Friday, January 28, 2011
Karl du Fresne: Perhaps we'll all be too drunk to notice
In every glossy magazine I open – and in newspapers, to a lesser extent – page after page is devoted to the pursuit of pleasure in one form or another. We are endlessly absorbed with food, fashion, travel, design and other trappings of an affluent, self-indulgent lifestyle.
A visitor from another planet could be excused for thinking we are a prosperous country with so much money at our disposal that we have no concerns more pressing than where to go for our next overseas holiday, which trendy architect to engage for our new beach house or what $50 bottle of Central Otago pinot noir to drink with our Moroccan lamb tagine.
Something is seriously out of kilter here. Our preoccupation with the good life is completely out of line with economic reality. As a nation, we seem far more interested in consuming than producing.
I don’t want to sound like a killjoy, but New Zealanders are living in a dream world. Economically speaking, the country is in a bad way. We have gone from being one of the richest countries in the OECD in the 1960s, when we had strong export-led growth, to one of the poorest.
The best analogy I can think of is a cruise ship on a very long voyage. Once a stylish liner, the envy of other fleets, it set out from port under brilliant skies with flags fluttering gaily, bands playing and paintwork gleaming. Several decades later it’s running on one engine, the hull is rusted and encrusted with barnacles, the sea has turned ugly, there are menacing skies ahead and the captain is worried he’ll be refused fuel at the next port – yet still you can hear the clinking of champagne glasses and the whooping of merry-makers as the ship limps on.
It’s a sobering fact that the last year in which our income from exports exceeded our spending on imports was 1973. We were once frequently reminded that we were living beyond our means, but we tired of hearing it and tuned out. We prefer to party and hope.
Late last year the Budget deficit was revised upwards to more than $11 billion. To cover this, the government is borrowing the eye-watering sum of $300 million a week – money that we taxpayers will eventually have to pay back. In the meantime, Standard and Poor’s has pinned a “negative outlook” to our credit rating, which may mean higher interest rates on whatever we borrow.
And it’s not just the government that is living on borrowed money. New Zealanders have binged on private debt as well, which would be all very well if that money had gone into activity that generated the exports on which our economy ultimately depends. But it didn’t; instead it fuelled a property boom. A strange sense of entitlement – one that would have been completely alien to previous generations of New Zealanders – convinced us that we all deserved to live in McMansions, even if we had to mortgage ourselves up to the eyeballs to do it.
Our leaders knew what was happening but were happy for household debt to expand because it provided an illusion of economic growth. As the former BNZ chief economist Len Bayliss has pointed out, such policies went down well with the majority of voters because they saw themselves benefiting from rising house prices.
More recently, sluggish economic growth has been exacerbated by adverse events such as the Canterbury earthquake, finance company collapses (most notably the South Canterbury Finance failure, for which the taxpayer is picking up the tab), the Pike River tragedy and the leaky homes fiasco, with its potential multi-billion price tag.
The income gap with Australia is widening, despite the government’s avowed attention of catching up. Half a million New Zealanders now live across the Tasman because of the better economic opportunities there, and the number is likely to rise.
This disparity between New Zealand and countries like Australia is not just a matter of sterile economics; it has social consequences too. Three of my four children now live overseas, and my family is by no means exceptional. It’s said that among developed countries, only Ireland has lost a greater proportion of its population to other countries, and those losses include some of our best and brightest.
There is talk of rebalancing the economy – of reducing state spending and putting more resources into the export sector – but the government shows little sign of having the political courage to make the necessary tough decisions. Politicians, locked in to a three-year electoral cycle which militates against coherent long-term planning, have difficulty seeing beyond the next election.
The media don’t help either. Coverage of serious issues such as the state of the economy is relegated to the back pages or to TV current affairs programmes viewed by a tiny audience on Sunday mornings.
The country is assumed to have little stomach for debates about such vexatious issues as the recent report of the 2025 Task Force on how we might catch up with Australia. Better to send a reporter out in search of the city’s most exotic cocktail or best eggs benedict.
Banality and frippery too often take priority, reinforcing the impression that we are a nation of airheads, determined to keep carousing even as our stricken ship slips below the waves.
The New Zealand Institute, one of several organisations with a record of pointing out facts that New Zealanders don’t want to hear, recently produced a bleak scorecard for the nation in which we managed only a “C” overall and a dismal “D” in such crucial areas as household wealth, labour productivity and innovation (violent crime, too – but that’s another story).
NZI director Rick Boven was quoted as saying New Zealanders are an under-performing, complacent lot with an over-generous estimation of themselves. The “she’ll be right” attitude, which he traces back to the era when Britain bought all we could produce and guaranteed our prosperity, is ingrained in our culture.
Oh well. Perhaps the best we can hope for is that when the SS New Zealand eventually sinks, we’ll all be too drunk to notice.
First published in the Nelson Mail and Manawatu Standard, January 19
at 12:06 PM