How come government doesn’t improve our economy?

Written By: - Date published: 8:24 am, May 21st, 2023 - 41 comments
Categories: Deep stuff, economy, grant robertson - Tags:

When we continue to spend our money on stupid stuff, we get a dumb country. New Zealand politics is now in perpetuity going to be dominated by massive disaster funding and rebuilds. Last week it announced a ‘national resilience plan’ with $6 billion attached, in response to the 2023 storms including Gabrielle. This is remarkably similar to the $6 billion of core Crown expenditure on the Christchurch earthquake rebuilds a decade ago. But it is dwarfed by the tens of billions government spent on direct wage subsidy during COVID 19. With this volume of state subsidy of our economy over so many years and three country-altering disasters, why is the New Zealand economy so bad?

Last year New Zealand’s current account deficit – the difference in value between what we import and what we export – was a massive $33.8 billion or nearly 9% of GDP. In part that is due to tourism collapsing, and in part because as soon as we were collectively able to travel we booked and went which drives up travel and services imports. The export sectors that kept us in literal bread and butter were dairy and meat products, and shortly statistics will also track the surge back in inbound tourism.

As MBIE reported last year, we continue to do a few agricultural things well in dairy, meat, forestry and fruit. Wine and infant formula being about as much as we stretch to major value-added exports in manufacturing.

After that, what we are good at in services is tourism. So when that tanks, we tank. MBIE also notes that our degree of ‘path dependency’ or just doing well what we’ve always done well is really hard to change, hence the use of the word ‘dependency’.

What we are spending $71 billion on is for the most part buildings, and concrete and steel for roads.

For the most part the Cyclone Gabrielle and Christchurch earthquake responses have spending on similar items: fixing transport infrastructure and sewers and water supply, repairs to Crown-owned school and hospitals, funding local government to deal with their local roads (For both Cyclone Gabrielle’s impact as for the Christchurch earthquakes there is also a lot more state expenditure in EQC payouts).

But while small bunnies were pulled out of tiny 2023 Budget hats in the form of prescription charges and public transport subsidies, check out where the real money is going: $71 billion on infrastructure. It’s got a title, but little else: the National Resilience Plan.

Minister Robertson said in his media release that “This investment will initially focus on building back better from the recent weather events. It will also include future proofing road, rail and local infrastructure wiped out by the extreme weather, as well as telecommunications and electricity transmission infrastructure.”

The obvious question must surely be: where was this scale of commitment to alter the economy after COVID 19? COVID 19 and our government’s response to it caused one of our worst and sharpest economic reversals we have ever faced. Why are we fundamentally unchanged as an economy? And why when we are so ‘path dependent’ do we not have economic leadership that can start to shift us out of this?

This government already appears to have forgotten how bad our economy was by late 2020: our GDP contracted by 12.2% in the 2020 June quarter. After propping up most of New Zealand business with wage subsidy, we then had sharp growth and ended with an overall expansion of .4% after a forecast full year 1.7% economic contraction. As typical examples, in mid-2020 Air New Zealand laid off 3,500 staff, and over 1,000 hospitality businesses closed. By November 2021 thousands of companies had been liquidated.  These major industrial shifts continue through 2023 in New Zealand industry sectors including tourism, film and television, construction, and horticulture. The low headline unemployment rate veils the massive continued churn and instability in most major private industry sectors.

It was only in February 2022 that the OECD warned us that border restrictions and declining house prices were the major risks to the New Zealand economy, and that excessive Government spending was causing the economy to overheat.

Why don’t we have a plan with dollars attached to actually improve our economy? Is spending $71 billion on dumb concrete and steel the response to the economic cataclysms that beset us?

The day after Budget 2023, Grant Robertson was interview on RNZ and said of the COVID 19 response, “I don’t govern in hindsight.” Well that’s all fine but where is the plan for the future beyond yet more disasters?

On the one hand is the dumb and low value: $71 billion on concrete and steel, and an export economy dominated by low value-added sectors in dairy, meat and wood as it has been since about World War 1. On the other hand the engines of innovation, our universities, are choked of funding and continuing to rapidly shrink. AUT has taken out over 230 academics and tutors. Massey University is going through massive restructuring. Otago University is in the process of getting rid of several hundred academics and other positions and wiping out whole departments.

