Political donations, National, and Jami-Lee Ross

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

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

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

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

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.

Electioneering 1954 style

A few weekends ago I was fossicking in a charity book sale when I stumbled on The National Government 1949-1954: FIve Years of Progress and Prosperity, published by the National Party.   It was, it appears, published as part of National’s 1954 election campaign: 150 pages of (often quite detailed) text and tables, complete with a detailed chronology of measures, and an index.

I’ve always been interested in that first National government.  Apart from anything else, the Prime Minister (and Minister of Finance) was my grandfather’s cousin –  they’d been close, and in our family Sid Holland was always “Uncle Sid”.  It was a government with a fairly mixed record.  Through my career at the Reserve Bank I was always quietly proud that a relative had legislated to establish the primacy of price stability in what we expected from monetary policy and to put monetary policymaking at a further remove from direct ministerial control (even if, in practice, it didn’t make much difference).

There was some genuine liberalisation –  including of those banes of New Zealand economic management for too many decades, import licensing and exchange control.  And there was the ANZUS Treaty –  which I hadn’t previously known came into effect on ANZAC Day, a nice touch –  and the interesting episode of New Zealand’s approach to the Suez crisis.  It was the time of the wildly popular first ever visit by a reigning sovereign.  And the sort of short-term austerity that led to the Auckland Harbour Bridge being built too narrow from the start, or central planning that meant that for years the Reserve Bank wasn’t allowed to start building its own building.

In the territory of serious black marks, it is hard to defend the way the 1951 waterfront strike was handled –  not so much the confrontation with the watersiders itself, but the brutal undermining of civil liberties and the freedom of the press during that period –  often using powers introduced by the previous Labour government.

Perhaps only in New Zealand  –  where good histories and biographies are few – could a government that was in power for eight years, with a leader who spent 17 years in the role, not have either a decent scholarly treatment of that government or a biography of its leader.

But what of the book?

It has a foreword by the Prime Minister which, I imagine, captures quite well the way National saw things in those years

It is a proud thing to belong to a Government which is able to say that the people have never been better off, that there is a new spirit of vigour and enterprise abroad in the land, that there was never a time when so much progress was being made in the development of the resources of the country.

Once again, New Zealanders feel that the future belongs to them…….

Freedom, which is at the heart of the National Government’s philosophy, is perhaps an intangible thing – until you have lost it.  But it yields tangible results. The Government’s recrod, which this book outlines, is the answer to those who stand to the creed of Socialism.

But having lauded freedom, the Prime Minister goes on to laud the apparently growing role of the state.

A vast programme of development works is in progress –  imaginative and progressive schemes like the new pulp and paper and timber industry in the Rotorua-Bay of Plenty area, the utilisation of geothermal steam, the huge hydro-electric project at Roxburgh.  More hospitals, more schools, more houses –  there is no neglect of everyday necessities because of the scale of the development programme.  The Government has liberalised and extended social services, more is provided for other social services, trade is booming, the needy are cared for, the workers are prosperous, savings are greater.  On all fronts New Zealand has gone ahead, as a young country should…..

I lived in Kawerau as a child, but it is only over the last decade as I’ve come to read a lot more New Zealand history that I’ve come to realise how big a deal –  in some way, the decade’s Think Big, complete with outside capital and protected markets –  the Kawera/Murupara development really was in the 1950s.  The state was at the leading edge of promoting economic development, as it saw it (in this book, the Kawerua scheme is described –  perhaps with a little exaggeration, depending on how one classifies Vogel’s interventions –  as “the greatest single enterprise ever attempted in New Zealand”.

On the one hand, in the early 1950s, New Zealand still had some of the very highest material living standards in the world.  On the other, only a few years later people started writing serious reports (eg the new Monetary and Economic Council and the new NZIER) observing that New Zealand’s productivity growth was lagging behind.  Sadly, it was to be the story every decade from then to now.

But this post isn’t really intended to be an abbreviated political or economic history of the decade.  It was more that I was fascinated by things the National Party chose to highlight, and the accounts of interventions I’d just never been aware of.

Take rest homes for example.  When I was young, almost all of them were run and provided by church groups. I had never given much thought to why –  caring for the vulnerable was one of those things the church had done since Roman times.   But this little book tells how the government skewed the playing field:

Soon after taking office the Government introduced a policy of helping charitable or religious organisation to establish homes for aged people. Generous subsidies, up to 50 per cent, are offered, together with loans finance on favourable terms in respect of housing schemes.

The next sub-section recounts the introduction of a similar subsidy for such groups to establish youth hostels.

There are reminder of times past: anti-tuberculosis campaigns get two-thirds of a page to themselves.

