What we should be doing

Written By: Steve Pierson - Date published: 4:25 pm, February 11th, 2009 - 17 comments
Categories: economy, national/act government - Tags: recession

As IrishBill has said, National’s so-called ‘kick-start’ is pretty underwhelming – bringing forward a few more roads and a bigger bridge so that a couple of times a year those Aucklanders that can afford to holiday in the Coromandel won’t create such a big traffic jam, 69 new State houses in six months (= bugger all, the net number of State Houses grew by 500 in the last fiscal year), and an average of $8,000 per school, most of it already announced spending. National has purposely made its ‘plan’ confusing to make it sound larger, knowing that will help it get its spin past most journos. It has conflated new spending with spending that announced in last year’s Budget and obscured the fact that much of the really new spending won’t happen until after Bill English reckons the recession will be over. But when you strip away all the bollocks, it’s a big pile of not much.

Despite their claims, National has announced next to no economic stimulus to counter this recession. In fact, National’s biggest response to the recession has been de-stimulatory (albeit the right decision) – that was to reduce its tax cut package, which was going to be larger.

Where’s the vision? Where’s the plan to not only get the economy moving but to use this opportunity to rebuild a better economy?

Here’s some of what we should be doing:

The Greens’ housing insulation project. National is now saying it will be doing insulation on State houses but no-one’s sure what they mean by that – State houses are already being brought up to modern insulation standards, in fact the project is nearly complete. The Greens’ project would provide modern insulation to hundreds of thousands of Kiwis living in low-quality private (mostly rented) housing. It’s a great project that would pay for itself in reduced health costs alone while also also providing jobs and lower power bills for low-income families.

Energy efficiency. The Electricity Commission has a fascinating report on energy efficiency. It says that the technical means are available to improve our energy efficiency by 23% – ie we could get the same end use using only 77% of the electricity if we used the best available technology and procedures. It also reveals that we could make a 14% cut in our electricity use for less than the cost of producing the electricity. That means, if the Government were to fully subsidise the extra cost of using a set of energy efficient technologies (we’re not just eco-bulbs and insulation for hotwater tanks, we’re talking industrial and commercial equipment too) then the country as a whole would actually save money, as well as using 14% less power, which would mean we would hardly ever have to burn coal and other fossil fuels. If the Government only offered partial subsidies, the power saving would be less but the economic saving larger – if the Government spent just $37 million a year on incentives it would save 5% of our power use and have a net economic benefit to the country of $180 million.

Electric transport.Yesterday, to much excitement, it was announced the first electric cars will be going on sale in New Zealand later this year. We should certainly encourage the uptake of electric vehicles, especially electric public transport. I would like to see the Government investment in conjunction with the major bus companies and the bus assembly plants to create an indigenous electric or hybrid bus for large-scale production. It’s not rocket science (it’s automotive and battery science) and we have the technical capacity for this kind of project. It would create hi-tech jobs, exactly what we need. But don’t forget that the energy for transport has to come from somewhere. If its not coming from carrying around hundred year-old device that’s basically a controlled version of a gun firing powered by blowing up the remains of ancient plankton, it has to come from stationery electricity generation. And we’re not talking small amounts of energy here. Transport burning oil uses nearly half the energy generated in New Zealand, 50% more than the amount of energy get from electricity.

Organic farming. The fertilisers we use for non-organic farming are based on phosphorus. The world-supply of phosphorus is peaking. The price of milk powder is dropping because it was driven by an explosion in demand in China that has now dried up. Demand for organics, a more high-end product, has not suffered so much. Although demand growth for organics is slowing because of the recession, the price of organics has not tanked like it has for commodity foods. Organic farming doesn’t pollute our waterways like industrial farming does. And its more labour-intensive, perfect for creating useful jobs. The Government could encourage organic farming by charging farmers for the costs of their pollutant run-off and offering tax breaks for those that go organic.

Upskilling. Government departments once provided initial job experience for new workers. They saw it as a public service in parallel to their primary one to train-up workers above the level required. Many of these people then moved into the private sector, which reaped the benefits of what was essentially a massive apprenticeship programme. Since that was largely abolished by the idiot neo-libs, investment in upskilling the workforce has plummeted – the public sector doesn’t do it, the private sector is too cheap. If we want a brighter, better workforce we need to invest in it, the Government is the only organisation that is going to do it on any meaningful scale, and the recession is the perfect time to do it. It would mean National braking its commitment to cap the dreaded bureaucracy but they’ve already done that with nearly all their new policies and, frankly, we’ve got bigger worries than keeping some daft, populist promise.