Government restructuring of all polytechs is also leading to hundreds of further teaching and administrative positions. The pro-commercial agenda of successive governments including Labour has seen a long term decline in per-student funding and a turn to commercial operations relying more and more on overseas students.

Government investment in R&D this time is $400 million for Wellington to re-do a couple of buildings into health, oceans and climate, and a few exceptionally niche pet projects out of Crown Research Institutes.

Yes, that’s $400,000,000 for a few smart jobs in Wellington, compared to $71,000,000,000 spent on dumb concrete and steel.

When we continue to spend our public money on stupid stuff, over a few terms we get a dumb country that is more and more subsidy and welfare dependent, more and more vulnerable to changes in commodity markets, more and more unable to pay its way, more and more in debt, and going down the same path every year doing the same dumb poor things.

What we missed this budget and every single budget since about 2002 is an actual good and funded plan for the prosperity of New Zealand. Until then we don’t have a government that is improving the economy of New Zealand.

41 comments on “How come government doesn’t improve our economy? ”

  1. DS 1

    Last year New Zealand’s current account deficit – the difference in value between what we import and what we export – was a massive $33.8 billion or nearly 9% of GDP.

    You are confusing the Current Account with the Balance of Trade. The Current Account not only covers imports and exports, but also foreign investment flows. New Zealand tends to do OK with the Balance of Trade, but we're generally sucked dry in the other area (basically, we spend more than we earn, and have done for a good half century).

    Interestingly, early 2020 was a rare case of New Zealand actually running a (temporary) current account surplus.

      • lprent 1.1.1

        One of the major problems is that the stats is measuring a 1950s economy rather than a 21st century one. That is dumb. Most of the growth in the export economy is coming from sectors that simply simply aren't measured.

        That lack of definition leads to some pretty dumb discussions about economic matters. Like your one. Try finding ANY of the high profit sectors in your discussion as an example.

        Farming and forestry are essentially low profit commodity industries for the country. They don't employ that many people and most of the value added is effectively in offshore capital. Sometimes we get a new branch popping up – like wine or kiwifruit or venison. Over time they always drop back to being commodities and to being monopolies of quasi-monopolies because of it.

        So is tourism, especially when you consider the fragility of it as an industry. Changes in fuel prices or disasters or terrorism and the level of tourism goes down. Tourism’s main benefit is mostly in providing low-wage employment for the country.

        If you're looking at IP industries, they aren't grouped as sectors.

        I've worked in export IT now full time since 1995. I can't even find that as a sector of the economy in the stats. Some is in manufacturing. Some in services. Some in godknows where. The whole industry, highly profitable and highly production, is essentially invisible as an export sector.

        It is recognised outside NZ in market analysis. For instance (my bold)

        New Zealand ICT Market Analysis

        The New Zealand ICT Market is expected to grow at a CAGR of 7.2% over the next five years. The growth of the market is anticipated to increase owing to the increased spending on items and services related to information technology. Businesses are shifting from IT ownership to IT services and investing more in cloud technology than on-premises technology.

        • With its excellent digital infrastructure, New Zealand is among the top 20 nations in the world for network coverage, 5G rollout, and internet speeds. Fintech, health IT, digital, and creative technologies are flourishing in New Zealand and are highly competitive. According to the International Trade Administration (ITA) report, ICT is New Zealand's third-largest export sector and comes with an annual export income of approximately USD 8.7 billion. There are over 7,500 firms in the ICT industry of New Zealand, and it is where most global brands are distributed.

        Almost all ICT in NZ is divided into local and export. The local is pretty moribund, like most local GDP.

        The ICT export is typically more than 90% exported. Often closer to 100% offshore sales. They employ a lot of mostly well paid people, often working remotely with teams worldwide. Some of the offshore bespoke projects are huge and meant that I have spent quite a lot of time offshore doing installs.

