Is there a mood for change emerging?
Having recently returned from a very enjoyable, long-delayed trip to the UK and Europe, I was surprised to feel sad a few days after returning. Although the UK and the Eurozone are not free of their own issues, some of which we share, when compared to their vibrancy – retail and hospitality bustling, tourism booming – I cannot help but notice a feeling of glumness here. We’re despondent and down across all aspects of our society, we are in social and economic malaise at best. And it’s reflected in the statistics too with the past few ANZ Roy-Morgan Consumer Confidence Surveys plumbing all-time lows, a record 51.5% of people surveyed saying “…things in NZ are…seriously heading in the wrong direction.”, Barfoot & Thomson reporting last month its lowest home sales volume for the past 22 years and the RBNZ reporting the lowest level of new mortgage commitments across the banking system since 2013. Not good.
Fortunately it’s not all doom and gloom. As in the latter stages of the Clark government, where a then record 49.5% of people surveyed said “…things in NZ are…seriously heading in the wrong direction…” I am sensing that there is a palpable mood for change. People have had enough of life under the veil of various and persistent covid-related restrictions and the everyday and economic consequences and just want to get on with their lives. What does this change need to be and why?
First and foremost, we need a healthy, energetic growing economy to get us out of the slump and the current mess of high public and private debt, low growth and high inflation. A strong economy means broad, increasing economic activity which brings higher employment (not just low unemployment), wages and salaries and an increasing tax take necessary to fund Government spending / repay borrowings without burdening future generations with excessive debt. We need to acknowledge that it’s mainly tourism, agriculture and immigration that differentiates New Zealand on the world stage and we need to leverage that position.
Unlock tourism and immigration right now. We need tourists here to spend money and work, just ask anyone in the hospitality and retail sectors. I can tell you first-hand that despite our Prime Minister’s recent overseas marketing pitches, there is a sense that New Zealand is not “open for business” with our persistent covid-related restrictions affecting people’s perception of New Zealand as a destination. Although reopening our borders a week or so ago is welcome, that is not enough in itself to generate inbound tourism. For example, visa processing times are woeful. A friend of mine has been told by her immigration consultant that it will take up to five months for her parents to receive their visas authorising their visit from France – they’re wanting to come for Christmas! With a natural net outflow of New Zealanders to live and work overseas especially Australia, we need an active and attractive program to fill the gap they create. “Green” immigration lists which do not, for example, include nurses and hospitality workers are not helpful, everyone within reason should be green.
End covid-related restrictions now. We urgently need to get things moving and get people working productively, to free-up our labour supply which is hindered by outdated household isolation requirements, vaccination mandates and general working from home acceptance. More labour supply equals more output equals less inflation. Orange doesn’t work.
Do all we can to encourage agricultural production and exports – to feed the world if you like – rather than put up obstacles in the sector. For example, recent recommendations on agricultural emissions pricing are estimated to cost farmers $2.9 billion each year when in full effect and will reduce gross nitrous oxide and methane emissions by up to 3.2% and 5.0% respectively. ANZ Bank calls this “the biggest regulatory disruption to farming since agricultural subsidies were removed in the 1980s“. Should we be causing such disruption at a time we need to be fostering economic activity? When our agri-customers overseas cannot buy products from NZ, they substitute to other less-efficient and more likely higher emission producing suppliers. Where’s the sense in that? This does not be mean being frivolous, wasteful or irresponsible but rather focus on, and make the most of, what we are good at.
Reduce taxes now. The $60 billion plus of additional spending over the past two years or so has been funded by “printing money” and is now debt. This cannot be repaid from a greater tax burden on the economy – Governments cannot tax their way out of debt or a recession. One way to expand and encourage growth is to reduce income and corporate tax rates and leave people with more of the money they are earning to kickstart the economy. Think Reagan / Laffer in the 1980s. A cold hard look at Government spending with a view to efficiency is commensurately necessary.
Invest in sensible long-term infrastructure designed to get the economy moving. Think of how much more effective the $60 billion of debt funded government spend over the past two years would have been had at least some of it gone into game-changing infrastructure. I would be prioritising high quality roading and rail between Auckland, Whangarei, Hamilton and the Bay of Plenty. The Ports of Auckland should be wound down with its business sold and progressively transferred to Tauranga and Whangarei over the next 10 years. Such a move would both fund much-needed waterfront commercial and residential real estate development as well as facilitate a new rail corridor from Whangarei into Auckland and a long overdue new harbour crossing involving multiple modes of transport. These initiatives are arguably much more productive than, for instance, the $20 billion plus light rail project from Auckland’s CBD to the airport, never-ending and underutilized cycleways and the wasteful spend on centralising polytechnics and DHBs. Priorities.
I think it’s simple really: with bold vision and aspiration we can shake this prevalent veil of glumness. If we do not make the necessary changes, we seriously risk being left behind which threatens to undermine economic and social outcomes. If my comparison of the current mood with that at the time of the late-stage Clark Government is correct and there is a broad mood for change, then we might see things start to improve a year or so from now. We need a recover, restructure and rebuild approach.