased the taxation of Kiwisaver, and so on. And and there was fiscal drag too.   The emphasis of the fiscal adjustment might have been on the spending side, but there were increased taxes.

There was also the weird claim that “Bill English developed the Living Standards Framework”, except….he didn’t, Treasury did.  And all while not offering the sort of analysis and advice that the Minister and his office often claimed to really want.   Pledging to use it in future National Budgets is just another example of the me-too ism and the same avoidance of the hard issues –  productivity failure –  that seemed to drive The Treasury in the first place.

As a young man Muller worked for Jim Bolger when the latter was Prime Minister…..but only after the reform era had already ended.   Now he is desperate to distance himself and National from the reform era –  sounding a lot like Grant Robertson used to sound re the Reserve Bank Act, even as his actual reforms made next to no difference.   Thus we read

I was in for a bit of a shock when my own party took over in 1990 and moved even faster, allowing unemployment to reach 11 per cent in 1992 – the worst since the Great Depression, but a record that will probably be broken over the next year.

I think both Labour and National could have done those economic reforms more gently, more caringly and with a greater sense of love for our fellow Kiwis.

If we look across the Tasman to our sibling rivals in Australia, it pains me to say that Bob Hawke, Paul Keating and John Howard managed the reform process better than David Lange, or my friend and mentor Jim Bolger.

I believe the speed and sequencing of the economic reforms did terrible harm to the institutions of our communities, and to far too many of our families.

The same Australia whose unemployment rate in the 1991/92 period peaked at almost exactly the same (11.1 vs 11.2 per cent) as New Zealand’s, and whose unemployment rate has been higher than New Zealand’s for most of the subsequent 30 years.     Quite what does Todd Muller think  –  specifically –  should have been done differently?   This cartoon is from the late 80s.

douglas

And yet despite disowning his own party from its second to last term in government, Muller expects us to believe that we can count on them to handle the recovery better because  “economic management is in our National DNA”.  The same party that (a) was happy for the unemployment rate to stay unnecessarily high for 10 years, and (b) which made no progress at all (rather the contrary) in closing the glaring productivity gaps, reversing the decades of underperformance.  Oh, and which promised to fix the housing market and did almost nothing.   Why would we?

It was sad and sobering to get through Muller’s speech, reread it again slowly and carefully, and find not a hint of any concern about productivity (however expressed) or housing.  It isn’t that long ago since National put out a discussion document on the economy which did actually seem to recognise the productivity failings, and that those failings mattered for whatever else individuals or governments might want to do.  No more apparently, even though the failure hasn’t just been magic-ed away with the virus.   And if house prices may fall back a bit during the current recession –  as they did (15 per cent or so in real terms) in the last recession –  that isn’t fixing the underlying problems is it?  No ambition, no promise, not even any mention.

All we seem to get is the promise of a bigger welfare state.   But again, if that is what you want why vote National?

If you were really erring on the generous side, determined to find a silver lining, there was this line near the end of the speech.

I’m proud of what National and New Zealand has achieved since then [when he joined National in 1988], but I do not yet see an economy that is truly internationally competitive or agile enough to maintain and improve our standard of living.

And yet there is not even a hint of what he means, or what he or his party proposes might be done.   You wouldn’t know, for example, that the productivity gaps are larger than they were, that foreign trade as a share of GDP is smaller than it was.  And with no serious policy, it looks as feels just as empty as when current government ministers, then in Opposition, suggested things could be better –  but offered no serious clue as to how that might happen.  They are as vacuous as each other.

Oh, and then there was the truly weird attempt to appropriate the legacy of Michael Joseph Savage

We would not use this term in today’s more secular and diverse age, but, in the 1930s, Michael Joseph Savage spoke of “applied Christianity”. As I’ve said, something like that will guide my Government.

Savage faced the last economic crisis of the magnitude of what is ahead of us, and was forced to borrow. He launched a major public works programme. At the end of it, New Zealand had the first of many state houses for low income workers, and significant infrastructure to power an improving economy – including large-scale hydroelectric schemes on South Island rivers and lakes.

It sort of makes some sense when Labour does it.  Whether or not there is much truth to what they (Ardern, Robertson) say, at least he was the first Labour Prime Minister –  some Labour figures still like to display his photo in their offices and homes.  It is pretty weird when National does it, and even worse when their “facts” are so misleadingly bad.

Thus, the Great Depression –  New Zealand style, where it was bad –  was largely over the time Labour took office in December 1935 (as it was in Australia and in the UK –  the latter overwhelmingly our major market).  Real GDP had recovered to pre-Depression levels and the unemployment rate was falling.   Through the Depression, governments had not been “forced” to borrow, they had largely been unable to borrow –  as National’s finance spokesman knows well –  and had actually defaulted on some of their debt.    And although Muller swears by his macroeconomic orthodoxy –  and thus professes himself entirely unbothered about a Reserve Bank doing almost nothing to counter this recession –  the first significant legislative act of the incoming Savage government was to nationalise the Reserve Bank and give the government progressively more power to use Reserve Bank credit.     The Savage government did borrow domestically, it did build state houses (all while doing little to actually prepare for the coming war) but……it also ran New Zealand into crisis in late 1938 and early 1939.  Unable to borrow internationally, and yet with a fixed exchange rate, the foreign reserves held by the Reserve Bank and the trading banks fell away very sharply (variety of influences), and government’s response was to slap on exchange controls and import licensing, regimes that didn’t finally disappear until the 1980s.

And then there was that interesting claim about hydroelectric capacity.  I hadn’t heard of that before, so I went looking.  There was a good reason I hadn’t heard of it before: it just didn’t happen. Muller seems to have simply made it up.

I went to the old yearbooks and found nice detailed tables of (what they called) public works spending (which does not include state houses).  Combine that with some historical GDP estimates, and you get something like this chart.

public works

Public works spending was held up in the early stages of the Depression –  including, the record shows, the Waitaki hydro scheme, partly to keep people in work –  but were cut deeply as the situation worsened and the foreign borrowing constraints became tighter.  The trough was the worst year of the Depression for New Zealand –  that to March 1933 –  and thereafter public works spending increased.  It is certainly true that the rate of increase picked up with Labour in office but even at the end of the period was no higher as a share of GDP (about 2 per cent) than it had been a decade ago under Forbes and Coates.