        Most importantly, and unlike tourism, it doesn't require massive concrete and steel investment – which makes the profit level to the country much higher. It definitely doesn't have a inherent low-wage economy like tourism or farming/forestry.

        Like all of the tech industries in NZ, it is really hard to see in the stats figures – those are so 1950s.

        • RedLogix

          Good analysis. And alongside the ICT sector is a thriving world class OT (Operations Tech) sector as well. These are the guys doing what most people think of as Industrial Automation and NZ has been doing well enough at it since sometime in the 80's. Mostly local work I think, but some export as well.

          Top of their game and can stand alongside the best from anywhere in the world – especially Asia.

          • lprent

            I used to do a lot of work around that area many decades ago. It seems to be expanding out into more general automation these days with a lot of vertical bespoke robotics and other hardware areas. Amazing what can be done with SOC, sensors, and actuators.

            The export side of that has been fascinating to watch. It is typically by takeover and then exporting IP inside large industrial groups. We wind up as a country with what is effectively a R&D locally using a local clients as a test bed. Useful for creating high paying jobs here.

        • Left for dead

          Well stated.

        • SPC

          Yes. Superficially it looks a bit like a third world economy and the stats seem to show this still.

          But we do have some niche production – usually with some export. And that includes IT, because we have the infrastructure for it here. In this budget support for gaming, so Oz does not nab the skilled workers. And of course some film industry.

          Politically Labour has R and D tax credits and apprenticeships over National.

          We've moved on from DFC to other methods for aiding business with start up capital. Continued suppression of the landlord industry – direction to productive investment (either new builds, or capital investment in industry and or infrastructure).

          We need to do more here, such as cheaper business finance – I'd windfall profit tax banks for this purpose.

          As for R and D tax credits, perhaps more applied research on an industry basis (responsive to industry advocacy) to back up pure research. The Tier 2 AUKUS sphere.

  2. Johnr 2

    That's a fair enough critique of our current situation.

    Can I look forward to your next post detailing a plan for the future

  3. RedLogix 3

    Excellent OP as always Ad. I am consistently impressed at the thought you out into these essays.

    My take is that a functioning society requires a balance between three way balance between the state, markets and individuals. The role of the state is to provide a stable playing field with secure, predictable rules. The role of markets is to generate innovation, wealth and human development, the role of the individual is to participate to the best extent they can, build family, and community with purpose into the future.

    We have been getting these roles confused and demand the state solve problems we are not willing to do the work for ourselves. Or that markets generate fairness, when this is not their innate purpose at all.

    I am struck at how we want a smart responsible, morally justified economy, yet too few of us will commit to those values as individuals. In particular we have no idea of how to solve the problem of both generating human development AND a just distribution of this wealth at the same time.

  4. tsmithfield 4

    I agree with your post Ad. We may disagree with how money should be spent. But that is for another day.

    I think public-private partnerships for major infrastructure such as roading is essential. This would mean less public money required. And, likely toll roads to fund a lot of the roading infrastructure.

    Toll roads are great if they make travel quicker, more efficient, and safer (having driven on some of the European toll roads).

    • Craig H 4.1

      Toll roads don't require a PPP though, just to agree to partially fund something with debt to be repaid with tolls. That could be extended to other infrastructure funding with some form of user-pays really.

      The NZ Crown balance sheet has plenty of room for this sort of thing – there's no need to do PPPs other than to gift profit for the sake of gifting profit, or to fudge the Crown debt levels and ratios by selling equity instead of funding via debt.

      • tsmithfield 4.1.1

        Sure. I agree with that as well.

        We had that situation in Christchurch with the Lyttleton tunnel that had tolls charged until it was paid off.

        Paying the tunnel fee was a no-brainer compared to the drive over the hill.

  5. Ad 5

    To be slightly more charitable to the current government, great to see them subsidise NZSteel to the tune of $140 million to shunt them away from using coal.

    It's about the same carbon effect as taking all the cars of Christchurch off the road.

    “Our partnership with NZ Steel shows we can tackle the challenge of decarbonising even our hardest to abate and largest emitting industries. This investment would not happen without government support.