There were 506000 radio licences in New Zealand in 1954, and not a single television.

And in a country of two million people, there were still only 334580 telephone subscribers (and a little subsection on “Mobile telephone services” –  some 2000 people had telephones in vehicles, up from only 192 when the government had taken office five years earlier).

The forerunner to Air New Zealand –  Tasman Empire Airways Ltd –  flew 30888 people trans-Tasman in the entire year to March 1954: fewer than 100 a day.  Domestic air services, so the party (fairly) boasted, has increased substantially during its term in government, but total passenger numbers were still less than 1000 per day.

And if economists are (largely rightly) inclined to be censorious about the excess demand policies of the period (inflation nonethless kept in check) there is still something to hanker after in these numbers:

In spite of the large increases in the labour force, ample work is still available.  At 15/1053 the number of vacancies for men was 13500 and for women 6500. Unemployment in 1953 averaged only 85 persons throughout the year.

(These were people registered as unemployed.  Five-yearly census numbers were higher, but still very low by modern standards.)

These were the days when, in New Zealand almost uniquely, cars held their value, the numbers imported being rationed.  There was an exception for people with overseas funds themselves (the “no-remittance” scheme) –  which made an English OE additionally attractive.  My grandfather was not infrequently heard to jest that my father proposed to his daughter only because she had a car, (having done her OE).

What of monetary policy?

The declared policy of the Government is to divorce currency and credit from political control, to avoid the issue of credit unbalanced by goods and services, and to stabilise internal prices by establishing a proper balance between money and goods.

From an economist’s perspective, two out of three isn’t bad, but that middle phrase is disconcertingly reminiscent of the real bills doctrine.  In fairness, the same government liberalised what were then known as “capital issues controls” restricting the ability of firms to raise funds on market.

And if there were elements of liberalisation, (eg the “state monopoly of coal seams” was abolished  on 10 October 1950) there was also this

The Potato Board was established in 1950 to control the production and marketing of main crop potatoes.

Why, one has to wonder?

In the some things don’t seem to change category, there was the boast that

Maori land claims.  Removal of grievances over land claims is being vigorously pursued, Claims settled include: [and a list follows]

Perhaps in the same category, pages and pages are devoted to housing and housing finance, including this curious observation under the heading “Encouraging local authorities to buy land and develop it for housing”

A retarding influence in many cases has been the desire on the part of local bodies to avoid placing a further burden on ratepayers by raising loans for housing activities, but the loan procedure has been simplified to open the way for local authorities to engage in housing activities without recourse to long-term finance.  They can now finance these projects on bank overdraft.

I’m clearly missing something in understanding the greater appeal of a bank overdraft.

Meanwhile large scale immigration has restarted (I wrote about it here), including subsidised (“assisted”) migration.  Being a skilled building trade worker was enough to get assisted passage for married people (at the time, policy explicitly favoured single people because of the housing shortages).  But there is no hint of the politicians realising –  what economists knew even then –  that new arrivals added more to housing demand, and overall resource pressure, than any feasible increase in supply (even in the building sector specifically).

For an economic history junkie, it is a fascinating read.  There is the line from L P Hartley’s novel The Go-Between that “the past is another country, they do things differently there”, and it comes to mind strongly reading this book  And, it won’t surprise regular readers to know that the other thought that comes to mind is one along the lines of “if only” we’d done things differently then and since, and could still today boast of being one of the richest countries in the world.  How much more we could offer our people –  on market, and off.  Of course, in material terms, people are better off today than they were in 1954.  That is an important benchmark, too easily lost sight of –  only a few years prior to 1954 my mother had done her masters’ thesis on the incidence of basic home appliances in Dunedin (far from universal) –  and yet, and yet, the failures and lost opportunities since then, which mean we now languish so far down the international league tables, matter too.  Both National and Labour must take responsibility for that failure.  Not that one would know it from either party’s campaigns last year.

 

Sir William and the rockstar economy

I don’t really want to revisit the questions of whether retired politicians and senior public servants should be given honours largely for just turning up and doing a (fairly reasonably remunerated) job, or even whether there are really 15 people per annum in this country deserving of knighthoods.  I touched on those issues in a post in January.

But two awards in yesterday’s list caught my eye.  The first was the knighthood to former Prime Minister and Minister of Finance Bill English, and in particular the descriptions of Bill English’s contribution.

There was the official citation, the words put out under the name of the Governor-General, but presumably supplied by the current Prime Minister and her department

As Finance Minister from 2008 until 2016, Mr English oversaw one of the fastest-growing economies in the developed world, steering New Zealand through the Global Financial Crisis and the Christchurch earthquakes and ensuring the Crown accounts were in a strong financial position.

