The weekend newspapers had several articles highlighting the second anniversary of the New Zealand First choice that led to the creation of the current government. There was, for example, the double-page spread in the Herald devoted to a not-at-all-searching interview with the Prime Minister and the Minister of Finance. And there was another double-page article in the Dominion-Post looking at the government’s performance under a range of policy headings. Since the government’s term is now two-thirds over – likely to be in full campaign mode (say) nine months from now – it seems not unreasonable to take a look at performance.
The Stuff political stuff divided up nine policy areas between them and wrote short reviews of the government’s performance in each of them. On my reading, they tended towards a generous assessment. All governments do stuff – sometimes even just things in the works under a previous government – and where this government has done most (education notably) there isn’t a huge amount of evidence that there were real problems that needed fixing, or that their fixes were dealing with whatever real problems there were.
Take housing, for example, where the Stuff journalists summarise thus
Two years into the Government’s term, housing is far from Labour’s strong point, but it is not an area of total failure.
So house prices are still rising, rents are still rising (even in a low-interest rate world in which provision of rental housing could/should have been cheaper than ever) and there has been no legislation to free-up urban land markets, or to compel local authorities to operate a more liberal approach. Set against that, a foreign buyers’ ban was largely irrelevant, and there is little reason to suppose that building a lot more state houses will increase the overall effective supply of housing (certainly won’t deal with the land issues). For what was declared to be a “crisis” – I’ll just settle for disgrace – what has been done, or accomplished, is astonishingly little. And it isn’t as if markets are pricing in better outcomes in future either.
But what really caught my eye was that there was no discussion of the government’s economic policy performance. One might reasonably grant them a pass mark on fiscal stewardship – but on anything beyond that the best reason why Stuff might have chosen to overlook this key area of policy is that there just isn’t much there at all.
Back when they were in Opposition we would, occasionally, here about the lack of any decent productivity growth, talk about growing export sectors, and so on. Even today, the mantra of a “productive and sustainable” economy gets rolled out from time to time…..but with almost nothing to back it.
Actual productivity growth still languishes – running at no more than 0.5 per cent per annum, slower than in most other OECD countries. (It is fair to note here that there could be material revisions to a large number of macro series over the next couple of months, consequent on the census (and subsequent creative efforts) results, but there is no obvious reason to anticipate material improvements.)
There is no sign that the external orientation of the economy has strengthened (eg exports and imports as a share of GDP). no sign of robust business investment, and of course we all know that business confidence results are in the doldrums. Interest rates have had to be cut further and the real exchange rate remains pretty high.
And what response has government policy made? The government seems to have made quite a fuss about the new research and development tax credit. But they’ve produced no sustained analysis illustrating why this will make a great difference – and no sustained either looking at why firms didn’t regard higher rates of R&D spending here as offering attractive risk-adjusted returns. And that really is about it.
And on the other hand, we have the government sitting idly by while the Reserve Bank Governor pursues his whim of making credit less readily available and more expensive, a halt to most new road-building even as the population continues to increase rapidly (and not, even, say, a congestion-pricing regime that might help reconcile the two), a ban on most oil and gas exploration, looming new regulatory restrictions around water. Oh, and immigration policy – for which there is no evidence of systematic economywide gains, in a country where (fixed) natural resources underpin prosperity – is, if anything, becoming more liberal.
The government keeps telling us it has a plan. I wrote here at the start of the year about an economics speech the Prime Minister gave, concluding
If there is any sign of a plan, it isn’t one that is going to do anything to lift our economic performance, in the short or longer-term. All indications are that the Prime Minister doesn’t care.
And then last month the government released something they did call an “Economic Plan” – in fact a thirty year one. Notwithstanding all the glossy pictures and long lists of points, it sank without a trace, barely even reported at the time, even with a supporting op-ed from the Prime Minister herself (my take was here).
Once upon a time, I wondered (perhaps naively) if perhaps they – upper reaches of the Labour Party – really did care. They should. After all, it is their traditional voters – the poorer people, the working classes, the younger – who suffer most from the decades-long failure of successive governments to improve New Zealand’s woefully poor productivity performance. But all the evidence from their time in office is that any care is superficial at best. Sure, they’d probably welcome a much better performing economy if it suddenly dawned fresh and shiny. But they seem to have no real ideas, no compelling narrative, for how to markedly re-orient our economic performance, and they is no apparent interest in finding answers, or ensuring that our economic policy and analytical institutions are delivering them serious advice, grounded in the actual experience of New Zealand, on policy approaches that might really make a difference.
It is an utter abdication of responsibility. No one made them run for office, no one forces them to stay in office, but when they take office they have responsibilities for the future prosperity of New Zealanders that they show no sign of taking at all seriously.
An academic economist left this comment on one of my weekend posts
With this in mind, I must confess that I always threaten to fail my Otago students if they don’t migrate to Austalia, because it shows they haven’t learnt anything from me; but the university doesn’t allow me to deliver on the threat. Still, most would be financially better off if they took this advice, and migrated to a place where better firms are located, and sought jobs there.
Sadly true. And what a sad commentary on decades of policy failure here: Labour ministers currently hold all the key portfolios (Prime Minister, Minister of Financem Minister of Economic Development) and it is their failure now.