    “Steel is critical to our economy for manufacturing and construction. Lower carbon steel production at Glenbrook has massive wins for our materials supply chain. It also helps retain a significant local source of employment.

    “We are proving once again that decarbonisation does not mean de-industrialisation. It demonstrates how the transition to a low emissions economy can not only be good for the climate, but also a win for minimising waste, retaining jobs, and improving New Zealand’s economic resilience,” Megan Woods said.

    “Melting scrap steel using electricity, instead of converting ironsands into steel using coal, will substantially reduce the emissions generated from NZ Steel’s current activities. It will also build a more circular, resilient economy. This will put New Zealand in a much better position to meet its climate target of net zero carbon by 2050,” James Shaw said.

    “This deal is estimated to contribute 5.3 percent of the emissions reductions needed under New Zealand’s second emissions budget (2026-2030), and 3.4 percent within the third emissions budget (2031-2035).

    With a little (ahem), NZSteel, taxpayers have made this the most subsidised single business we've ever had.

    – Started by the New Zealand government in 1965

    – Supported by the Huntly Power Station, built by the New Zealand government

    – Vastly expanded by National's Muldoon government in the early 1980s

    – Expansion finished under the Labour's Lange government, for $3 billion

    – Sold by the state to Equiticorp in 1987, by the government, for $327 million. Government agreed to take the money in shares.

    – In the early 1990s the state has to give $198 million of that back to Equiticorp, because the deal was so shit

    – Equiticorp then went completely bust

    – In 2016 NZSteel sought protection from the government for Chinese steel-dumping practices here

    – And despite all that assistance it still nearly went bankrupt

    – And now it gets a further $140 million of taxpayer money, so that the government can start to make up for killing off its main carbon-reducing buiofuels subsidy that it decided to kill for no reason.

    Good on NZ Steel for getting the deal but holy hell how much more of my money do these guys really deserve?

    • RedLogix 5.1

      In 2016 NZSteel sought protection from the government for Chinese steel-dumping practices here.

      That has been a problem everywhere. Around that time I was working on a project that needed about 200 process skid frames – think a steel fabrication about 2m wide by 4m long, typically 250mm C-Section. Needs to be cut, drilled, welded, blasted and painted to an industrial spec. Nothing fancy or high tech – just regular stuff that makes up the bulk of all large projects.

      We had planned to do it all locally in Ballarat, but when the Chinese bid to deliver the completed frames at literally half the price of buying the raw steel locally – the wheels rather fell off that plan.

      When our QA team went to the Chinese plant they discovered there was no price advantage for them either – their steel purchase was only a little cheaper, the labour was only somewhat more productive, and their shipping costs cancelled out any advantage they might have had. It was plain as day this supplier was doing this job at a massive loss – one that could only be sustained by a weaponised hyper-financing program driven by government policy.

      If you want to know where all the good, well paying jobs went – China did not become the 'factory of the world' purely on it's rationally economic merits. It was the direct result of their predatory economics.

    • And the Popocatépetl blew up and negated all the NZ Steel savings

  6. Incognito 6

    Awesome Post!

    Much of that $400M for those pet projects all just around the Thorndon Bubble will go into infrastructure, plant & equipment. It will make for cutesy photo ops for the powers that be.

    The $55M for fellowships and training of PhD students is a nice gesture but without jobs here in NZ for those highly qualified, highly motivated bright young people to go to it is simply money to increase future brain drain – good for those who can get it, but is it good for NZ? [subscription required]

    I won’t even go into the pocket change contribution to the Horizon Europe Initiative, as it makes me cry.

    Budget-2023 has done SfA for Science and R&D in NZ – it is mere tokenism and virtue signalling and not a genuine change because the political will isn’t there and hasn’t been for a very long time.

  7. Adrian 7

    Isn't it time to ask why over 30% of NZers need an expensive university degree, when 30 to 40 years ago about 1/3rd of that number studied for one, the other 2/3rds now apparently need one to do jobs their parents did by learning on the job. Our daughter has a Fashion and Business degree but maintains she would have probably been better off starting paid work 4 years earlier as it wasn't until she got a job in the industry that she learnt almost everything relevant she needs to know. She has a senior role in fashion in London and hasn't once been asked if she has a degree.

