Steven Joyce may not be popular, but no one can deny his economic ability. Those who disliked him in the past obviously had no idea how inept and incompetent the next government was going to be. Steven Joyce belongs to an era, only recently ended, where we expected skill and ability from our politicians. How I miss those days.
Steven Joyce was Finance Minister for a short time, but he knows what makes our economy successful, and if he were still in that position, we would not be going backwards, as we are now.
It was confirmed this week that New Zealand is now running at little more than half speed.
From growing at rates of 3½ to 4 per cent three years ago our economy at the end of June was only 2.1 per cent larger than it was the previous June.
That’s a problem firstly because our population is growing at about 1.6 per cent a year, so if our economy grows at 2 per cent then the amount of additional wellbeing per person (to coin a phrase) is three fifths of not very much.
Never underestimate the effect of a growing population. It is conveniently forgotten in most current discussions about our economy.
The second problem is that our terms of trade (the prices of our exports versus our imports) are still very strong so we should still be cranking along. It’s a problem if we are slowing down when the world really wants to buy what we are selling. What happens if the world actually falls out of bed?
The world situation is volatile, but not very bad as yet. This may change, but if it does, it will simply mean that our economy is affected more than it needs to be. We could still be growing at 4% if this government had half a clue.
But they don’t.
The government has been quick to blame the world economy for our lower growth rate this week, but our terms of trade put the lie to that.
The third problem is that there is no sign of anything on the horizon that will lead to much of an upturn, and in fact all the signs are that we are going to slow further. Our businesses are in a funk because of what is known as regulatory overhang. In short, they are too fearful to invest because the government is making lots of rule changes that could mean they don’t get much of a return for the risk they take.
Uncertainty changes everything. The fact that our exports are still holding up is a good thing, but if government policy was more business-friendly, we could be rocking along as we did during the GFC when most countries were struggling. What exactly was it that made the difference back then?
We had a competent government with a business-friendly attitude.
The fourth problem is that lower growth means less to go around. If we were still growing as fast as we were then in real terms our economy would be around $5 billion bigger this year than it is. That means more money for higher pay and more jobs, and of course about 30 per cent of it goes into the government coffers – which would pay for a lot more cancer drugs, teachers or electric vehicle subsidies.
Oh dear. What can I say?
Its time to rein in some of his [the Minister of Finance] ministerial colleagues who are wreaking havoc with business confidence.
For example he should suggest the Minister of Immigration sort out his portfolio so that horticulturists can find seasonal workers and the international education sector can get up off its knees. He should tell the Minister for the Environment to come up with a more reasonable plan for water quality improvements and methane emissions reductions so farmers step back from the cliff edge, and the Minister of Education to stop stuffing about with the apprenticeship system.
He should encourage the Reserve Bank Governor to be less heroic on bank capital requirements, persuade his colleagues to do a backtrack on gas exploration now it is proven the ban is simply value destroying and does nothing for climate change, overrule the Greens to permit some gold mining, and stop taxing tourists more so the tourism sector starts growing again. He should cancel the return to industry-wide pay bargaining given that NZ First are never going to vote for it anyway, tell the Transport Minister to get on with building at least some of the stalled roading projects, particularly given that light rail is years away, and reverse at least one of the petrol tax increases.
Then he could watch the economy recover and start thinking about how he’s going to allocate the increased government revenues. And New Zealand will be in much better shape if the world economy does get worse.
Some may disagree, but I feel that Adrian Orr’s policy of dropping interest rates to zero per cent (yes, he will) while forcing a more conservative policy on capital held by banks cancel each other out. Banks are under more pressure to hang on to your money, while interest rates are so low that they are ineffective. None of this is working in any positive way.
Unfortunately none of that is likely to happen this year, which means as a country we will be poorer and there will be less rather than more to go around. The Government has outsourced economic policy to the Reserve Bank Governor so interest rates will keep dropping, which brings its own risks, and the government will simply cross its fingers and hope the world keeps growing.
It’s a massive missed opportunity. Our country should be doing so much better.
STUFF
We could be doing so much better if we had a competent government. But we don’t.
I miss Steven Joyce. And John Key and Bill English. Yes, some may have disliked them as politicians, but they knew what they were doing. Can you say that of the current government?
No. You can’t. And we will all suffer as a result of their ineptitude.