And, even more incredibly, a story by Stuff political reporter Stacey Kirk in which she noted that the official citation had been expressed “rather dryly”, as if it didn’t do full justice to the man’s contribution, and going on to observe, without a trace of critical scepticism or irony,

More colourful commentary at the time would globally brand him the man responsible for New Zealand’s “Rockstar Economy” – the envy of government’s worldwide and a textbook example of how to pull a country out of recession.

From a sudden jump yesterday in the number of readers for an old post of mine from 2015 on the emptiness –  or worse –  of the “rockstar economy” claims, it seemed that at least a few others might have been a bit sceptical of Kirk’s column.

I’m not going to quibble about everything.  The Crown accounts were in a strong position when National took office in 2008, and were in a fairly strong position when they left office.  Net debt was higher when they left office than when they took office, but the deficits which were emerging in 2008 as the recession took hold –  recall that only a few months earlier in the 2008 Budget, Treasury’s best estimate was that the budget was still in (modest) surplus – were gone and the budget was back in surplus when National left office.

The terms of trade make a big difference to the government’s finances.  Here is Treasury’s chart from this year’s Budget, illustrating how much help our unusually high terms of trade have been in recent years.

cab with tot adj

It is a real gain, but it is an exogenous windfall, not something any government or politician could simply conjure up.

What about the official claim that Bill English was responsible for “steering New Zealand through the Global Financial Crisis”.   It has become part of established rhetoric, but it has never been clear to me –  and I was working at The Treasury at the time –  that there was anything of substance to it.    As ever, the biggest single contributors to getting New Zealand through this particular recession were (a) time, and (b) monetary policy.    The crisis phase in other countries had been brought to an end by about March 2009 –  initially as a result of extensive interventions in those countries (bailouts, fiscal stimulus, lower interest rates, and so on).  That took the pressure off the rest of us.  And our own, operationally independent, central bank had cut the OCR by 575 basis points by April 2009 (having begun to cut well before National took office in mid-November 2008), and some mix of the sharply lower interest rates, global risk aversion, and lower commodity prices had also lowered the exchange rate a lot.  The Reserve Bank also put in place various liquidity assistance measures, at its own initiative.

What role then did New Zealand politicians play in “steering us through”?  The previous Minister of Finance had put in place the deposit guarantee scheme, designed to minimise any risk of panicky runs on New Zealand institutions. I happened to think (having been closely involved) that was a good and necessary intervention, even if on important details the Minister departed from official advice, in turn increasing the later fiscal cost.  On taking office, the new Minister of Finance, Bill English, made no material changes to the scheme, and took no material steps to rectify its weaknesses.   Mr English did approve the (better-designed) wholesale guarantee scheme, designed to assist banks tap international wholesale funding markets in a period when those markets had largely seized up.  It didn’t end up being extensively used, but was also the right thing to have done at the time.

What else was there?  In the 2009 Budget –  delivered after the crisis phase abroad had passed –  a couple of rounds of tax cuts, promised in the 2008 election campaign (itself occurring in the midst of the crisis) were cancelled.  That was prudent –  given other fiscal choices the government had made –  but there wasn’t anything extraordinary or particularly courageous about it.   There was no discretionary fiscal stimulus undertaken in response to the crisis by either government –  or nor was it needed, given the scope monetary policy here had.

The truth of the international financial crisis of 2008/09 is that the New Zealand was largely an innocent bystander, caught in the backwash.  There wasn’t much governments could, or did, do about it, and – to a first approximation –  what they (Labour and then National) could do, they did.   Both supported an operationally independent Reserve Bank and it, largely, also did what it could do (if, arguably, a bit slow to get off the mark).  And then the storm passed and we started to recover, in a pretty faltering sort of way.

What about the other bit of that official citation, the claim that “as Finance Minister from 2008 until 2016, Mr English oversaw one of the fastest-growing economies in the developed world”?    Why does the current Prime Minister continue to buy into this sort of nonsense –  the myth  (no, sheer falsehood) of the “rockstar economy”?    To the extent the claim has any meaning at all, it simply reflects the much faster rate of population growth New Zealand experienced, especially in the last five years or so.   Over that five year period (2012 to 2017), New Zealand’s real GDP per capita increased at almost exactly the rate of the median OECD country.   Which is okay, I suppose, but nothing to write home about, especially once one remembers that we are poorer than most of these countries, and are supposed to have been trying to catch-up again.

But, one more time, let’s dig a little deeper.