And what of hydro developments.  To my pleasant surprise, the data for those were broken out separately.  Here is public works spending on “Development of water power” as a share of  total public works spending.

public works2

So the hydro share of public spending works spending actually peaked in the year to March 1933, and it was pretty much downhill thereafter.   Of course, total spending on hydro also increased but in the last peacetime years (to March 1939 and 1940) it  no higher –  in real terms, or as a share of GDP –  than it had been in 1928 ( and less than it was 1932) –  this for a technology where underlying demand  was increasing very rapidly, and for which the state had taken effective control of the development of new power generation.

I don’t know where Muller got his story from.  But surely they have people who can do the basics like fact-checking an important speech by a new leader?  Then again, perhaps it really didn’t matter, because all they wanted to do was to swear allegiance to the Labour legacy, real or imagined, past or present.

Muller suggests that he would be a one-of-a-kind Prime Minister

In my lifetime, New Zealand Prime Ministers have tended to be kind, competent or bold. Some have managed to be two of those things. My background in business and politics, and my grounding here in Te Puna, mean I plan to be all three – kind, competent and bold.

There was no sign of any boldness in the substance of the speech, and not much evidence that he has basic competence nailed either.

Oh, and he’s promoted  his Chinese Communist Party member, former part of the PLA military intelligence system, who acknowledges lying about his past to get into New Zealand, further up the caucus rankings.  If that qualifies as kind, competent, or bold he must have a different dictionary to mine.   Shameful is a better word for it.

The void where hope might have been

Michael Reddell Housing, National Party

If, as I do, you’ve lived for almost 25 years 100 yards or so from the old Erskine College you have a fairly good sense of what National was on about in this snippet from their new “Building NZ, RMA Reform and Housing” policy discussion document released yesterday.

Objections to proposals for residential reuse of the old Erskine School site in Wellington held it up for more than 20 years. It involved claims that the decaying buildings had heritage value, as well as the routine RMA neighbour objections. Long after the school closed the buildings were red-stickered by Wellington City Council as being unsafe for occupancy. After two decades of costly objections and delays, development eventually started on the site providing 94 dwellings for families.

The school closed in 1985.  Some of the land was developed decades ago, but the main site is only now getting the first few occupants in the new (eye-wateringly expensive, at least on the advert I followed up) townhouses.

But if there seem to be some hints of some modest good things in the document, it is hard to be that positive  Every so often Opposition parties talk a good game about fixing (or rather, freeing) the housing market –  the one that results in such appallingly high price-to-income ratios, systematically skewing opportunity away from the young.   And then nothing very much that matters happens.  It has been that way for 30 years now, even as the problem has got worse and the imbalances more entrenched.

National talked a good game leading up to 2008.  And then accomplished almost nothing –  people from David Seymour to David Parker argue they made things worse – including when they had a clear absolute majority with ACT.  Some elements of Labour –  well, mostly just Phil Twyford – talked a good game prior to 2017.  Twyford can still give a pretty good speech on the subject, but are real house/land prices higher or lower than they were when Labour took office two years ago?  Higher of course.  And these are asset markets, that trade not just on how things are right now –  policymaking and legislating takes time – but on best credible expectations about the future.

And now we have National in Opposition again, trying to shape the best policies for New Zealand –  oops, the best policies they think they might win on –  heading towards next year’s election.  They seem to have given up already.

Oh, I know the headlines don’t say that.   They’ll report National talking of splitting the Resource Management Act in two, to have separate regimes for urban development and for wider environmental resource utilisation issues.  But then the current government is already looking at that option in one of their numerous working groups and consultative processes.    Have land prices on the edges of our cities been falling towards the value in the best alternative (agricultural?) use?  Not that I’ve noticed.  In principle, the idea of  splitting the Act sounds appealing, although with the caution that various experts have posed that there is a risk of creating huge uncertainty for a decade or two as courts define the implications and limits of a whole new regime.

But what is striking is how little specific there is about how differently things might actually operate under new National legislation.  National grappled with these issues in government for nine years, with ready access to experts inside and outside government.  They’ve now had two years in Opposition, with key former ministers (eg Amy Adams and Nick Smith) still on board, and yet nine months out from an election we have page after page of ideas from other people (notably the Environmental Defence Society) and discussions of how things are done in Scotland, South Australia, and Queensland, but little or nothing specific, and nothing that articulates any sort of National vision of a radically more functional future system.     And nothing that, for example, notes that Scotland has little population growth and the big cities in Queensland and South Australia have house price to income ratios well in excess of six –  classified in the annual Demographia rankings as “severely unaffordable” –  when both Brisbane and Adelaide not that many decades ago had price to income ratios of three.

And, sadly here I add an “of course”, there is not a single reference anywhere in the document to that myriad of thriving growing US cities where house price to income ratios today  –  10 years into an economic growth phase, with interest rates almost as low as those here now –  are anywhere from 2.5 to 4.    Or how we might be able to deliver those sorts of outcomes for New Zealanders.

I got to the end of the document last night and was rather struck by the lack of apparent ambition and by what appeared to be an avoidance of directly addressing the main issues.  So I checked the entire document and neither ‘land prices’ nor ‘house prices’ appear at all.   And yet every serious analyst knows that one of the key presenting issues is how large a share of the cost of an urban house+land is the price of the land under the house.  We aren’t short of land in New Zealand –  far from it.   Fly in and out of even Wellington or Auckland –  let alone most provincial cities –  and it is striking just how much land is close by the existing urban areas.  And yet our governments –  central and local –  have managed to create an artificial scarcity that often means that well over half the cost of a house+land in our cities is the price of the land.  It is crazy –  and we aren’t just talking close-in places like Mount Victoria or Parnell, with distinct locational advantages.   But it is worse than crazy, it is a chosen evil that governments do to our younger generations.    National can do all it likes –  and there looks to be good stuff that could and should be done –  but unless they end the artificial (government created and maintained) scarcity of (potentially) urban land, they will never make any serious inroads in fixing housing affordability.    There wasn’t even any sign in the document of National pushing back against the current proposal to worsen the situation around so-called “highly productive land”.    No hint of, for example, a flagship stake in the ground, promising (say) to enact a presumptive right to build two-storey housing on (almost) any land.

