The government needs to stick to a plan of "considered and consistent change" focused on raising productivity over the next five to ten years to help close the wage gap with Australia and stem the flow of Kiwis crossing the ditch, Finance Minister Bill English says.
Speaking on TV One's Q&A programme on Sunday, English touted the government's infrastructure programme, changes to the Resource Management Act, welfare reforms, and improvement of skills programmes as contributing to the self-set goal of closing the wage gap with Australia by 2025.
It was a weekend of selling last Thursday's budget for English, who also appeared on TV3's The Nation Programme on Saturday. On The Nation, English said Friday's 5.2 earthquake in Christchurch may have hurt confidence in the insurance industry, which was critical to have in terms of the scope and speed of rebuilding work in the city.
This week English will give a series of speeches around the country on the budget. See interest.co.nz's Budget 2012 coverage here.
'We will close the gap'
On Q&A, English was asked about then Opposition-leader John Key's pledge in 2008 to turn around the net 35,000 people a year exodus of Kiwis to Australia. That has now risen to a record net migration of 39,778 in the year to April 2012, with the majority New Zealand citizens.
English said that showed what a big job New Zealand faced in terms of closing the gap with Australia.
"That gap opened up over a long period of time, and the last few years has been a set of circumstances which have meant that Australia has got a once in 100 year resources boom at the same time there’s been a global recession," English said.
The new record of net migration to Australia was not a failure. The government was taking the steps needed to close that gap, and had learnt lessons from Australia.
"Where they’ve been successful is considered and consistent change over time that always focuses on lifting their productivity and their growth potential. And if New Zealand sticks to this plan that we’ve put in place for the next five to 10 years, we will close that gap," English said.
"The Australian economy’s got its own challenges. But the better they do, the better we do. There’s no point in catching up with Australia by them doing badly. We have to focus strongly on taking every opportunity for jobs and growth," he said.
"And the wages are higher in Australia, so what do we do about higher wages in New Zealand? Well, what we need is businesses who can employ - who have sufficient capital to invest, can employ another person, sell their products for more so they can pay higher wages."
Growth could not just be plucked out of the sky, English said.
"In the end, the growth in wages comes from businesses and organisations who are able to make a sufficient profit to employ another person and pay a higher wage, and a lot of our decisions are focused on getting those decisions more easily made in New Zealand," he said.
The government had a programme across 100 areas which ranged from more investment and infrastructure, to the roll out ultrafast broadband, improving skills programmes, breaking welfare dependency, and changing the Resource Management Act to allow for effective business decisions to be made.
Recent quake could hit insurance confidence
Meanwhile, on TV3's The Nation on Saturday, English said while there might be not a lot of physical damage arising from Friday's 5.2 magnitude earthquake in Christchurch, a critical issue in terms of getting rebuilding work moving in the city was the confidence of the insurance industry, which may have been hurt by the quake.
"[Earthquake Recovery Minister] Gerry Brownlee has to get some collective solutions to quite complex insurance problems, and part of the challenge of getting those solutions has been insurance companies are preferring to be insuring people again against a backdrop of no quakes, so that they're not taking obvious risks," English said.
"I think that’s yet to be seen. In Christchurch you have got a very resilient attitude, and I think they are willing to go as fast as they can given the risks, but this earthquake is a reminder that it's not just a matter of policy or process to get the rebuild going," he said.
"There is the ongoing concern that there can be further earthquakes, and each one of them has some effect on confidence."
Net long term migration
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7 Comments
Alex - can you ask Brian Fallow, Colin James and Patrick Smellie to contribute here with answers to the question David Parker asked of them?
Cheers, Les.
The new record of net migration to Australia was not a failure.
Is that a credibility gap I see showing?
"Where they’ve been successful is considered and consistent change over time that always focuses on lifting their productivity and their growth potential. And if New Zealand sticks to this plan that we’ve put in place for the next five to 10 years, we will close that gap," English said.
How would New Zealand close that gap by doing what Australia is already? If it is a model that works doesn't Australia keep moving ahead?
It seems convenient that he's set the timeframe for any success to be yet another 5-10 years. A look at the graph shows a pretty quick growth in exodus when the Nats came in, and there's no sign of plateauing yet.
He also says you can't pluck growth out of the air. This furthers the suspicion that he has no idea how to create growth. Can he explain what industries will find more customers, or higher paying ones, as a result of his tinkering (some of which, I accept, may be useful, but hardly game changing). Where will the real economies of scale come from, in what industries?
Is it expanding farming, is it tourism, is it food processing, or other manufacturing, is it other resources- timber, paper, coal; is it comms/IT/financial services, contact centres? Is the focus import substitution; or exporting? Are we a manufacturer for Australasia, and a resource supplier to China? Who are the main customers? What do those customers want? How can we add more value? What will need to be true to do so, and to persuade those customers that we can and should do so? Who are our competitors; and what competitive advantages and disadvantages do we have?
Its not obvious that he has any plans for any of this. Am certain that the Singaporeans, the Chinese, even the Europeans, have very considered and government sponsored analyses and plans for all of these. And they build their economic models around them.
Importantly, they don't have an underlying monetary and economic model that is guaranteed to pull the rug out from business through exchange rate appreciation and interest rates rises as soon as their current account deficit gets close to say -3% of GDP; from its present say -4 -5%; and growing to -7%, using our paradigms. They of course don't have such deficits in the first place.
What are his plans to manage the distortion to the economy caused by a correct massive focus of money and resources into Christchurch? Am not aware there is one at all. There's a risk the rest of the country will be unnecessarily shafted, through the same mismanagement of monetary and interest rate policies.
Not very impressive, Bill, really. Can't see you being around in 5 years to see your promised uptick in net migration.
At least all the Kiwi builders in Australia have a sustaiable supply of new customers, more New Zealanders.
one of the primary reasons Kiwis are leaving is the lack of supply of new affordable homes.
security or even a path to home ownership would be a start.
The average time a couple need to save a deposit for the average home 7 YEARS.
The average age of a NZ first home buyer 36 Years old.
QLD has a $10 000 builders boost to promote new builds, great deal as the GST returned to Govt is about $45 000.
First home owners grant and plenty of kiwi builders to build you a new home for about $305k.
Power bill comes every quarter and is less than a NZ monthly bill.
No GST on unprocessed foods,apples,oranges,WOW pitty thats in the to hard basket here,,,phew thank goodness we dont have ambition to close the Gap,,MIND the Gap.
MCNZ you have summed it up succinctly. we should have variable rates for GST and power is overpriced. Sort out issues here. create a level playing field and frankly there aren't too many differences between the two countries. at present however we are polls apart on philosophies
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