    • Incognito 7.1

      With a few notable exceptions, university degrees are not for specific jobs per se.

      You may have noticed a few changes over the last 30 to 40 years, including in jobs and the type of jobs.

      Out of interest, did you daughter apply for her first job in the industry?

      • tWiggle 7.1.1

        Tertiary education in NZ, and in many Western countries, is a) largely a ruse to cover the fact of a big loss of entry level jobs and on-the-job training since the 70s; and becomes b) a gate-keeping exercise into employment, not real training.

        In opposition, Grant Roberston was involved in a Future of Work initiative. That should have covered topics like strategic planning for new economic sectors 20-30 years out, plus forward planning for workforce realignment in response to new technologies like AI.

        I have never seen anything come of this Future of Work initiative. I was expecting a Royal Commission at the minimum, to pull info together for future NZ governments, and to educate the electorate. It could have restored the tripartite discussion between workers, industry and government that was for a while a feature of NZ's political landscape.

        Instead, Labour set itself as the middleman in discussion behind closed doors, invisible to voters, and without any longterm strategic outcomes for economic transformation (which is not the same as growth). The result is a patchwork, fix-a-problem approach to government by Labour in place of forward planning.

        It looks weak to the electorate when key pieces of legislation have no clear strategic context. For voters, government then boils down to bean-counting and dollar signs instead of nation-building.

        • Incognito

          I agree with you that tertiary education in NZ should not be just a gate-keeping exercise into employment, but rather a catalyst for innovation and economic transformation. That’s why I think we need to invest more in Science and R&D, and encourage genuine partnerships between tertiary education institutions and the private sector. Tertiary education is much more than preparing for jobs; it is also about creating new knowledge, new technologies, and new solutions for the challenges we face as a society.

          There are many examples of successful collaborations or partnerships between tertiary education institutions and the private sector that have led to high-value products or services, or new job opportunities. However, there’s a huge untapped potential in collaboration and cross-fertilisation of research efforts that could lead to development of more high-value products. Furthermore, this would create an ecosystem where under- and post-graduates could and should actively participate in thereby creating their own future job prospects if not job market.

          By investing in Science and R&D, we are not only enhancing our competitiveness and productivity, but also our nation-building and our well-being. We need to foster a culture of innovation and collaboration that involves workers, industry, government, and academia. That’s the bigger picture that I think we should focus on.

          Arguably, the greater support for parents to access ECE announced in Budget-2023 aligns well with the Future of Work Tripartite Forum.

          • tWiggle

            Hey, thanks for rustling up that MBIE link, Ergo Sums It Up. I see it wasn't a Commission, but backroom policy development. It could have done with more publicity and rah rah. Now I see where the Income Insurance idea was floated, for one, where it seemed to appear out of the blue.

            Certainly from my experience in research and study, the link between industry and research has always been strong. Most post-graduate scholarships in science and engineering are supported by industry. CRIs and organisations like the McDiarmid Institute, which are embedded within NZ industry, play a greater role than much of academia in national R&D.

            Just by their critical mass and institutional knowledge, these focussed organisations allow more effective research, which is very much a team effort. Most fields of study are so complex these days, it takes 10 years to get a handle on the system you're looking at.

            Our agri-hort industries only maintain their competitive edge internationally by constant improvement in place. Incremental innovation can be as valuable as brilliant light-bulb moments for making money. A 1% saving in a multi-million dollar process produces a large annual saving that can be directed elsewhere, maybe to take a punt on something new.

            • Incognito

              I see it wasn't a Commission, but backroom policy development.

              Ideas that feed into policy development can come from multiple sources at multiple times. I sincerely doubt that the Future of Work Tripartite Forum singlehandedly developed the ECE policy.

              It could have done with more publicity and rah rah.

              Not sure what you mean by this. Was Budget-2023 not public enough?

