One of NZ’s leading economists, Shamubeel Eaqub, says NZ is facing a huge economic shock. He questions what new steps the government will take to boost economic growth other than housing and immigration.
Speaking on Radio NZ’s Morning Report, he said:
“More of the same is not going to give us better outcomes. We have tried to have this growth in property prices, growth in borrowing, growth in immigration without having the increase in the productive capacity of the economy, infrastructure – it is really not going to work.
“There’s kind of this disconnect between saying that we’re going to just crank up what we’ve done before and we’re going to get better economic outcomes in the future. I just don’t buy it.
“I haven’t really heard much on this campaign trail around what’s going to be remarkably different. In some ways, I think, the pain still hasn’t been enough for us to be forced into having a conversation”.
Eaqub said there needed to be a discussion about modern monetary theory.
But later in the same programme Finance Minister Grant Robertson was unequivocal:
“That’s not where we’re heading at this time.”
He told Morning Report now is not the time to make a structural change to the system.
“We’ll keep our eye on that but I am prioritising stability and continuity at a time of massive uncertainty for New Zealanders.“
Treasury’s Prefu earlier showed NZ emerging from the Covid-19 lockdowns better than expected but facing years of large deficits and ballooning debt.
Robertson has concerns about the Treasury’s predictions regarding housing and immigration.
“As I have been clear over some months now, we are going to have higher levels of debt and a deficit for some time to come. That is the nature of responding to a one-in-a-hundred-year shock.”
Robertson welcomed new Treasury forecasts as proof the economy is doing better “right now” than when, as the latest quarterly GDP figures show, NZ slumped into recession.
But the Crown’s balance sheet is already looking worse than it was a few months ago, and will be exceedingly ugly by next year.
NZ is in for a stubborn Covid hangover, the NZ Herald warns.
There’s no sign of any fresh ideas to spur growth. And with Labour coasting along on its achievement against Covid-19, why rock the boat?
Except, as Eaqub warns, more of the same is not going to give us better outcomes.
Ministers talk of new initiatives to improve education results, or advances in agritech. But these won’t do much to offset the loss of earnings from international tourism or create new opportunities for those who have lost their jobs.
Indeed the current government has shown, in several different ways, an underlying hostility to increasing farm production, reflected in the Green desire to impose penalties on methane emissions and a reluctance to encourage gene editing and in new freshwater rules that could restrict the dairy industry, as well as subsidising forestry on agricultural land.
The ACT party has come up with a policy that would seek to exploit resources waiting to be developed. Notably, it would get rid of the ban imposed on offshore oil and gas exploration.
The government’s decision on exploration was meant to be a gesture towards mitigating climate change—but how does it stack up against the hard fact no-one else in the world is stopping oil and gas production (91 million barrels of oil was produced globally in August).
NZ needs a much wider response than ACT proposes to develop resources, among them the re-creation of full-blown ministries in the government structure: a Ministry of Energy, a Ministry of Fisheries and a Ministry of Forestry. Currently the oversight of these are tucked away as divisions in ministries whose managers have too many other priorities.
The focus in these re-established ministries would be on science-based initiatives. These could originate in the Crown Research Institutes which, as a recent review established, are doing world class work but need restructuring to stimulate innovation.
Point of Order is convinced that, taking the quality of NZ scientists into account, a restructuring as recommended by the CRI panel, plus innovative ideas on financing science, should be a priority in any economic recovery plan.
If NZ were to follow the example of Denmark it would restructure and integrate its public research institutes and universities.
And then how best to encourage specific research which could be applied across the productive sectors in agriculture, forestry, fisheries, horticulture, aquaculture, minerals, and technology as well as to other sectors like biology, health, and education?
One idea would be for the government to set up a $500m specialist fund to subsidise dollar- for-dollar research to be carried out in universities or the CRIs. Then it would be over to the universities to qualify to draw on the fund through appeals to alumnae and other private sector sources for the targeted research.
This would be more effective than politicians who are “pledging” money for pet projects — as, for example, “NZ First pledges $25m for new marine biology facility in Tauranga” (or does Winston Peters really have his own bucket of money?).
Point of Order 