And so one comes away from the document with a sense that National really doesn’t care that much about severely unaffordable housing and rigged land markets, or they are scared and don’t trust themselves to actually be able to sell the case for change and what it might take to bring that change about.   Probably only they know the answer to which influence is more important, and perhaps not even they do (since the human capacity for barely conscious self-deception is pretty well-developed).    And so the government-created disaster, and all the attendant injustices, will go on.  It doesn’t make National any worse than the Labour-New Zealand First-Greens government, but what consolation is that to anyone (other than those sitting on existing artificially high-priced assets)?   On these issues –  as on so many –  they are really two sides of the same coin, largely protecting the status quo and wasting the offices of government which could be occupied by an –  as yet non-existent party –  that might be really willing to address the core issues to promise to get house and land prices a long way down, and perhaps even offer some sort of limited compensation scheme for those who –  largely through no fault of their own –  have taken on very large debts in recent years to get into any sort of home of their own.

Instead, all we get is small-target stuff, with nothing to scare the horses, no bold messages to sell, and little or no prospect of overdue real change and improvement.  Much like –  again from both parties –  the failure to even begin to get to grips with the decades-long productivity failure.  I’m guessing National – like Labour –  would be quite happy if several decades hence houses were once again affordable (perhaps three times income) more or less by accident.  But they won’t promise to get house and land prices down, they won’t do what it would take to fix this massive failure of our government.  And, so it seems, they’d mostly also be happy with just a bit of marginal product differentiation and just little enough action to keep the public angst (my children should be in the house market 10 years from now) more or less in check.

 

Political donations, National, and Jami-Lee Ross

Michael Reddell China, National Party, NZ politics

Jami-Lee Ross, MP for Botany, appears to be a somewhat odious character.  Between his repeated betrayals of his wife, on the one hand, and his apparently quite-central role in National Party’s large-scale fundraising from PRC-affiliated sources (New Zealand citizens and not), there seems to be little that is at all appealing.  And yet……for whatever reason (and since I’ve never heard an apology to the New Zealand public for his part in the process it is hard to believe it is totally public-spirited) he has been drip-feeding material to the media about the details of several such donations.    The first involved non-English-speaking Auckland businessman and close affiliate of various CCP/PRC groups, Yikun Zhang.  And this week we’ve had some details of the (previously disclosed) large donation from a New Zealand registered company owned and totally controlled by a PRC billionaire.  And, amid these disclosures, he is now calling for law changes, to prevent some of the practices he was formerly so adept at, and apparently untroubled by.   We should be thankful for small mercies, although it would be better if he –  and all those involved –  departed the political scene, and the swamp was drained.

On Twitter yesterday afternoon, Anne-Marie Brady drew her followers’ attention to the fact that Jami-Lee Ross was speaking on this issue in Parliament’s general debate –  presumably one of his rare speaking opportunities, and no doubt the Herald story was timed with this slot in mind.

Two things were striking about this event. The first is that no other MP speaking after Ross even mentioned these issues. Sure, each MP has his or her own barrow to push, but it goes to the apparently general desire among our political parties to avoid confronting what has been, and no doubt is still, going on.

And the second – prompt for this post – was realising that despite the coverage given to the Todd McClay story on Monday, there seemed to be no media coverage at all, anywhere, to Ross’s speech. Perhaps I missed something, but I searched myself, and I checked the Politics Daily email listing compiled by Bryce Edwards, and couldn’t see a single mention. Sure, probably no one has much time for Ross personally, but the issues he is raising aren’t imaginary.

And so, since Hansard is in the public domain, here is Jami-Lee Ross’s speech.

JAMI-LEE ROSS (MP—Botany): A regulation we do need in this country is greater restrictions around foreign donations to political parties. Yesterday, we saw in the New Zealand Herald a very good example of how the current rules around donations do not work for our democracy. I don’t need to go into depth around that particular donation, but what it does highlight is how our current laws around donations are wrong. It’s true—I was one of the sources for that story. It’s true—I was able to outline for the journalists my phone records and email records and contacts around that particular donation, because at the time I was asked by someone who held ministerial office to collect the donation. I did so because I wasn’t “OIA-able”; the person that asked me to do so was subject to the Official Information Act (OIA).

The issue that that donation highlights is that our current laws do not adequately restrict the ability for foreigners to make donations to political parties. It is true that that donation in the Herald yesterday was lawful. It is true no laws were broken, but we’re in the business of making laws and fixing laws where they are wrong. It is wrong, in my view, for a foreigner who has interests in New Zealand, who wants to donate to a political party, to be able to utilise a New Zealand-based company. It is wrong for an individual who has no other links to New Zealand other than business through a company to be able to make a donation, and have influence by making that donation to a political party.

Our laws are wrong. In my view, if you are unable to influence an election by voting, you should be unable to influence an election or our democracy by making a donation. It’s a fairly simple concept, and it’s one that we should be looking at in this House. Correct, the donation was not unlawful; our law is wrong and needs to be changed.

When we talk about foreign interference, it’s very easy to look at donations, and look at the way in which we interact with people that have connections to foreign States, and just dismiss what might be going on. But when we look at it very clearly and carefully, when we try and understand the connections and the influences that people from offshore are trying to have on our democracy, it can be very chilling. Does anyone really believe that a Mongolian oligarch wants to, out of the goodness of his heart, make six-figure donations to a political party after meeting the person who has responsibility for the very policy that he’s interested in, when it comes to the exporting of livestock? I don’t think he did so out of the goodness of his heart. I don’t think any laws were broken, but I think we need to fix the system. We need to ensure our democracy is safe from foreign influences, and ensure that we tighten up the rules.