Productivity growth is the only sure foundation for sustained improvements in material living standards.  Over the full period 2007 (just prior to the recession) to 2016 (the last year for which there is data for all OECD countries), New Zealand experienced labour productivity growth basically equal to that of the median OECD country.  Again, perhaps not too bad, but no sign of any catching up.     What about the last four years, the period to which most of the “rockstar economy” claims related?

real gdp phw english

Spot New Zealand –  if you can –  down next to Greece.  And adding in 2017 –  for which we have data, but some other countries don’t yet –  would not improve the picture.  Our recent productivity record –   through the period presided over by Bill English (and John Key and Steven Joyce) –  has been really bad.

What that means is that, to the extent that real GDP per capita growth has been middling, it has all been achieved by more inputs (mostly –  since business investment is weak –  more hours worked), not smarter better ways of doing things, old and new.  Perhaps it really is a rockstar economy: a John Rowles or Cliff Richard one, belting out the same 1960s favourites over and over again?   Recall that, being a poor OECD country, New Zealanders work more hours per capita than most other advanced countries do.

And despite more hours worked, it isn’t even as if we were particularly good at keeping the economy fully-employed during the English tenure.  In this chart, I’ve standardised the unemployment rates of the G7 group of big advanced countries and of New Zealand so that both are equal to 100 in 2007q4, just prior to the recession.

U rates g7 and NZ

Our unemployment rate went up about as much as the G7 countries (as a group) did, but just haven’t come back down anywhere near as much.  For the G7 as a whole –  which includes such troubled places as Italy and France, and is mostly made of countries that exhausted conventional monetary policy capacity –  the unemployment rate is now lower than it was before the recession. But not in New Zealand.

Politicians don’t directly control the unemployment rate (or most of the other measures in this post), but it is pretty amenable to micro reforms, and (within limits) to monetary policy action.  Under Bill English’s oversight, minimum wages kept on being raised, and nothing was done about a Reserve Bank that consistently kept monetary policy too tight (evidenced by the persistent undershoot of the inflation target set by the same Minister of Finance).

And what about foreign trade as a share of GDP?  Successful economies tend, over time, to have a rising share of GDP accounted for by foreign trade (exports and imports).  Small countries that succeed tend to have much larger foreign trade shares (since abroad is where the potential markets –  and products –  mostly are).

Foreign trade as per cent of GDP
2007 2016
Exports New Zealand 29.3 25.8
OECD median 40.5 42.3
Imports New Zealand 29.1 25.5
OECD median 39.2 39

But from just prior to the recession to 2016 (again the last year for which there is a full set of comparable data), New Zealand’s foreign trade shares shrank, even as those of the median OECD country held steady (imports) or increased (exports).  Relative to our advanced country peers, our economy became more inward-focused.

And that is despite the fact that we’ve had the second-largest increase in our terms of trade of any OECD country –  very different from the other commodity exporters (Norway, Mexico, Chile, Canada, and even Australia).

OECD TOT

Fortune favoured us, and we –  our political leaders, the long serving Minister of Finance foremost among them –  accomplished little with that good fortune.

Of course, not everything has been in New Zealand’s favour.  We didn’t have a material domestic financial crisis, we weren’t locked into a dysfunctional single currency, we went into the lean years with a healthy fiscal position, we had more space to adjust conventional monetary policy than almost any other advanced country, and we’ve enjoyed a strong terms of trade.  For enthusiasts for immigration, we’ve continued to draw in large numbers of permanent migrants, and have accelerated the inflow of temporary migrants.

But there were the earthquakes.  I’m not about to deny that they have held back economic performance, compelling resources to shift into domestically-oriented sectors, rebuilding (and inevitably/rightly so) rather than doing other things.  But even the earthquakes need to be kept in perspective: they were seven years ago now, and in wealth terms were more than paid for by the combination of offshore reinsurance and the lift in the terms of trade. There is still no sign of things turning round now –  of higher business investment, or a greater export orientation, of a recovery in productivity growth.  It is just, at best, a mediocre story.

And did I mention house prices?

real house prices OECD

There are, of course, some other black marks against Bill English.  There were the questions of integrity around the Todd Barclay affair.  There was the willingness to lead his party into an election with a candidate who’d been part of the PRC military intelligence operation, and a member of the Chinese Communist Party, all things hidden from the electorate, and then to go on defending the indefensible as it became clear that important elements of this past had also been withheld from the immigration authorities.

But, even on his own ground – the economy –  the record just doesn’t add up to much at all.

Oh, and as for the other top award that caught my eye yesterday, that was this astonishing one.  I’ll probably write about that elsewhere. [UPDATE: Here for anyone interested in this non-economics issue.]