              CRIs and organisations like the McDiarmid Institute, which are embedded within NZ industry, play a greater role than much of academia in national R&D.

              Indeed, and I argued that more of NZ academia should contribute & participate in the nation-building.

              Just by their critical mass and institutional knowledge, these focussed organisations allow more effective research, which is very much a team effort.

              I don’t know what you mean by “effective research” or why you seem to imply that academia cannot or does not do team effort.

              Incremental innovation can be as valuable as brilliant light-bulb moments for making money.

              I agree! Brilliant light-bulb moments and ‘geniuses’ are hugely overrated not what our nation-building is or should be about – this is not about growing a cohort of Elons.

      • Adrian 7.1.2

        To Incognito, She just worked her way up doing a few shitty jobs in the industry and doesn't recall being asked but her point was that it was only from the first one that she really stared learning what was required. Interestingly her first impression in the first weeks of Massey was the number of students who were doing fashion because they didnt know what else to do. Essentially just wasting time and money, and only a small percentage went on to get jobs in the industry according to her, not surprising, its a hard industry to get a job particularily in UK, where years long unpaid internships are rife. She was lucky, her internship was only 6 weeks and she reckoned that mostly only those with parents who could afford to support their kids in London for a year or two were generally able to eventually get a paying job. I am not prejudiced at all about the role of Universities, my wife is a Nursing tutor now but ironicly being paid as an in Hospital junior nurse from the first day on the job 45 years ago. I know , nursing has changed dramaticly, now maths and science dominate the course work Our boys are Chemical and Electrical engineers with Masters and PhDs and Uni was vital for those jobs. Funnily, one of them says that the person who really knows whats going on and how to do shit in a new high tech agricultural start up started as an engineering apprentice 35 years ago. My point being that a lot of time and money is being wasted by learning a whole lot of unnesseccary stuff.. I note a lot of comments before this one echo a similar theme.

        • Incognito

          My point being that a lot of time and money is being wasted by learning a whole lot of unnesseccary stuff.. I note a lot of comments before this one echo a similar theme. [sic]

          I disagree and I’m not at all swayed by ‘a lot of comments’ echoing whatever – numbers per se don’t equal a compelling argument.

          Who decides what is necessary? Should universities only teach narrow specialisms that are out of date or inadequate when the student gets his/her degree 3 or 4 years later? Or should they provide a deeper education across a wider range of topics and topic areas that possibly prepares the graduates better for dealing with wicked problems in ‘wicked environments’?

          I’d suggest that many university graduates use tacit skills and knowledge they ‘picked up’ at uni in all sorts of situations without realising it, even when they don’t work in the field they were supposedly ‘qualified’ in.

    • Johnr 7.2

      Interesting question Adrian.

      As a chief engineer in a large manufacturing plant one of the griefs was book learnt engineers from head office with new beaut theories. Sure, some of them were educatable but some of them were a lost cause.

      Interestingly my daughter has degrees up to her armpits, to the degree that her expertise has narrowed her employment opportunities. Whereas her brother (three years younger) was asked to leave school at 14 (I'm sure the school heaved a collective sigh of relief) is in IT and has for the past 30 years always earned more than she has.

      I'm a dad love them both too bits.

    • tsmithfield 7.3

      When I was doing my Masters years, I was marking papers for first year students.

      From my experience of that, there are a lot of people who shouldn't be in university. At that time, there was a general push to get people into university, and the trades were seen as a second-best option.

      But, I think that there is nothing at all to be ashamed with in taking up a trade. For someone with a practical bent, that is by far the best route for them to take. And there tends to be well paying jobs at the end of it.

      University takes a style of thinking that some people just are not suited for. Not better. Just different.

      • tWiggle 7.3.1

        Germany's vocational training system

        Wish we had this in NZ. A bit more than apprenticeships, and embedded in the workplace. (Although Germany is supposed to have the lowest social mobility in Europe.) No flimsy degrees with no relevance to the country's workforce requirements.

    • Anne 7.4

      Yes Adrian you are right. 40 plus years ago most of us could not afford to go to university. It was virtually confined to those whose parents could finance them through, and a handful of bursaries that only the very, very brightest among us could obtain.

