Former Prime Minister John Key a fortnight ago made headlines when he told Newstalk ZB’s Mike Hosking that some of the economy’s drivers need replacing.
Key said: "If you look at what has driven a lot of New Zealand's demand in the time I was Prime Minister from ‘08 to ’16, it was a significant increase in migration, a very strong housing market, a lot of confidence running around in the business community, what was very low interest rates, and over time globally a capacity for governments to spend a lot of money.
"Add in to all of that a China that was very, very strong and growing and spending enormous amounts of money.
"And what I would say is if you look at what's happening at the moment in the New Zealand economy most of those factors that drove that very strong economy are either being taken off the table or are reducing. That's the right of the Government. I'm not criticising that, I'm just simply saying that if you want to continue to stimulate the New Zealand economy the question is what replaces those factors and that's the question the Government ultimately needs to answer."
So interest.co.nz asked National Party leader Simon Bridges what he would replace strong migration and house price growth with if he was in government.
Speaking at a Trans-Tasman Business Circle lunch in Auckland, this was his response:
“It’s easy for me to say this, but if I was designing the Budget that Grant Robertson had designed and I had the money that he had then (as the GDP comes down he has slightly less of that kind of optionality) I would’ve done it differently.
“In an ideal world I would have… actually this may surprise you, I would’ve invested more in health and education. I think they under did those for the money that they had. You don’t hear this much, but actually in health they’re doing less use spend than we did last year.
“But then I would go heavier on infrastructure - I think they’re a bit underdone there. And we’re seeing it in the MBIE report two or three weeks ago where infrastructure numbers are coming down. You can waste money in infrastructure, but it’s harder frankly. I’ll be looking at all the creative tools we have to do more there.
“And I’d definitely go and double down on what we would do in - call it what you want - science, innovation, technology, that area. You know, I think we should be doing more in that area.
“Look, I’m not telling you I’ve gone through and dissected the numbers finely, but I wouldn’t beat ourselves up that badly. When people talk about productivity - and you know there’s that paper out, it’s quite a good read for an economist’s read, by Paul Conway of the Productivity Commission, I think it’s conventional wisdom. New Zealand is an isolated little country, so we will always have a bit of a more challenge in this area than other countries.
“But I come back to it, take 2016/17, let’s not beat ourselves up. We’re 3.5/4% growth. Some of that was immigration, some of it was housing, but it wasn’t all. Actually I would argue as much as they fuelled growth, they were also a by-product of the growth because there was a sense that we’re a prosperous, successful little place that people wanted to come in to.
“Again, you all have your different view. Some would say we still do too much in the way of dairy power and the like. I would argue that actually our economy is much more diversified today than people give credit. If you go back 20, 25, 30 years, we were meat and dairy and a few other bits and pieces - wool.
“The truth is today, even if you just take food, we are massively into high value in the way we work. Viticulture - my neck of the woods in the Bay of Plenty. Horticulture - that kiwifruit is much more than just an ordinary little commodity. There’s a lot of science and innovation in it. That PSA story and coming back from that with science is a world class story.
“But then you move out of food and it’s all a bit anecdotal, but you’ve got gaming that grew under the last National Government. It’s early days, but it’s a couple of hundred million dollar industry now. Actually films, we have subsidised that. The reality is that with that investment, we have a multi-billion sector that’s moved out into all matter of high knowledge areas.
“Steven Joyce can claim the credit, reality is, I was the first minister for space. Look, that has the capacity to be a multi-billion dollar sector over time. So look, you’ve just got to keep pushing on those things. But I think I’ve given you a sense.
“If I was the boss and I was doing the Budget, I’d be doing more in those social services, particularly the poor too, infrastructure and innovation. I think that then comes to those hard choices that Andy [an attendee at the lunch] was talking about. We’re actually left blowing about $9/10 billion on effectively Winston and his pet projects and big entitlements. That requires some hard choices, but you know, think probably have to be done.”