I’ve heard that there is a lot of support in the House for banning foreign donations. That’s great, but simply lowering the threshold from $1,500 down to zero will do nothing, because any foreigner, at any point in time that they wish, can set up a New Zealand company or use an existing one to make a large donation. We have politicians in this House, and those seeking election, that have a lot of connections to people that have offshore influences and offshore interests. We should ensure our democracy and our electoral laws are much tighter.

There is a foreign interference inquiry under way, through the Justice Committee. Unfortunately, that inquiry is going very slow. Unfortunately, the committee that is looking at that inquiry may report back too late for us to make changes to our electoral law. It’s important we move now and we move swiftly because election year is very close. That same committee is also looking at the Electoral Amendment Bill right now. Unfortunately, that Electoral Amendment Bill is too tight and does not allow the committee to consider foreign donations or consider donation laws at all. The very same people sitting on the inquiry are also considering that bill. It’s my view that the House should give that committee the power to look at donations; give those same people doing the inquiry around foreign interference and around elections the power to make recommendations around amendments to the Electoral Act, with regards to donations. We need to move on this. Election year is not far away. There is a very good example out there, and there will be many others, that foreigners—and we heard directly from the spy agencies yesterday at the select committee, in both an open session and then in much more detail in a secret session—about—

SPEAKER: Order!

JAMI-LEE ROSS: —influences in our democracy, and we need to take them seriously.

I’m going to seek leave in a second to have a Supplementary Order Paper (SOP) in my name—SOP 324—which does seek to make some changes referred to the Justice Committee.

I seek leave for Supplementary Order Paper 324 in my name to be referred to the Justice Committee, and for the committee to, in its consideration of the Electoral Amendment Bill, have the power to consider, and if it thinks fit, adopt the amendment set out on SOP 324 or any other amendments relating to electoral donations.

SPEAKER: Is there any objection to that process? There is objection.

I thought the central line was this one

In my view, if you are unable to influence an election by voting, you should be unable to influence an election or our democracy by making a donation. It’s a fairly simple concept, and it’s one that we should be looking at in this House. Correct, the donation was not unlawful; our law is wrong and needs to be changed.

It isn’t clear how anyone could reasonably take a different view but –  based on their comments this week –  Simon Bridges (now heading off to Beijing) and Todd McClay do.

But the other key aspect was the Supplementary Order Paper Ross intends to introduce at the Committee stage of the Electoral Amendment Bill currently before the House.  The link is here.   As I understand it, the proposed amendments would prohibit anonymous donations and would allow donations only from registered electors in New Zealand (thus prohibiting donations to political parties from companies, unions, or any individual not eligible to vote in New Zealand).   All of those sorts of changes make a great deal of sense to me.  I hope Ross is able either to bring these amendments to a vote –  which would force individual MPs to make an on-the-record choice about what influences they regard as acceptable –  or perhaps up the pressure on the government – which has done precisely nothing about these issues, and was never keen on an open inquiry by the Justice Committee on foreign interference (government departments would tell the Committee all they needed  to know, or so the PM’s office told us) –  to propose serious reforms of its own.   As you’ll see in the record from Hansard there was objection –  apparently from National –  which blocked Ross’s SOP being referred to the Justice Committee.

Perhaps I shouldn’t be surprised, by I still am anyway, that none of this seems to have been covered by our media.   But I imagine that the PRC embassy will have taken note, and the welcome accorded to Bridges and Brownlee in Beijing will be a little warmer for knowing they are not willing to be pro-active and initiate or champion steps to fix these gaping holes in our electoral law.

And we are left wondering whether Todd McClay’s defence of the PRC’s conduct of Xinjiang was because of the large donations from regime-affiliated sources (including the Inner Mongolian one he was directly involved with) or because he genuinely believed it.  It isn’t clear which option would be worse.   Either way, the whole business reflects very poorly on McClay, his leaders, and his party.   (And not much better on Ross.)

National on the economy

Michael Reddell National Party, New Zealand economic performance, Productivity

On Monday the National Party released their “The Economy” discussion document, the latest in a series of such documents they’ve published in recent months as they move towards setting policy for next year’s election.    The documents actively invite feedback, and if one should be sceptical of crowd-sourcing policy programmes mostly it seems like a worthwhile initiative.

A few weeks ago I was quite critical after Simon Bridges’s conference speech about the apparent lack of recognition of the structural failings of the New Zealand economy, let alone of any hint of a serious strategy that might reverse the decades of underperformance.

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)

I went on to note that National appeared to be glossing over the fairly woeful overseas trade performance: exports and imports have been shrinking as a share of GDP.

I’m much less critical of the discussion document.   This line appeared on the first page, the leader’s own statement

New Zealanders’ productivity and income levels have fallen behind countries we once had similar income levels to, like Australia, the United States and leading European economies.

And from Paul Goldsmith’s opening

Improving productivity remains New Zealand’s most important economic challenge and the ideas discussed in this paper provide ways to meet that challenge, with the goal of raising incomes for all New Zealanders.

National understands that significantly lifting productivity is the only way to materially improve New Zealanders’ living standards. Increasing productivity means we can produce and sell more of what the world wants, at better prices, using fewer resources.

Good stuff.  And he goes on

New Zealanders’ living standards will not improve by simply redistributing what we
already have. Instead, we need to be absolutely focused on lifting New Zealand’s relatively weak productivity levels.

and

New Zealand’s core economic challenge is to lift our relatively weak productivity. To do that, our economy needs to become more internationally competitive. The world does not owe us a living. We are a small, isolated country far from global markets, which creates both opportunities and challenges.

and

The only way to materially improve the living standards of New Zealanders over time is to become more productive. Higher productivity means more in the back pockets of New Zealand families. New Zealand’s productivity is a more productive and competitive economy that lifts household incomes approximately 30 per cent below the top half of the OECD and 25 per cent below Australia.  New Zealanders also work more hours a year than any countries in the top half of the OECD. In 2017, for example, workers in Denmark, Germany, the Netherlands and Norway worked 300 hours less than New Zealanders.