      However various careers could be achieved through government-run faculties which specialised in certain 'career' subjects. I took advantage of two of these. The first was the School Dental Service training school and the second, the Meteorological training school in Christchurch. Both have long disappeared so those who want to go into these careers have to go through university to attain the necessary theoretical qualifications..

      The beauty of the former system is you did all the theory – exams included – while gaining practical on the job experience. It was arguably a better system and you came out of it with the appropriate diplomas.

      In most cases those diplomas were at a level equivalent to a BA degree and in a few cases they were above.

  8. Thinker 8

    "When we continue to spend our money on stupid stuff, we get a dumb country" –

    That's politics for you. When you live in Auckland, spending money on rural roads in the Hawkes Bay is "dumb stuff". When you live in Hawkes Bay, spending money on dealing with ram-raiders in Auckland is "dumb stuff".

    I'm just old enough to remember New Zealand's change to a market-driven economy. Admittedly, subsidies had got out of hand, but the new thinking was that the things we are good at should be able to stand on their own feet against the rest of the world (in many cases, having to compete against their subsidies). Infrastructure is a way of subsidising all businesses, lowering the cost of getting from A to B, providing reliable power and water, helping us to get our goods, services and tourism to the the rest of the world.

    When the market-driven economy was introduced, it enabled at least a generation of politicians to politicise infrastructure. The concept of 'intergenerational equity' came in, which was a sexy way of saying why fix it, if it ain't broke. Today, Wellingtonians are finding out why, when the breaking up of all the pipeworks that were out of sight, out of mind has created a crisis. We let rail infrastructure fall into disrepair, by comparing rail and road using a discounted-cash-flow approach that minimises the payback beyond (say) 20 years, when in fact rail lasts for far longer than the equivalent road – in doing so, we destined ourselves to commuter congestion in the urabn areas and bottlenecks on rural road networks.

    Deferring all that infrastructure has led to a backlog of necessary projects. Don't lets carry on the mantra that spending on infrastructure is stupid.

    Although, I have to say, my opinion is that we do seem to waste a lot of money on bureaucrats who would rather re-evaluate projects than build them.

  9. Stuart Munro 9

    It is, unfortunately, a weakness of NZ governments, that they neither know nor care much about the economy. We, the wretched citizens, are further impoverished by the infrastructure required by mass low-quality migration. They care more for pronouns and similar political fashion statements than for the well-being of our people.

    The Gnats are even worse – they never saw a piece of austerity they didn't like, and when they're not stealing public assets they're wrecking public services to allow their cronies to further enrich themselves by providing vastly inferior alternatives.

    The recent promise, of electrifying NZ Steel, is on the face of it, promising. Even though it amounts to improperly gifting vast sums to a corporate owned by Australiens. The climate effect may prove less than stellar however, given that Huntly is already burning large amounts of Indonesian coal to supply current electricity demand. It may stave off sanctions for falling short of Paris or Kyoto responsibilities, but if we are going to burn coal for it, it's not a climate policy.

    Redlogic argues that it's not the government's job to see that the economy thrives. Even had successive governments not caused great damage to employment in many sectors, supporting and developing a healthy economy is an obligation of government. Moreover, done properly, it facilitates the business of governance by giving them more resources. If only they had a few clues of how to go about it. They certainly won't get any from the neoliberal hacks that created the existing quagmire.

    It has been obvious for decades that we need to transition to a less impactful, softer economy. EVs for the public service isn't it. Tiny homes and electric bikes would be closer. Curtailing follies like mass low-end immigration and tourism (which provides typically low-end service positions) while degrading local recreational opportunities together with massive aviation fuel use, would have been part of any serious plan.

    The industries that have languished through decades of corrupt neo-liberal bullshit like the QMS ought to have been the base from which new generation industries developed. But government didn't care. Corrupt, irresponsible fools like Gnasher were good enough for them, because they don't care enough to do a proper job.