Sovereign Wealth Fund. The depth of a recession is the right time to be buying assets. A fund comprising government investment, funds people choose to investment via Kiwisaver, and funds invested via Kiwibank could be tasked with buying assets of strategic value to our economy both in New Zealand and overseas. We would get great prices for these assets while the recessio lasts; no-one else has the money to buy. It would help reduce our current account deficit. It could even inject some life into our stock exchange (people who want to get hold of some nice cheap investments always say we should be selling SOEs to boost the stock-market, that’s rubbish, the Government selling a huge asset would just drive down the prices of other stocks, but if the Government started buying stock in important companies, that would lift prices across the market). If we don’t invest in buying these assets, the Chinese will – just look at what is happening to Rio Tinto, which owns the Bluff smelter.

17 comments on “What we should be doing ”

Comments are now closed

Aj 1

11 February 2009 at 7:04 pm

You should also be pointing out that while Key’s party has asked the HSC for a nil wage rise this year, they are already in the salary bracket that will benefit most from the National Party’s changes to the taxation scales.
keith 2

11 February 2009 at 7:32 pm

another green party energy initiative that would be hugely helpful to NZ is to put solar hot water heating in kiwi’s homes. It would save about a third or more of a householdrs power bill (hundreds of dollars per year), would pay for itself within 5-10 years, would relieve the delapidated transmission network, alleviate the winter shortage of the hydro lakes, create employment, bring about world peace.
It’s pretty much the single best thing the government could do during this recession and it will never happen because the people who could make this happpen are fucked.
mike 3

11 February 2009 at 7:59 pm

Thanks for listing the Greens policies from the last election SP

94% of NZers didn’t vote for them then so now that we are in the shit I’m sure even less people are interested in their warm & fuzzy madness.
keith 4

11 February 2009 at 8:39 pm

Classic mike post mike, do you get that the only reason you haven’t been banned here is tht the mods love how your posts reflect the ‘right’ as an ideology followed by drooling degenerates? Your posts have some great resonance with the wider right-wing theme; percieved short-term gain which in reality is just shitting in your own nest.
Jum 5

12 February 2009 at 9:27 am

Electric cars costing $50,000 to $60,000 and now the government says the owners won’t be subject to road user charges.

Come again! People who spend that sort of money can afford to pay road user charges.

Once again the rich are favoured by NAct. How does the Maori Party feel about that?
Daveski 6

12 February 2009 at 10:27 am

Accepting that these are worthwhile strategies, one could rightly question why they weren’t pursued more aggressively by Labour when Labour not only had the opportunity but the economic conditions to boot.

It’s a little rich to condemn the Nats for failing to do something Labour also failed to do.
Pat 7

12 February 2009 at 11:08 am

SP wrote: “69 new State houses in six months (= bugger all, the net number of State Houses grew by 500 in the last fiscal year)”

I am trying to compare apples with apples.

What do you mean by the “net number” of State houses grew by 500?

If 69 new State houses are going to be built in 6 months, how many new ones were built last year?
Camryn 8

12 February 2009 at 11:16 am

I’m a confirmed right-winger, but I agree with many of these items but with different thoughts on implementation:

Electricity/Insulation: Of course, if home insulation and other energy efficiency initiatives supposedly yield such great savings then there should be sufficient market incentive for them to happen anyway… no need for subsidies for purchases that pay for themselves. Since they aren’t happening, or aren’t happening fast enough, then something must be out of whack in how electricity is priced. I say government should get the price signals right and then focus on assistance to adapt (e.g. low-cost loans etc) rather than straight out subsidy. The targeting will be more accurate. On the ‘smart grid’ side… I agree, government could do a lot to advance smart grid development which in turn does a lot to open up the market to small-scale producers which will give a big boost to solar, efficient new ideas, etc.

Organics: Agree NZ agriculture needs to target high-margin niches to compensate for distance from market. Organics seem logical given prices, stability and grow of demand, and existing national image (well founded or not). Again, not sure the government actually needs to do anything except enforce costs of externalities such that pricing signals re: fertilizer are accurate. Of course, this type of effect is always hard to build into price, but not impossible and totally worth it.

