Considered consistent reform better than opposition

The second 2025 Taskforce report recommends a much smaller role for government if we are to close the gap between New Zealand and Australia.

It’s broad recommendations are:

Cutting both government spending and tax rates
• Government withdrawal from most commercial activity to allow the private sector to drive value for money and innovation in those areas – including health and education services
• Proper cost-benefit analyses of government infrastructure projects
• More focused research and development in the public and private sector, including better governance of research and development in tertiary institutions and full contestability for government research and development funding
• Better quality regulation – more “fundamental review” of the Resource Management Act, restoration of the youth minimum wage, and a less restrictive hazardous substances and new organisms regime.
• More openness to foreign investment
• Better processes for scrutiny of regulations along the lines of the Regulatory Responsibility Bill.

Taskforce chair Don Brash commends the government for making some progress but also criticises some policies:

There has been some progress since the Task Force’s first report, Dr Brash said. He cited the tax cuts in this year’s budget, the first stage of the government’s Resource Management Act changes, extension of the 90-day probation period for employment law, and the lifting of the last government’s effective moratorium on new aquaculture farms.

Negative though include an even larger government deficit and a number of large government infrastructure projects undertaken without any sufficient cost-benefit analysis.

He also noted the budget’s changes to company tax law meant that even with the drop in the overall company rate the depreciation changes and new thin capitalisation regime means that overall the business sector is actually paying more tax than it was previously.

Finance Minister Bill English made a diplomatic response to the report, accepting the challenges it identifies but differing on the speed at which reforms can be made:

The second 2025 Taskforce report shows the Government has taken steps to lift New Zealand’s sustainable economic growth, but catching up with Australia will be a long-term challenge, Finance Minister Bill English says.

“Budget 2010 took several steps in that direction – including across the board personal tax cuts on 1 October that narrow the gap in after-tax incomes with Australia,” Mr English says.

“However the report shows just how challenging it will be to catch up to Australia by 2025, especially as we continue to recover from a recession – started under Labour – that Australia never had.

“Our first step has been to get the economy out of recession and growing again. We’ve now had five consecutive quarters of growth and we’ve put in place a broad programme of action, which will provide a platform for future growth.

“The Taskforce’s report – part of ACT’s confidence and supply agreement with National – raises some interesting ideas, which will hopefully generate constructive debate. The Government will consider some of those ideas, alongside the range of other advice we receive, and make practical decisions.

“However we disagree with the Taskforce report’s authors about the ideal speed of reform.

“History shows that reforms done at breakneck speed tend to be fairly counterproductive. If you don’t take the time to convince people of the benefits of change there’s a good chance the next government will simply reverse them.

“We are already moving in some of the directions suggested in the report. As well as cutting personal and corporate taxes, we have put a cap on new Government spending, have put better incentives into the welfare system and are reviewing major regulation.

“But any changes must meet the tests of fairness and equity, be consistent with our election promises and occur at a sustainable pace.

“The only way we can permanently lift New Zealand’s economic growth is through considered and consistent reform and change, year after year,” Mr English says.

I agree with the broad thrust of the 2025 report but also accept the political reality. 

Unpopular governments don’t get re-elected and it’s better to make slow progress in government than no progress in opposition.

However, I think governments sometimes underestimate the public’s acceptance of the need for stronger medicine if we’re to cure the economic malaise which has been widening the gap with Australia for 40 years.

11 Responses to Considered consistent reform better than opposition

  1. Lindsay says:

    “However, I think government’s sometimes underestimates the public’s acceptance of the need for stronger medicine if we’re to cure the economic malaise which has been widening the gap with Australia for 40 years.”

    Agree. I have just blogged on this subject. National needs to take a much stronger lead or there is no point to them being in government.

  2. Alex Burns says:

    Well, well, what a surprise. Brash reccommends even more of the same poison that led to the gap in the first place.

    And just to underline how stupid Brash thinks we are comes this gem … as we continue to recover from a recession – started under Labour – that Australia never had.

    So Labour is responsible for all the strife in the US, Greek, SPanish, Japanese and other flailing economies? Labour invented sub prime mortgages and CDOs and the other toxic instruments of financial destruction? I guess labour was also responsible for Worldcom, Enron, Arthur Andersen, Tyco, et al.

    Don Brash – yesterday’s man with yesterday’s ideas.

  3. Alex Burns says:

    And as an addendum re the recession “Australia never had”, it was a Labor government in Australia at the time, and it was mainly the mineral wealth that underpinned Australia’s economic foundations. Does Brash think there is an equivalent mineral wealth in NZ?

    No, Brash just thinks that a half a cup of frozen peas and two slices of corned beef is all the workers need.