Since the late 1990s, New Zealand’s productivity growth rates have been similar to that of the top half of the OECD. We need to be doing better to catch up and close the gap. That’s hard. It requires a relentless focus on productivity growth.

National is ambitious for New Zealanders and believes we should target higher rates of productivity in order to close the income gap with countries like Australia, the United States, Canada and leading European economies.

There was even talk of adopting a productivity growth target.

On foreign trade, we read this

New Zealand is a small country with a domestic market of only about five million people – so we depend on trade for generating greater prosperity. Trade supports over 600,000 jobs across our country, and is responsible for a higher standard of living and better quality of life for New Zealanders.

However, New Zealand has a relatively low exports-to-GDP ratio compared with other small, advanced economies. Lifting our exports will take further improvement but create new jobs and raise incomes.

So the rhetoric and some of the framing isn’t bad at all.    They could have made the same points even more brutally:

  • relative to the top tier of OECD countries (US, and leading half-dozen north European economies), productivity (real GDP per hour worked) has kept on slipping (in the last 25 years, productivity here has fallen from around 65 per cent to 60 per cent of those in the top-tier OECD countries while in, for example, Poland it has risen from around 30 per cent to around 55 per cent),
  • New Zealand has managed hardly any productivity growth at all over the last five years, and
  • not only are foreign trade shares (exports and imports) low for a country our size, but they’ve been shrinking.

But even if Simon Bridges in his introduction did note of the previous government “we didn’t everything right”, to have done so might have prompted too many hard questions about National’s own record.

What of the policy proposals and ideas?

I found a reasonable amount to like:

  • they haven’t fixed on a public debt target yet, but I liked the articulation of the flow fiscal goal (“Governments should aim for balanced budgets over time, so that surpluses in the good times offset the bad times”).  With little evidence of an overheating economy at present, that should have them arguing for a balanced budget now, not for surpluses,
  • I was pleasantly surprised that they remain committed to lifting the NZS eligibility age, and to introducing a somewhat more demanding residence requirement.    They should have gone further on both fronts (my thoughts on NZS here) –  said from the perspective of a household where my wife is 10 years younger than I am and still won’t be affected by National’s proposed change.  But we should be thankful for small mercies: on this issue, National has moved decisively on from the Key irresponsibility.
  • I like the idea they are toying with of adjusting for inflation the interest earnings and interest payments that are tax assessable/deductible.   Various people, including at times the Reserve Bank, have argued for this for years.  It is just and right to do so, but……there isn’t that much in the issue.
  • I like the mention of possibly using congestion pricing on some parts of the roading system.
  • I am encouraged that they are willing to think seriously about the possibility of lowering the company tax rate (although disquieted by talk of favouring small businesses through the tax system).  That said, given our imputation system, a lower company tax rate benefits foreign investors (we would generally benefit from more of such investment), and if they are serious about addressing this issue –  and productivity growth –  substantively then they need to think about options for lowering the taxation of capital income earned by New Zealanders as well.  Whether they have the political skills to manage the narrative around that sort of proposal is, at very least, an open question.
  • The talk –  not specific in this document –  of a proper overhaul of the RMA and serious liberalisation of the urban land market is encouraging.  The ability of the next generation to afford decent houses (and gardens etc –  the sort of place most New Zealanders seem to want) depends on it.
  • And I like the idea of a much tougher approach to new regulation, and some sort of commitment to reducing the overall volume of economic regulation.  On that count, I like the (adopted first in parts of Canada) idea of eliminating two old regulations for each new regulation (ie a shrinking cap on the volume of regulation itself).   There are risks around such an approach once it in turn becomes bureaucratised –  ministers and bureaucrats will game the system skilfully, so it would need serious leadership from the top, and sustained follow-through –  but for now the value is in the signal it sends.

And there is other stuff I like, often undoing bad calls by the current government (eg the ban on new oil and gas exploration and the planned labour reforms  – I found this note valuable on the latter).  There was even talk of possibly unilaterally lifting all remaining New Zealand tariffs, recognising that tariffs tax New Zealanders.

They were even surprisingly muted on immigration.  I thought this line from early in the document was quite cleverly drafted, with the focus on creating a climate in which New Zealanders no longer want to leave permanently.

New Zealand is also competing with the rest of the world for skills. If we aren’t internationally competitive our best and brightest leave for overseas and our living standards worsen relative to the rest of the world.

And if I disagree, quite firmly, with their paragraph on immigration itself  – after all, we have one of the highest levels of workforce skills among natives of any OECD country

Immigration can help to deliver a more skilled and willing workforce. National understands the benefits of sound immigration policy from an economic, social and cultural perspective. The skilled migrant levels should match industry needs and the administration of visas needs to be prompt and predictable. New Zealanders must be at the front of the queue for the jobs created by our growing and changing economy, but immigration will remain an important complement to that growth.

at least the “critical economic enabler” gung-ho rhetoric is gone, and this paragraph is a long way down the document.

Of course, there is other stuff I didn’t like.    Their section on regional development is about as devoid of a serious framework –  real exchange rate anyone? –  as anything from Shane Jones.  They still seem enamoured of big taxpayer subsidies to “glamour” industries (screen grants), and when they talk of privatisation it is never about efficiency or competition or accountability or things like that, but rather silly arguments about freeing up cash to spend on other things (when, as they know, the Budget is in surplus and the debt is low).   And they seem tantalised by the idea of more infrastructure spending without offering much assurance that the sort of schemes they might proceed with would be any better –  in economic return terms – than those of the previous National government.   Perhaps I’ve mentioned that there was next to no productivity growth economywide over the last five years or so?

But when I got to the end of the document, I guess my overriding reaction was a bit similar to my reflections on the reports of the 2025 Taskforce (the body set up by the previous National government to provide analysis and recommendations on closing the income and productivity growth gaps to Australia  –  by 2025, a date that mocks us now).  I had quite a lot of involvement in that process, and largely wrote the first report.  I also largely agreed with most of the recommendations the Taskforce themselves made –  very few of which were ever adopted.   And yet, as I reflected on the report in the months after it was released, I became increasingly convinced that, sensible as many/most of the recommendations were, they weren’t enough to make a decisive break in New Zealand’s economic and productivity performance.  Some important things were missing (although at the time I wasn’t really clear, even in my own mind, what they were).

