Wednesday, July 23, 2014

Mike Butler: ‘Maori economy’ underperforms

Financial commentator Bernard Hickey puts his political correctness on show in his article titled “New Zealand's Maori economy: a powerful force in the Kiwi success story” that is posted on the ANZ website.(1) This promotional piece of advertorial writing from Hickey marks a seasonal event, the Maori New Year, by lauding the Waikato-Tainui announcement that they had assets worth $1-billion.

Hickey cites a 2010 study by Business and Economic Research Ltd for the government's Maori department, Te Puni Kokiri, that estimated the asset base of the Maori economy at $36.9-billion, up 18 per cent from 2006.

He did not define the Maori economy although another research unit, the New Zealand Institute of Economic Research defined it as including “all those businesses and transactions where ‘Maoriness’ matters. It includes the activities based on collectively-owned Maori assets, the businesses of the self employed who identify as Maori, commercial transactions involving Maori culture, services oriented to specific Maori needs, as well as the housing owned by Maori.” (2)

Despite the headline that shouted “powerful force in success story” BERL found Maori-owned businesses produced $22.2-billion worth of goods and services in 2010 or around 11 per cent of GDP”.

But Maori make up 15 percent of population, according to last year's census. If the Maori economy produced 15 percent of GDP it would be doing its bit. If it was doing 20 percent it would be over performing. At 11 percent, the Maori economy is still under performing and under-performance continues despite of generous servings or corporate welfare from central government.

Treaty settlements are the most visible form of this corporate welfare. A total of around $2.2-billion has been paid in the current round of payments to resettle grievances resurrected by a 1985 amendment to the Treaty of Waitangi Act that allowed any Maori to make any claim for anything right back to 1840.

The bulk of the financial redress in these “settlements” came as property and long-term leases to government departments. This meant that the new tribal capitalists did not have to source, finance, purchase, and rent out property—it was already done for them by the government and all the new tribal corporations had to do was collect the rent.

Furthermore, the new tribal corporations were permitted to function as charities and pay no tax. No charitable work was required. From April 1, 2003, any organisation that administers a marae on a Maori reservation may qualify. This exemption gave neo tribal commercial landlords at least a 30 percent advantage over their non-Maori peers.

To show how little charity results from much profit, Waikato-Tainui's Raupatu Land Trust had a total income $78.1-million in the 2014 year, paid income tax of $342,000 at a rate of 28 percent, and made charitable distributions of just $6.1-million. (3)

That $72-million a year available to these property investors for self-enrichment is a huge advantage over non-Maori property investors and Bernard Hickey appears oblivious to the non-level playing field and continuing Maori under-performance.

A further dollop of corporate welfare is delivered through contracts to the 177 Maori social service providers throughout the country. This functions as a parallel welfare system in which Work and Income clients may get a helper from a Maori provider to make appointments for them and drive them around.

As an example of the annual revenue of these providers, the Hastings-based Taiwhenua O Heretaunga recorded revenue of $11.05-million in the 2012 year. Supposing 177 such providers had government contracts receiving a similar level of reimbursement from government departments, the total for all such contracts in a single year would be $1.7-billion

Despite all this corporate welfare, Maori social indicators have worsened.

Maori unemployment in 1981 was 14 percent, in 1993 it was 24 percent, and in 2012, it was 36.5 percent. In 2002, 38 percent of those on the domestic purposes benefit were Maori, and by 2012, it was 42.7 percent. In 2002, 23 percent of those on a sickness benefit were Maori, while in 2012 it was 28 percent. In 2002, 19 percent of those on an invalid’s benefit were Maori, while in 2012 it was 22.4 percent. (4)

The term “Maori economy” is a politically correct construct. The high degree of exogamy by Maori, or “marrying out” of one’s ethnic group, means it is nonsense to talk of a Maori economy when many Maori have more non-Maori blood than Maori

If Bernard Hickey wishes to talk up the “Maori economy”, he would be more credible if he dropped the political correctness and addressed some inconvenient truths.

1. New Zealand's Māori economy: a powerful force in the Kiwi success story.
2. Maori in the economy.
3. Waikato-Tainui 2014 annual report
4. Mitchell, Lindsay, Maori and Welfare, NZ Business Round Table, 2009, p16


Ray S said...

Operating as a charity, paying no tax, spare me please.
If as you say, maori generally are still dependent on welfare, then where is all the money going. I have a pretty good idea.

Unfortunately nothing will change until such time as NZ collectively including all the disadvantaged maori stand up and scream "enough"

Kiwi Dave said...

Is it possible to meaningfully compare the 11 percent GDP with the 15 percent population given that:

1) the population age profiles are different, affecting both asset and income totals, even if everything else were the same;

2) a proportion of the Maori workforce is in non-Maori economy employment?

I read the Hickey article and it did not address these issues.

paul scott said...

just reading Hickey socialist make a man feel crook, even in Bangkok

Unknown said...

Anothergreat piece Mike thanks for that. Of course the end September is the time to shout enough. Vote for real change this year not the usual right,left club who have failed us. We do have other choices so use them this year. With the country 69 billion in overseas dept and borrowing money to pay the interest the axe is ready to fall and Keys Government has added the majority of that in 6 years. Try another way. Can it be worse than what we have now. New blood

Anonymous said...

I read the other day that an iwi had lost $20 million of their Waitangi settlement money, primarily due to mismanagement and incompetence. I can see why they are registered as charities - they're simply throwing the money away. And I haven't heard a whisper on radio or TV about it.

Anonymous said...

Most important is NZ not getting a constitution, particularly one with Treaty of Waitangi in it.The US is struggling with gun control due to constitution 200 yrs old.England does not have a constitution but uses bill of rights, magna carter to make law as we have to this day.

Why do we have special treatment for Maori not just help our poor.Im glad to give heaps to someone who with a bloodtest provesMaori, if not it is racist to speak of Maori or nonMaori, we shouldcall be equal NZ.

Wayne JJ said...

They (Maori) should be doing well with all the Treaty money that has been dished out! However it would seem that it isn't being used wisely and/or is going into the wrong pockets!
In our town one visual change is three of the better buildings being purchased or rented for Iwi authority offices. I wonder if this is the best use of their money.
Another change is the limiting of access to a local river!
Waiting with baited breath for future changes.