Minister Mahuta’s water reforms are by some measure the most consequential industry intervention of this Labour government, and likely to be the most successful in over a decade.
The most direct commercial intervention by the John Key National government was the Sky City deal of 2009-11.
Let’s never suggest that National don’t massively intervene in business. Let’s remember how that worked out. Sky City got a 27-year extension to its Auckland casino license. It was enabled to add 230 slot machines and 40 gaming tables with a further 12 gaming tables that could be constituted for automated table games. SkyCity also gained up to 17% of slot machines in restricted areas that could accept notes greater than $20. It was also enabled to go cashless to empty all your accounts faster. All of it by using Parliamentary process. It also got a substantial piece of public property from TVNZ.
New Zealand in return was to get a National Convention Centre for free.
The National Convention Centre according to the Economic Development Minister Stephen Joyce at the time said the convention centre would add an estimated NZ$90 million a year to the local economy, create 1,000 jobs during construction, and could draw some 33,000 additional conference delegates here each year.
This was all personally brokered by John Key, directly with the SkyCity Board.
Net result a decade later: fat profits to the company and not a goddam single cent of benefit to the New Zealand citizen nor a convention centre nor a single delegate.
That is National industry intervention.
Now let us get to the deal most comparable deal to that mutant: Local Loop Unbundling and its farsighted economic good.
In 2004 Labour determined to break the Telecom near-monopoly on broadband access and pricing. For that effort Minister Swain was undercut by Telecom and demoted from Cabinet. In the next attempt Telecom staff colluded with a Parliamentary staff member to intercept a draft Cabinet decision, stole it back to Telecom headquarters, and with it attempted to screw the new Minister, David Cunliffe. It occurred right on Budget and was the worst budget leak, and worst public sector leak of any commercial decision of this magnitude, that New Zealand has yet seen.
Minister Cunliffe was regularly vilified in the media and had little support from his Labour colleagues for it, other than when Parliamentary votes were required. No doubt Minister Mahuta knows that that feels like: she and she alone knows how it feels because she alone has challenged New Zealand capitalism and hence paid the price for challenging its power.
But this is what Labour industry intervention looks like.
By 2010 the Telecom Board Chair Roderick Deane resigned and in February 2007 Theresa Gattung resigned having turned the largest company on the NZX into a wreck.
This is what happened next. New Zealand punched through the second decade of the millennium with the fastest fibre uptake in the developed world. Mobile operators leaped from 3G to 4G to 5G at a speed which has revolutionised New Zealand society to every device.
The New Zealand film industry within a decade of smashing Telecom added NZ$1 billion to real GDP, was estimated to contribute to export volumes by NZ$700 million, and employed around 14,000 jobs.
In 2021 and 2022 despite the pandemic-induced recession enabled schools, polytechs and universities to keep on teaching right throughout. An entire societal shift has occurred to enable people to work from home, and commuting increasingly is just an option. In no small part the structural separation of Telecom under Labour and then National enabling the state-directed broadband rollout saved this country and accelerated its cohesion and efficiency simultaneously.
It also gave rise to Crown Fibre Holdings as a permanent Crown entity with massive investment power and planning ambit.
To put not too fine a point on those two examples: National makes shit commercial intervention, and Labour commercial intervention leaves a long term legacy of good.
Now let us turn to what Minister Mahuta has left us with. Under Labour and with support from no other party.
Minister Mahuta will leave a legacy in water which does several long term things.
First it is the final de facto peak of mass volume dairying that has sickened our land and water since the GATT agreements and accelerated by National directly funding the irrigation of much of the South island for dairy. This is the death of bulk dairy that has destroyed much of our rivers, lakes and streams. We knew we needed a country beyond bulk dairy exports, and here it is coming.
Second it is the disempowerment of local government which has outside of Auckland, Wellington, Christchurch and Dunedin been run for the interests of farmers and their cattle companies and dairy companies. Local government if you are Maori, Pasifika, disabled, female, poor, renting, not driving, or under 60, has simply needed to die and Mahuta has just stood on its neck and shot it. Local government has mostly been controlled for a century by old white men for increased agricultural production and the lowest possible investment in water, and damn the risk to human life. There’s no defending the track record of local or regional government in water.
Third it turns New Zealand into a distinctive governance form by fulfilling a core part of the modern interpretation of the Treaty of Waitangi that we are all to be in long term kawanatanga with Maori about water. In this we are now quite distinct from the native governance arrangements of Australia and its states, Canada and its provinces, the United States and its Nations, Fiji and its tilted constitution, South Africa, or indeed anywhere else on earth. We get to own it, and we as ever get to make it work like the independent nation we are. Arguably we are the best at native peoples co-governance arrangements in the world, and are simply building on what we’ve already got going anyway.
You can make some educated guesses about what, similar to the Telecom takedown and its societal consequences, will be some water industry consequences.
I’d expect to see bottled water go up in price, and few if any further raw water export bottling plants.
I’d expect water use per citizen including farming to come down fast with universal metering. As it did fast across Auckland.
I’d expect any new dairy company that tried to set up will concentrate like Tatua on very high value export products, or perhaps indeed that no new large dairy companies will set up.
We can expect companies and entrepreneurs that add the very high value to raw water or indeed to raw milk will grow and flourish, just as we saw with telecommunications with dozens of major IT companies, film companies, gaming companies, financial services companies and more flooding our venture capital and stock markets. Yes that means more exported expensive wine, more beer, more spirits, more of any kind of expensive fluid, or any high end protein additive.
Sure, 2023 may risk , like the great Fast Forward Fund of 2007 or Kirk’s great 1974 Superannuation Fund, that National will come in again and kill it all and again tie the feet of New Zealand to slow-growth and slow-wealth and slow-ambition. If National had not killed either of those initiatives we would be outstripping the wealth of Australia right now.
But for now understand this: there is not a single other party in Parliament today other than Labour who knows how and why to intervene in the right industry at the right time. And this time it was Minister Nanaia Mahuta.