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.

Where there is no vision

Michael Reddell National Party, Productivity, Uncategorized

Each year, as a disillusioned voter (pondering being a non-voter, for the absence of credible options) I go to the effort of tracking down the conference speeches of the main party leaders.  What party leaders choose to emphasise, in one of their most-covered speeches of the year, can be telling.  As, of course, can what they choose to omit.  When Labour was in Opposition I never took very seriously talk (eg from Phil Twyford) about  fixing land use regulation and thus materially lowering the cost of housing because the leader never mentioned the issue, including in conference speeches (Jacinda Ardern still doesn’t, in conference speeches or elsewhere).  Of course, there are other speeches and interviews in the course of a year, but the conference speech isn’t just for geeks (see, eg Q&A interviews) or specialist audiences.  Things leaders care about, highlight, and spend reputational capital on tend to be things that get done.  Others things, not so much.

What, then, did Simon Bridges have to say in his conference speech on Sunday?  There was lots of rather sickly shtick –  his wonderful wife, his lively children etc.   And there was a rather strained attempt to suggest that somehow he’d overcome deprivation and disadvantage himself

Because it is the National Party that has shown that a young Ngāti Maniapoto boy from West Auckland, who talks like a boy from West Auckland, the son of a Baptist preacher and a teacher, can grow up to become the first Māori leader of a mainstream party in New Zealand, and the first Māori Prime Minister of our great country.

(I struggle to take seriously that sort of line because “son of Baptist preacher and a teacher” exactly describes me –  our fathers were ministers in suburban Auckland at the same time –  and I’ve never once felt any disadvantage.)

Perhaps he has conveniently forgotten that one of his recent predecessors –  Don Brash –  was the son of a Presbyterian “preacher” and of a mother who left school before high school, or that the first National Party Prime Minister was the grandson of a Yorkshire farm labourer. Or, frankly, that as far as I can see not a single Labour or National Prime Minister has come from any economically-privileged background.  Perhaps there are people in politics born with the silver spoon in their mouth –  the National Party president most notably at present – but that hasn’t been the background of any modern Prime Minister (or major party leader).

There are even some things in the speech that did resonate with me, including many of his criticisms of the current government.  But the centrepiece was, of course, cancer care.  I don’t have a view on the substantive merits of the specific initiative National is proposing, which looks like smart tactical politics, but perhaps rather small beer.   I’m inclined to think health is underfunded (there is a chart and some thoughts in this pre-election post, and the Budget estimate of health spending of 6.1 per cent of GDP this year is pretty much in line with what Labour was envisaging then) even on the basis of our current economic performance) but that wasn’t really his case.

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”).

What do I have in mind.  Well, of course, there is the shrinking – sideways at best –  share of foreign trade (exports and imports) in GDP, even though successful economies –  ones catching up on the leaders – are almost always marked by a rising foreign trade share.

ex and im

But the simplest starkest chart is the one showing labour productivity growth (or lack of it).

GDP phw mar 19

No labour productivity growth at all for four years now, and barely any for seven or eight (perhaps 1 per cent total growth since 2011/12).     Mediocre or worse as I think the current government is, these failures –  stark even in international comparison (and this isn’t a great decade for global productivity growth) didn’t start with Ardern and Robertson.   Now, sure, National people like to quote growth in per capita GDP but (a) even that was much lower over National’s term than in the previous nine years (lower again now) and (b) to the extent it was respectable for several years this decade, that mostly had to do with reabsorbing workers displaced in the last recession (the unemployment rate falling from about 6.5 per cent to about 4.7 per cent when National left office).  To repeat, as the chart illustrates, there has been barely any productivity growth, and although the unemployment rate probably should be pushed lower (see Reserve Bank underperformance), it is only productivity growth that will underpin sustained growth in material living standards.

National is promising a discussion document on economic policy later in the year.  I’ll look forward to that, and will study it carefully, but at present there is nothing in what they are saying –  and nothing in the Bridges speech –  suggesting that they really envisage anything different from what they did in the previous nine years, the period in which the structural economic indicators languished, even as a pretty muted cyclical recovery was playing itself out.     Some of the specifics Bridges mentions may even make some sense, but (individually or collectively) they aren’t the stuff of a transformational lift in economic performance, of the sort New Zealand –  including our ability to fund cancer treatments –  really needs.  It isn’t clear National has such a vision, let alone any real ideas about how to bring such a transformation about.

Sadly, of course, that does not mark them out from the current government, where we regularly hear about building a more “productive and sustainable” economy, but see nothing specific that might make a credible and useful substantial difference.

Bridges and the State of the Nation

Michael Reddell National Party, New Zealand economic performance

I mostly went looking for the text of Simon Bridges’ “state of the nation” speech yesterday to see if there were any signs, at all, that the Leader of the Opposition was going to confront New Zealand’s appalling productivity growth performance.   He had, after all, been Minister of Economic Development only 18 months ago.  There weren’t.

I’ll come back to economic performance and economic policy later, but the rest of the speech had some interesting snippets.

There was a long section on law and order.  There was plenty of rhetoric but one line in particular caught my eye

I am determined that under the next National Government, New Zealand will become the safest place to live in the world.

Wow, I thought, that sounds like a bold promise.  I don’t carry crime data around in my head, so I went looking.   Reporting and collection differences muddy cross-country comparisons of the incidence of crime, and for a full comparison you’d want to look at the full gamut of violent crime, theft and so on.   But the most comparable data across countries is that for the homicide rate.   Here are the homicide rates (per 100000 people) for advanced countries, using UN compilations of data.

homicides

Dreadful as any intentional homicide is, New Zealand doesn’t rank too badly, just a bit better than the median of this group of countries.  But Simon Bridges says that under the next National government, New Zealand will be the safest country in the world.   Say they come to office next year, and are in office for nine years.  That means he thinks that within ten years, they can take steps that will lower New Zealand’s intentional homicide rate by just over two-thirds, to match the record in places like Singapore, Japan and Luxembourg.

