Minister Roberston’s recent speech to the Trans Tasman Business Circle sets out both how this government is using the pandemic to reset whole sectors of the economy, and also how it is getting its head around economic and social challenges. The points made were unsurprising, but his intended direction was unclear.
The Minister rightly points out the very high performance of New Zealand in key headline economic numbers, such as unemployment at 4.7% and trending downwards, economic activity at levels higher than before COVID, and a credit upgrade to AAA which is our first upgrade since 2003.
But then he gets straight into the problems, the risks, and the way this government intends to meet these challenges. This is what we are going to concentrate on. He makes important points about the vaccine rollout, and then on to reconnecting New Zealand with the world. In terms of our reconnection, he notes Professor Sir David Skegg said that the experience at our borders changed materially after 9/11 and so too will there be a new normal after COVID. Roberston didn’t go into much detail there, but that comparison itself is useful as a hint to what travel will mean both inward and outward in the medium future.
Minister Roberston then concentrated on critical aspects of the path for the New Zealand economy as we look to the future with and beyond COVID.
Without calling it a FIRE economy, Roberston underscores that pre-COVID, “too much of our economic expansion was based on unsustainable increases in house prices, and high levels of population growth.” What he is setting up there is a debate later about really restrictive immigration levels that forces us to train, grow and retain more highly qualified people here rather than importing them. That will mean that low tourism volumes and with it low hospitality employment is going to wither for the foreseeable future, and employers who want these people are going to have to pay more and generate attractive durable careers here.
Too many jobs were created in the low-wage economy and not enough of our firms are exporting into international markets or developing new technologies and products at the global frontier.”
This is a rebuke to the low-wage and precarious tourism and hospitality economy which kept us busy rather than wealthy, as well as mis-directing capital to poor quality assets rather than on research and development investment into higher-value businesses.
Some of that low-wage economy has been perpetuated by this government. Robertson generated a policy of wage subsidy last year that threw tens of billions of dollars to employers with little oversight and no positive shift of our economy other than keeping people busy.
Then he peeks behind those apparently healthy unemployment numbers:
Maori and Pacific unemployment took around 10 years to return to its pre-Global Financial Crisis level, and those ‘normal’ levels of unemployment are still far higher than the rest of the population.
So what was particularly curious here was the absence of any talk of re-regulating the labour market including those mirage-like MECA agreements, or continuing to raise the minimum wage (which they have done), or actively encourage re-unionisiation (which continues to collapse), or indeed anything like transferring some of the grossly unequal wealth at the top to the great majority at the bottom (through shifting taxes, for example, which they have largely neglected apart from a very minor change to an elite few this year).
Roberston further reminds us that our economy has not been sustainable in climate, biodiversity, and waterways. The primary polluter of our waterways is dairy, and yet they passed recently on any strong measures to address this in the 2020 DIRA legislation review which enables the continued existence of Fonterra.
What is discomfiting by this point in the speech is that we are half way through their second term and the Minister of Finance is only now articulating integrated challenges to the economy in this manner. He did outline some of this in the Budget 2021, but the high level areas to address these issues are:
In industry transition, transformation and innovation, the Minister mentioned the Just Transitions fund for enabling mitigations under the Emissions Reduction Plan. He mentioned the Industry Transformation Plans for agritech and construction, with others in the pipeline for digital technologies, advanced manufacturing, and food and beverage, and forestry and wood processing.
The Minister is explicitly trying to use the national unification we all felt through our collective response to COVID, to see if that can be transferred to how business can work with government: “We have seen how our country’s stock of social capital (our trust in each other and the connections in our communities) has driven our positive response to COVID. The same must now also be the case for our economic recovery.
Given that we are about to get a whole lot of utes and dogs come into cities to protest the waterways regulations, Robertson’s final commentary is appropriate:
There is sometimes a tendency to think about the relationship between government and business as being dominated by regulation – that it is a dynamic defined by the prevention of particular activities. I’m interested in ways we can work together; where public investment can open up new economic possibilities and crowd-in capital from the private investor, rather than crowd it out.”
The tendency rather is a bit more problematic than that: the government has been “intervening” at greater and greater scale with each successive national crisis that we face year upon year upon decade, and yet for all this intervention we remain a low-income, low-savings, low productivity, low wage, low-regulated, oligopoly dominated, volume commodity dominated, China dominated economy for as far as the eye can see.
Robertson’s speech needed rather a whole-of-government effort more akin to the Growth and Innovation Framework of 2002. It needed to have a common set of themes that every minister then repeated.
This is Robertson’s first speech I’ve seen that has set out a set of economic issues and then what they might do. Perhaps I shouldn’t be so churlish as to complain.
At the moment we have disaggregated government that is not providing messaging on the major changes it is making which include:
The more big moves this government makes, the less sense it makes.
Currently we only have two strong arms of state, Treasury and Health, and even health is wobbly. To achieve any of what Robertson is proposing, the rest of the state needs to catch up – and that is front and centre a government leadership job.
Sure, it’s one speech. We’ll have to see if there’s something to believe in beyond it.
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