33 Comments
Western countries reduced their production without making corresponding reductions in their consumption. Corporations' outsourcing of production to emerging economies boosted their earnings (and, consequently, the incomes of the minority at the very top) whilst hollowing out their domestic economies through the export of skilled jobs. - Tim Morgan.
The long term challenge for NZ is to produce things people want and produce them in this country. Simple as that, Simon. National didn't raise a finger to stop the export of jobs, or the import of cheap labour.
Well worth visiting Dr. Morgan's website if you haven't already. He views our falling energy surplus (together with policy failure) as a main cause of our economic predicament.
https://surplusenergyeconomics.wordpress.com/
Exactly. We did it by going further into debt selling existing (and aging) houses to each other, renting them to each other and selling each other coffee. Which redistributed 'wealth' internally (increased stratification, obviously) but did nothing resource-aquisition-wise.
Both lots suffer from focusing on the token-system, rather than what tokens can be exchanged for, particularly in the future.
Both lots suffer from focusing on the token-system, rather than what tokens can be exchanged for, particularly in the future.
Yes.. to paraphrase into my language... Both Labour and National are fully committed to the debt CAPITALISM system that the Western world has followed since WW2. It has evolved into the FIRE economy being the primary way that an economy grows... and the blood/fuel of this system is perpetual credit growth.
Credit growth , credit worthy borrowers, and the ability to service debt are the key metrics in this system.
Real " Wealth of a Nation " is a function of resources + creativity/innovation + hard work...
My view is that "Natural resources" , essentially belong to the "People of a Nation," ... (present generations and future generations.)
My view is that the next economic system the world moves into , after this one fails, should allow for the rewards of hard work, nurture creativity/innovation and that the natural wealth of Natural resources be fairly shared....somehow..
there you go PDK.... a long winded way of saying what u said about tokens... ( thats if, I've properly understood what u meant..!! ? )
I'll wager I've addressed the coming problem(s) with more creativity and innovation than pretty much anyone.
But I've never lost sight of the fact that 3-D printers need feedstock. And I've lived long enough to see kauri off the menu, to see ever-heavier balsa, meranti and gaboon - to monitor the topsoil loss, water-quality degradation, biodiversity loss, refugee streams......... and extrapolate.
What I should have done was get a PhD in something which advocates the interchangeability of capital and resources. Then I could be a tad more optimistic......
Great question you raised. Well done for asking it. I'm still not convinced National have admitted to themselves that they stuffed up big time by merely running with the Clark/Cullen business model based on more people and more capital from overseas pushing up house prices and giving the illusion of prosperity. At some point the penny will finally drop. At least Simon Bridges is talking about productivity and business diversity; not wasteful, destructive, glamour casino construction projects, central planning rebuild, sucking up to overpaid professional athletes and giving our fish breeding reserves away. He could do with spending a day picking kiwifruit though...
I agree RW. For the first time SB has sounded like he knows what is going on for me. Some of the comments above that re-iterate the point of creating manufacturing jobs here in NZ are valid too, and any Government needs to create a plan to create those, but especially the current one, as they have decreed their plan is real jobs with real incomes everywhere. But addressing the infrastructure deficit is an important first step.
This man, on the one hand, speaks of the economy slowing down and on the other touts science and innovation as growth drivers. Does he even know the gestation period of most innovations is over several years?
Labour did not bring productivity up on their to-do list until signs of an economic slowdown appeared after they've handed out several millions in voter appeasements. Now that the money wells have dried up, they'll resort to raising more taxes to do the actual job they were elected to do.
Less than half a year into the role, Simon couldn't help get caught with his hand stuck in the cookie jar - https://www.radionz.co.nz/news/political/364015/bridges-national-caucus…
I honestly can't understand how Bridges $100k travel spend is supposed to be a political gotcha. As leader of opposition he spent a couple of months visiting nearly every town/electorate in the country to meet with locals and hear their views. Isn't that pretty core to his job as leader of govt-in-waiting?
