The Very, Very Lucky Country

While Australia is rightly branded The Lucky Country, it looks like we can reasonably be called the Very, Very Lucky Country.

Because of the way both the government and society have handled Covid-19, New Zealand is now one of the most successful countries on earth.

In the shorter-term performance metrics, the Lowy Institute has said so, following a fairly expansive set of criteria.

Obviously, each state responds to this global crisis with different kinds of instrument and forms of social persuasion, which the OECD has set out.

And for those who want a scan of everyone’s national policy responses, you can find quick summaries about how each country in the world has responded in primarily economic terms in this IMF summary sheet.

Covid-19’s impact is positively transforming the New Zealand economy.

It is currently a lower carbon economy, due to the falloff in international travel.

New Zealand’s coronavirus lockdown triggered a massive 41% drop in Carbon Dioxide levels – a reduction bettered by only one country in the world.

As a short term drop that was great, with a 75% drop in air pollution.

As a longer term drop due to air travel being down for years, that’s very positive for air pollution and the carbon cost of our tourism industry generally.

There was real industry disquiet late in 2020 when the new Minister of Tourism pointedly used the Covid-19 crisis in tourism to start levering out the low end of tourism and levering up our tourism productivity. As the Head of the Youth Hostel association commented about masses of young people flocking here, after Nash’s statement: “This has been a successful strategy of our country and has supported strong industry growth and, with that, economic benefit over the past 20 years.” That end of the tourism market is dead, and it needed to die.

The real economic pain many towns such as Rotorua and Queenstown are feeling is the identical pain that would have occurred through a sudden transition away from fossil fuels – because that’s exactly what it is.

Ours is also already a higher-value economy because tens of thousands of international students have been stopped from attending poor-quality education courses. All tertiary institutions are suffering, but those at the bottom end delivering international literacy courses are faring worst. A little-noted set of Cabinet papers in August last year showed the government explicitly using Covid-19 to transform the $5 billion international student sector. Obviously, they all came here by plane so that’s another massive carbon saving to another major sector of our economy.

The Cabinet paper said the pandemic was expected to cost education providers about $600 million in lost fees just for 2020, but that we stood ready to leverage its handling of the crisis to attract students. “The halt on international travel provides an opportunity to redefine how some of the sector value is generated. For example, the government can encourage the sector to rebuild in a way that is less reliant on student mobility which causes environmental strain, and place more focus on maximising the uptake of online delivery for students offshore.”

It is an economy with much clearer leadership from the state. This is affecting the companies that are already doing well out of 2021.

Construction is also an industry now leading the transformation of New Zealand out of Covid-19’s effects. Integrated construction and infrastructure companies are positioned to gain from government’s $30+billion of funding. You can see most of the big Auckland projects on display here.

With the publication of the infrastructure pipeline, and the Construction Accord, the industry is more cohesive and united – under government leadership – than it has ever been.

Companies that know how to work well with state development agencies, primary among these being Kainga Ora, are also doing well for themselves and the country.

There are whole suburbs of Auckland and Wellington being completely rebuilt by the multiple designers, architects, builders, landscapers, operators, and owners associated with this key agency. Check out Northcote, Mt Roskill, Owairaka, Cannon’s Creek, Hobsonville, Penrose, and more.

In sector after sector of our economy, Covid-19 is transforming us in precisely the same way as a lower-carbon transition has to take us anyway.

Which is quite possibly why there was near-zero disquiet about the 6 weeks of consultation about the Climate Change Commission’s recommendations. Covid-19 is being used as a moment to do the job of carbon transformation already.

This year, there’s going to be a lot more focus on the New Zealand companies that are focusing on very high end, niche high value exports.

And that obviously includes the head-to-head multinational competition of marine componentry in which national pride and multinational capital and the Research & Development resulting from that cooperation of both are fully on the line live before a global audience.

It’s in this moment of sustained global crisis that our state has reasserted itself as the primary agent of national cohesion. It’s the biggest Keynesian moment since the Depression. This is the Treasury summary of those interventions, so far.

With great dollops of subsidy, all exporting sectors of New Zealand’s economy now have transition plans underway.

And we can see people are getting that subsidy direct and indirect, and have the confidence to get out there and spend it, according to Treasury’s latest update.

The very idea of leadership as being of primary importance to our economic wellbeing has just gone up and up in both New Zealand and Australia as both governments were found to be decisive and effective.

And in the broader regional context, our trading neighbourhood in China, Australia, Indonesia, Japan, Vietnam, and Korea are in full fast rebound. They want our stuff and we are selling it to them.

There’s no doubt too that New Zealand’s average poverty has not reduced, and wealth inequality has not decreased. And our homeless rate at around 1% is the highest in the OECD. That’s a focus I will return to once this year’s budget announcements arrive and fresh stats come in with them. But here’s a hint:

In the absence of tax reform, the stealth-reform against our super-rich who have locked up most of our private wealth in trusts is the slow-burn revolution to watch. New Zealand’s wealthiest 1% of adults – around 38,000 people – have $141 billion in trusts. Another 150,000 people, rounding out the rest of the wealthiest 5%, have trusts worth a further $122 billion.

So reform of trusts is underway. Trustees will no longer be able to (a) exercise power for their own profit, (b) not give a damn about conflicts of interest, (c) act for reward (other than legitimate expenses reimbursed). It’s a shudder going down the spine of trust law specialists and their clients – but they’re keeping mighty quiet.

We are, in short, a very, very lucky country.