I ran this chart in a post late last year, using NZ Police data.

murders

Cutting our murder rate by more than two-thirds would involve getting, and keeping, it, down to the very lowest individual years managed in the last 100 years or so.   It would be laudable goal…….at least if Mr Bridges had any serious and plausible ideas about how to do it.  And the sort of change that really would support, over time, a much lower prison population.   Fifteen murders a year would still be fifteen too many, but even that seems like a tall order, even with an ageing population.  Mr Bridges promises that National will “continue to put forward the ideas” between now and the election to make his “safest place to live in the world” vision a reality.  Count me a bit sceptical, but I’ll watch with interest to see if there is some substance there.

The headline from the Bridges speech was around the promise to index the income thresholds in the tax system.  It would be a welcome, but well overdue, reform if someone finally does it.  But I wondered about some of the details.  This is how Bridges explained what they are proposing.

We will amend the Income Tax Act to make sure income taxes are adjusted every three years in line with the cost of living.

Within a year after every election, Treasury will advise the Government on how much the tax thresholds should be adjusted to account for inflation.

That means income tax thresholds will increase every three years to stay in line with the cost of living.

The first change will be in 2021 and relate to the tax years of 2018, 2019 and 2020.

We will include a veto clause so the Government of the day can withhold the threshold changes in the rare circumstances that there is good reason to do so.

But it will have to explain that decision to New Zealanders.

But why not

(a) adjust the thresholds every year, and

(b) adjust them automatically, with the formula written into the Income Tax Act?

After all, we manage to adjust (for example) NZ Superannuation rates automatically each year.

One of the arguments for indexing the thresholds is to reduce the ability of politicians to use occasional adjustments to present themselves as giving a tax cut.  The Bridges model –  adjustments only every three years, and only on the basis of the Minister of Finance responding to a Treasury recommendation – still seems to keep too much of that potential intact.  Adjusting for inflation will be in ministerial gift, not simply an automatic calculation routinely notified to taxpayers (according to legislative formula) by the Commissioner of Inland Revenue.

I’m also uneasy about this idea that the Minister could reject a specific  indexation recommendation.  First, if the adjustment were being done annually, the amounts involved are so small there could be no compelling reason not to proceed (with triennial adjustments the amounts get chunkier). And, second, we don’t apply this approach to (say) New Zealand Superannuation payments.  What the statutory formula says goes.

If a government thinks there is a persuasive case to raise tax rates –  and from time to time that may be necessary or appropriate –  they should be willing to come to Parliament and make the case in an open and transparent way.  That is, for example, what they have to do if they want to lower (real) NZS payments.    Inflation shouldn’t be able to be used to be used as a silent cover, enabling governments to grab more (real) revenue.

And then there was the economy.  Simon Bridges devoted a lot of space to it in his speech but there was very little serious content.  What it all boiled down to was:

(a) when we were in government our economy was a rockstar (he doesn’t use the word, just ‘one of the best performing in the developed world’)

(b) Labour is raising taxes

(c) Labour is doing wasteful spending (fee-free tertiary education and the the Provincial Growth Fund), and

(d) National would reverse the Auckland fuel levy, and any capital gains taxes, and not increase other taxes in a first term.

(It was notable that despite the talk of wasteful spending –  with which I agree with him on the specifics –  there were no promises to unwind those measures.)

And that’s it.  There was no suggestion of an economic reform strategy –  not even ideas to come –  or even a need for one.  Things would, it appears, be fine if only we had lower (Auckland) petrol taxes and no capital gains taxes.

So, as an aide memoire for Mr Bridges and his economic team, lets remind ourselves of some key New Zealand data.  I ran this table a couple of weeks ago

GDP per hour worked
USD, constant prices, 2010 PPPs
1970 1990 2017
New Zealand 21.4 28.6 37.2
Netherlands 27.4 47.5 62.3
Belgium 25.0 46.7 64.6
France 21.7 43.3 59.5
Denmark 25.1 44.8 64.1
Germany 22.3 40.7 60.4
United States 31.1 42.1 63.3
Median of six 25.1 44.1 62.8
NZ as per cent of median 85.4 64.9 59.2
Source: OECD

When Mr Bridges’ parents were young, New Zealand was still among the very richest and most productive countries on earth.    His children are born into a country where average productivity levels are barely 60 per cent of those in the top tier of the OECD.

And what happened under the government in which he was, by the end, a senior minister.

real GDP phw dec 18

Barely any productivity growth at all in the last five or six years (and allowing for the lags, and the fact that the current government has done little, the most recent year’s data reflects those some policy frameworks and choices).  We dropped further behind Australia over the last decade, and various eastern European countries –  never previously close to us in the last 150 years –  are either snapping at our heels or overtaking us.   Well done them.  Shame on us (and the succession of governments and oppositions).

Successful economies tend to trade a lot with the rest of the world.  Early in their last term, the National Party in government knew this –  reflected in the (slightly wrong-headed) targets for much higher exports as a share of GDP).   Here is the actual and forecast data (for exports –  the import chart isn’t that different) from the most recent Treasury HYEFU.

exports hyefu 18

Foreign trade as a share of GDP has been shrinking this century – under both National and Labour governments –  and nothing Treasury can see suggests that underperformance is about to be reversed.

But in two pages of speech text about the economy there was not a mention –  not even a hint – of any of this.  Of course, none of this is as immediately topical, or offering political mileage, as a possible capital gains tax.  But a serious leader might at least be able to point to the need to do so much better on the economic performance –  material standard of living – front.

It is only about 19 months until the next election.  Sadly, there is no sign from this speech that a future National goverment would be any more serious about reversing our relative economic decline than their predecessors –  of whatever stripe –  for the last 25 years.  Worse still, they seem to have given up believing there even is an issue.

