Friday, May 20, 2011

Owen McShane: A Post-Budget thought for the Week

The budget is based on Treasury forecasts of 4% annual growth in the economy. They must be dreaming.

First. Rebuilding Christchurch does not add to overall growth – investment is simply transferred from the rest of the country to Christchurch, and hence puts a damper on growth everywhere else. (The broken windows fallacy.) 

While this transfer is partially offset by overseas insurers these overseas funds are only a partial offset against total costs. And future insurance premiums, paid to those same overseas insurers, will rise, and increase costs, in the longer term.

Second. Our local councils control the toll-gates that determine whether growth occurs or not.

The toll-gates are firmly closed.

For example, we are building only half the houses we need to meet existing demand.

It seems remarkable that the Christchurch City Council and Environment Canterbury continue to object to several residential developments in recent weeks, largely because of “greenbelt” issues, and to allow time for the Canterbury Earthquake Recovery Authority (CERA) recovery strategy to be in place (by January 2012) and taken into account.

This leaves the developers in limbo. One might have hoped the Councils would have recognized the need to maintain momentum, endorsed the applications, and passed on a strong recommendation to CERA. Must action wait on planners to agree on their plans?

In New Orleans it proved to be a long wait.

The case for sub-local government, where neighbourhood associations deal with their own resource consents, grows stronger by the day.

Unless this local stranglehold on growth is addressed, anti-growth council staff will not allow 1% growth – let alone 4%.


Michael Palmer said...

You are so right. This is the single most important and immediate impediment to growth in NZ. It worries me that no other commentators see this.

Anonymous said...

Absolutely correct - the country cannot move ahead while the roadblocks at local government level remain. And the fact that National had to legislate to avoid all local government constraints in order to be able to make progress after the earthquake, shows just how bad it has all become.

We need solutions for the whole country not just Christchurch. But where is the leadership?