    Instead of a forward-looking housing reform, fear of the leaky building debacle has stymied innovation and blown out costs, imposing massive dead weight costs right across the economy. Not fixing it is even more disastrous than the corrupt and useless Gerry Brownlee's decision to leave NZ's second largest urban economy in ruins.

    Things are so bad almost any government action would be an improvement.

    • RedLogix 9.1

      Redlogic argues that it's not the government's job to see that the economy thrives.

      Fair enough I was probably being too concise for clarity there. I would say that it is the govt's job to create the conditions in which the economy can thrive. – essentially creating the physical, legal and social conditions that permit a healthy, innovative market economy.

      And that includes regulating for desired outcomes and acting as an employer, or supplier of last resort where necessary.

      Like all useful tools, markets and capitalism can be very dangerous when allowed to be used without skill or constraint.

      • Stuart Munro 9.1.1

        In an ideal market your position would be fine – but NZ is a small country and/or economy, and must be lighter on its feet. Market excesses result in capacity losses that can be ruinously expensive to reinstate here. We can lose whole sectors to Oz through careless regulation or failure to regulate. As we have learned to our cost.

        Our governments need to be less hands off – because our markets are more readily unbalanced.

        • RedLogix

          Agreed. The key point is if govts are going to engage with the economy more, this focusses us on what is important. For the most part I do not want the govt running corner dairies, but I do want it setting employment, environmental and safety standards. Providing the legal and police services that minimise ram raids, or a reliable banking and commerce systems – and so on.

          If we properly acknowledged this role, and demanded govts got to be really good at it – we might get a lot less stupid.

          • Ngungukai

            Chipkins and this Labour Government need to strengthen the laws with regards to Youth Offending, it is F#cking Chaos out there with delinquent youth going Hog Wild knowing they can not be prosecuted. These Little F#ckers are our fututre Gangsters as they have done their Apprenticeships as teenagers Ram Raiding Dairies, Bottle Shops and Jewellery Stores.

            They definitely have the skill sets to advance to the more established Gangs who are involved in drugs distribution, extortion, weapons, serious assaults, and other more sophisticated high level criminal activity. Unfortunately our politicans, judiciary, and enforcement agencies are Asleep at the Wheel.

            • RedLogix

              I understand what you are saying. People wrongly imagine it would be a good thing to be able to see the future – even in dark glimpses. It is not.

              As someone well used to reading maps it is not hard to foresee the dangerous terrain we are heading into.

  10. Ngungukai 10

    NZ has steadily gone down hill in the last 40-50 years, especially after the Lange-Douglas Labour Government's Neoliberal Experiment, which resulted in the stripping of our Tax Payers Assets, this was further extended by National's Bolger Government and the Used Car Salesman John Key's National Government. Selling NZ Assets to Offshore Investors. The Rich are getting Richer and the Poor are getting Poorer. The Top 1-10% of New Zealanders are on the Pig's Back, New Zealand is a great country if you can afford to live here. Unfortunately most of us are working our butts off, just to pay the rent and put food on the table.

  11. Years ago there was a TV documentary, entitled A Nation of Waiters. It was about Fiji, an economy even then overly dependent on foreign tourism.

    In the meantime, we've progressively gone down the same path. The tourism industry is dominated by overseas profit takers including airlines, hotel chains, travel agents, car-rental companies, shop chains for the wealthy, and so on.

    Improving an economy designed to meet the real needs of our people requires increasing productive capacity.

    Where is the increased productive capacity from catering to the needs of foreign travelers who by definition consume scarce resources and leave behind only waste? And burn a lot of fossil fuel in the process.

    We should welcome tourists but only in proportion as part of a balanced economy. Now we're hooked and we need to wean ourselves off. And we need to carefully calculate investment plans to avoid creating white elephants left stranded in the post-carbon economy.

    Those run-ways will still be useful. The hotels can be retrofitted as rental accomodation. Everything else can be progressively down-sized, re-purposed or disposed of as investment is switched in a measured way to the things that we know we need badly: in health care, education & training, cultural development, ecological restoration, etc.

    To the extent that we can reduce poverty and stress so we will reduce crime against property and against people.

    Let's get on with it.

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