School days and years

Michael Reddell Education, National Party

Sitting reading the Herald this morning as my oldest child headed out the door for his first day of the new school year –  two more still on holiday – I noticed that National MP Nicola Willis was making a bid for the state to do more child-minding for her and her husband   She has an op-ed trailing a private member’s bill she will seek to introduce to reduce the summer holidays for school children by a week or two.

That had me wondering how our school year compared to those in other advanced countries.  For some reason, the OECD doesn’t have data on New Zealand in their tables showing the number of hours per year of instruction at primary school.  But the Ministry of Education website says that our primary school have to be open for 390 half days a year (195 days).    The standard primary school day seems to be from 9am to 3pm, and if we subtract an hour for lunch and fifteen minutes for another break, that leaves 4.75 hours per day of instruction time, for a total of 926 hours per year.   Here is how that estimate compares with the other OECD countries for which there is data reported.

school hours per year

In other words, we already have one of the higher primary school hours requirements among the OECD countries.  (Accordingly to one website I looked at, Australia has slightly shorter school years, but slightly longer school days.)  And recall that these aren’t voluntary hours, but coerced ones.   Finland is sometimes touted as having an excellent education system, so I was particularly interested in the hours numbers reported there.  There are some odd looking numbers –  South Korea has a reputation for long hours and very intense schooling, which doesn’t seem to square with these numbers – but I can’t see any credible way in which New Zealand is not already in the upper half of the OECD for schooling requirements.    And everyone recognises that schooling has a considerable element of (compulsory) child-minding about it: home-schoolers rarely spend 900 hours a year on the equivalent learning.

Perhaps also not entirely irrelevant when an MP wants to reduce holidays for kids is to look at minimum annual leave requirements for adults.  It wasn’t until 1944 there were any.  When I was the age Nicola Willis’s kids are now –  and the school year seemed the same length as it is now – that minimum was two weeks.  In 1974, the minimum was increased to three weeks, and in 2007 it was further increased to four weeks.   These weren’t changes proposed by the National Party, but there is no sign Nicola Willis or her leader wants to undo them, so why does she think our kids should be conscripted to the state’s service for even more weeks of the year, even as (most) adults appreciate the greater leisure?

Willis claims a high-minded motive

Most importantly, Kiwi kids feel the impact. Research shows the “summer slide” in student achievement is real. Kids’ literacy abilities can decline over the six-week break, with one study showing students losing months of progress over summer. Much of term one can be spent getting kids back to where they left off the following year. This is a real barrier to achievement.

Count me a sceptic on that one.  “One study” can be found to support almost any argument.  But even if it were true (a) plenty of workers come back to their desks after the summer holiday at a bit of a loose end, less focused than they might be for a few weeks, (b) formal literacy abilities are not the only capability we want our kids to develop, and (c) it would surely depend a great deal on the specific child  (my wife and I both recall going to library almost every day in our school holidays, and one of mine tells me she has read 33 books this month so far).   And if New Zealand’s PISA scores have been dropping –  under Nicola Willis’s party’s term of government –  that isn’t because we shortened the school year.   And if the holidays sometimes drag a little (a) boredom is often good for children (as they find ways to amuse themselves), and (b) so do terms and school years. I presume I’m not the only parent to have noticed children getting tired towards the end of terms, especially towards the end of the year.  They are children, and primary schools ones in particular don’t have the stamina of heathy adults.

But National Party MP Nicola Willis –  a party that once claim to stand for freedom, family etc –  now wants to compel kids into state-run schooling for more weeks of the year.

And why?   That alleged summer time literacy drop isn’t the real reason –  despite that “most importantly” the argument is only introduced late in her article.  What she wants is the state to force kids into school –  away from beaches, climbing trees, picking blackberries, reading, trying out cooking, hanging out with friends, siblings, parents, or whatever –  for longer to make it easier for parents to work long hours (over the course of a year).    It is really as simple as that.

I do have some sympathy for some parents –  not high income ones like Nicola Willis and her husband, for whom these things are purely choices.  Thanks to successive National and Labour governments, good housing in our major urban areas has been rendered ridiculously and totally unnecessarily financially out of reach of many people.  I have no idea how young couples manage to buy a house in this neighbourhood (I bought my first house here at 26 for the equivalent of $300000 in today’s dollar –  the median price in the suburb is now $900000), but part of it is both parents working full-time, not really from “choice”, but from something closer to “necessity”.   But how then do you manage school holidays?

I’m fortunate. Not only did I get into the housing market before the absurdity took hold, but in the five years we both worked fulltime we had a nanny, and I (enjoyed) taking all January off to be around with the kids.  And now we are comfortably a one income family and I (most of the time) really enjoy the holidays and the time with the kids (grown up before you know it anyway).

Not everyone has those options –  although I’m sure Nicola Willis and her husband could, despite her claims of how tough it is for them –  but that doesn’t make the appropriate answer to have the state coerce your kids into school for even more weeks (at the hottest time of the year).  Before you know it, people like her will pop up wanting to have kids in school to (say) 5pm each day as well –  much more convenient for workers I’m sure.

For a National Party MP to fail to recognise that substantial distinction between compulsory attendance (school) and voluntary childcare arrangements tells you again how statist the National Party itself has become.  Perhaps there are regulatory barriers to more after-school or holiday programmes –  one imagines the National government’s OSH rules might be part of that –  and it might be sensible to identify any of those and advocate removing them.  It would certainly make sense to deregulate the land market and make decent housing affordable again, in ways that would give many more families options around part-time work, longer holidays, or one parent or other not engaging in market employment at all for a time.  It might even make sense to explicitly encourage strong two-parent families.   Those are the sort of measures a National Party might once have proposed.   But these days they seem to be mostly statist me-tooers, proposing to deal with one egregious state stuff-up (the housing market) with yet more state coercion.   And this from a party that barely even supports effective school choice, so that more coerced time in schools also typically means not forming our children in the academic heritage of our civilisation, but quite a bit more (mostly unthinking) indoctrination in the values and political beliefs of the teachers.

And now, when the wind drops a bit, I’m off to the beach with my daughter.