National 'endorsing' the Labour initiatives is no bad thing. If New Zealand needs one thing to assist it at the moment, it's consensus. We can flog the Westminster System of Government for all it's worth in the name of politics, but until we all agree on 'what has to be done' and get on with it, we're on a hiding to nothing.
Bridges' can do one thing to cement his ( brief) legacy - assist the current Government with its policies. He won't be remembered as a politician, like John Key, but a Statesman. What could be better?!
This 'booming housing market' John Key spoke of. Booming sounds really good, but I can't really think of what actually was good about it. House prices went up ? Didn't help anybody really, and hurt many. Booming ? You might think that meant there were lots of houses built. But clearly not.
Much of the housing market boom happened via remodeling and upgrades. Last time I visited Auckland, I was quite surprised as to the percentage of businesses catering to this business segment. So many people wanted to justify their home price via kitchen/bathroom/... remodeling. You see it in the comments here, where "XXX home price at YY% above CV is justified due to the extensive remodeling" type quotes. With the current flat to slightly declining market, less money will be going towards remodels.
As noted above, National just continued with the same housing and immigration playbook that they inherited from the gov prior to them. Still haven't seen any material changes to immigration policy, and darned little on housing policy changes. A welcome change would be an overhaul to the RMA, with attention to reduction on council fees.
A welcome change would be an overhaul to the RMA, with attention to reduction on council fees.
Not when yer mate's AC Mayor, the LG staff are heavily unionised and comfortable, and the OPM from ratepayers holds out. Two of those three have to have a stake through the heart before anything's gonna change....
I can dream, can't I??? :)
I fully agree with your comment. Things will not change easily, and it would likely be an unpopular move to attempt to limit/streamline local government.
Down here in Hawkes Bay, the regional council is increasing their rates by what they claim is around 20%, although my HBRC rates bill shows a 33% increase YoY, and doubling over six years. In addition to this very large rates increase, they plan on further increasing their budget via borrowing another $50M. It seems that the only direction .gov goes, is bigger. I'd rather that .gov growth is limited to wage inflation myself.
gee and how did we get here, first labour then natinal created this
Auckland one of world’s most ‘overvalued’ cities for housing
https://www.oneroof.co.nz/news/35261/?ref=nzhhome
What would he do....why this......a wise old Spend-Thrift.........me thinks......Not.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12106675
This whole '''rolling of Bridges'''in my opinion appears to me to be an attempt by TV3 to become not only the reporter of news but also the instigator of news.
They have even taken their attack dog off political duties and replaced him with a female who imo isn't up to it.
Well at least Key is admitting that one of the major planks of Nationals economic management was an unsustainable ponzie scheme based on immigration and increasing house prices. He had the sense to get out before the chickens came home to roost and now he is trying to appear knowledgeable advising others to do what he should have done. He had the opportunity. What a tosser.
Interesting and yes, a really good question. So after spending more on health, education and infrastructure:
I think that then comes to those hard choices that Andy [an attendee at the lunch] was talking about. We’re actually left blowing about $9/10 billion on effectively Winston and his pet projects and big entitlements. That requires some hard choices, but you know, think probably have to be done.”
I wonder, does he mean that he thinks the type of direct government investment in specific one-off projects (from a multitude of sectors), such as is being done by Shane Jones, has to be done? Or do you think he's saying that that money should have been used to spend more on health, education and infrastructure (i.e., no direct investment in private sector activities/initiatives)?
Yeah, it's pretty ordinary stuff alright. The central government controls everything model is broken. They should be able to run the ship on a third of the current GDP. The other 20% (of what they get now) should go to the regions where locally selected business people and leaders should run their regions on a competitive basis with other regions. Within a decade you will see three or four outstanding regions develop, which could be used as a template for the struggling regions. Now I'm not saying giving that money to local gov as we know it. We need to get some serious leaders involved which will be tough, as we haven't been encouraging or educating these types for decades. Good leadership is the way forward. This group think left wing stuff will destroy us. Oh, sorry, I forgot. It already is.
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