Upskilling: Clearly there are public good benefits to a more skilled and productive workforce, but I disagree that government should be an upskilling *provider*. I’d first look at what government disincentives are in place to private sector training/apprenticeships and remove them, and then look at any incentives that can be provided at less than the cost of the increased public good… most likely in the form of tax breaks on the first two years of employment of a first time employee in selected industries (or similar). Should be something easy for the IRD to administer without the need for an additional bureaucracy.
insider 9

12 February 2009 at 1:31 pm

On a range of comments above

Camryn – Isn’t a subsidy a price signal or are you saying that power is so cheap that most people don’t think it is worth the cost so power prices should rise artificially? Isn’t cheap power usually a good thing?

Jum – no user charges for electric cars was Labour policy. It’s been rolled over. But I agree with you.

keith – Solar hot water pay back in 5-10 years? Don’t make me laugh. This guy who has one and has logged its performance says it will be 50 years http://www.inthelight.co.nz/techo/solarheating.htm. Branz say 8 to 20 years but many of the systems won’t last that long.
Draco T Bastard 10

12 February 2009 at 1:44 pm

Energy efficiency.

What you’re really saying here, even if you didn’t realise it, is that privatising the electricity generation and distribution failed miserably. We should have kept it, have it continue losing money and we would have all been better off.

Sovereign Wealth Fund.

Yep, bring ownership back into the community and we’ll be better off than we would ever be while having foreign ownership.
bobo 11

12 February 2009 at 2:03 pm

Just an idea would be to use some of our ever growing stockpiled NZ wool for housing insulation while the export market is flat ?
randal 12

12 February 2009 at 2:12 pm

before the election Bubba Hayes from the wairarapa was big on an international airport at masterton and putting a car tunnel through the rimutakas
why isn’t he pushing these projects now when his party is in power?
insider 13

12 February 2009 at 3:04 pm

Draco

The majority of eLectricity generation is state owned, transmission is completely state owned and most of the distribution was never state owned and remains in the hands of the community. So much for having been privatised.

bobo

there is wool insulation. I wonder if it degrades more than glass fibre though.
IrishBill 14

12 February 2009 at 3:20 pm

insider, there is enough private investment in the electricity sector to ensure it cannot be re-regulated or returned to an (extremely efficient and reliable) ECNZ model without spending billions of dollars. Contact energy’s last reported equity alone was $3bn (I suspect it will be less now but a hell of a lot more if it were to be bought back).

Effectively the deregulation and partial privatisation of the electricity market forces state and community owned players to act as if they were privatised.

Until a government works up the balls to either procure Contact and the privately owned distributors or alternatively regulates them into a strict ECNZ cooperative model (which would have business and shareholder groups screaming about forced nationalisation and communism no doubt) Bradford’s fiasco will endure.
Irascible 15

12 February 2009 at 3:49 pm

Don’t forget the auction of Key’s cast as a contibution to the great dribble salvation plan… headline stuff possible here … Ex money speculator NZ PM auctions plaster cast of his broken arm as cash injection for NZ’s foreign aid contribution as Govt considers response to international finance crisis.
bobo 16

12 February 2009 at 5:55 pm

Insider – I saw wool being used on an episode of Grand designs on tv, it is supposed to be the best insulation there is, I wouldn’t think it degrades ,so long as it doesn’t get wet , (leaky homes..) better for environment unlike fiber glass and foam. Just seems a waste to import or use other products when we have an oversupply of it sitting unsold in warehouses.. New innovative ways of using domestically produced products would help the exporters out in recession times.
Camryn 17

13 February 2009 at 4:43 am

Insider – A subsidy a not price signal. It’s a price hiding device. I am saying that power is so cheap that most people don’t think it is worth the cost to be more efficient, but I’m not saying power prices should rise artificially… I’m saying they should rise realistically. If the real cost is apparent then whatever efficiency is worthwhile will happen (especially if government then directly assists the poor). If it doesn’t happen, it isn’t worthwhile. Cheap power is indeed usually a good thing, but not if it is artificially so and causes overuse or misuse… are some customers subsidising others due to insufficiently precise pricing mechanisms? Have all externality costs of production been included?