  4. homepaddock says:

    Alex: it was a Liberal government in Australia which was booming when we were already in recession under a Labour government. Labour wasn’t responsible for the global meltdown but it was responsible for NZ being in recession before the GFC hit the rest of the world.

    We do have mineral wealth and more importantly we have water which Australia doesn’t.

    You do Brash a disservice in your final comment. He sees the need for economic growth so we all benefit – better growth enables better wages and services.

  5. robertguyton says:

    The gap has grown wider and is continuing to widen.
    Key and English have failed by their own standards.
    We are worse off and Brash knows it.
    Double D will tell us the very opposite but you know he’s polishing the t*rd.

  6. Alex Burns says:

    Mineral wealth does not seem to be helping NZ much, apart from coal exports. We certainly don’t have a mining industry anywhere near Australia’s capacity to export and employ at phenomenal wages, do we?

    We do have a water advantage, but not all of Australia is desert/drought stricken. In fact, Australia is the world’s third largest dairy exporter, a business renowned for its need for water. And if the EU figures were broken down by nation, Australia would be second only to NZ in dairy exports.

    Brash is an unreconstructed acolyte of Friedman.

    jakarta is coming.

  7. JC says:

    I agree political reality means we can’t go as fast or far as Brash would like.. but, ignoring the doctor’s advice and not taking the medicine won’t make the ailment go away. There’s nothing revolutionary in what he’s saying, and its just a question of when we will be forced to take the medicine.

    JC

  8. gravedodger says:

    Until we as a nation grasp the economic reality that borrowing for the groceries will lead us to bankruptcy nothing will change and the slippery slope will become an avalanche.
    Rather than the cacophony from the shrills who believe that the government can provide everything for all for “free” and ignore that every free service is a direct drain on the economy as money is diverted from growth areas to consumptive and without the constraint of the consumer having to evaluate the real value of the service, expanding government expenditure will continue to erode the chance of recovery.
    Alex Burns, denigrating and ignoring the messenger with the unpalatable message will be a great response “yeah right”

  9. murrayg1 says:

    some time ago, I pointed out that this kind of target – and talk – was nonsense.

    Now it’s in the Parliamentary (and thus public) arena.

    No excuses for ignorance, then.

    http://www.parliament.nz/en-NZ/ParlSupport/ResearchPapers/4/6/a/00PLEco10041-The-next-oil-shock.htm

    an excerpt:
    “To put it another way, because oil is central to the global economy, the world’s maximum capacity to supply oil acts as a cap on world economic output, one that the global economy may hit repeatedly in coming years”.

    Welcome to ‘the long emergency’, (I prefer the alternative ‘powerdown’) but please no more talk of ‘economic growth’, or ‘closing the gaps’.

    Sustainability, and quickly, is the only valid target.

  10. homepaddock says:

    Murray – your prognosis assumes there will be no adaptation and no development of alternatives to oil.

  11. murrayg1 says:

    No ALTERNATIVE in the timeframe, with adequate EROEI, correct.
    As the report finds too.
    I started studying Peak Oil (and Peak Energy all-in) with the purchase of my McGraw-Hill Encyclopaedia of Energy 1976. ‘Limits to Growth’ the same year,Bouldings ‘Spaceship Earth’ the year before. I’ve probably averaged an hour a day on it ever since. Not arrogant, but confident of my ground in any company.
    I do not anticipate no ADAPTION, indeed, there will be no chance to do anything else!
    You need to get the exponential math of the powerdown, though. The graph (mathematicians call it ‘gaussian’, starts at zero, finishes at zero, and maxes out in the middle. The area under it is the URR. If you force the production (as with the water-cutting of Ghawar)you can flat-line the peak, for quite some time, maybe even 10 years (you have to realise we hit that point in 2005….).
    What happens is that, because the area under the graph is fixed, the more you ‘force’ the flat-line at peak, the steeper the drop-off on the right-hand side.
    For the record, lignite-to-oil doesn’t do it EROEI-wise, hydrogen is only a vector, nuclear only does electricity (4wd tractors on an extn chord? – um) wind and solar needed to be developed while there is oil to fuel the process. We’re out of lead-time now.
    I first raised this issue at the Silverpeaks County Council table, in ’86. People of your persuasion (Labour too, for that matter)thought they knew better. It would have been funny, it the repercussions weren’t so dire.
    Most people still don’t get exponential math – growth rates and doubling-times. There is an urgent need for two things: a new Bretton Woods, working out how to manage fiscal interchanges without growth (the Arabs do it), and locally, a need to address sustainability.
    Timeframe? Less than 10 years, probably TSHTF within 5.
    Don’t say you weren’t told!
    If your Ministers of Energy and Housing ever want to really address Powerdown, my house is a blueprint, and they’d be welocme.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: