Saturday, April 22, 2023

Oliver Hartwich: Supercharge New Zealand with supply-side reforms

After a massive amount of fiscal and monetary stimulus, New Zealand’s economy overheated. The Reserve Bank of New Zealand (RBNZ) faces an uphill battle to bring inflation under control. It tries to do so by dampening demand. I wrote about this in last week’s Insights.

But the key to stabilising our economy is not merely to rein in demand – it should also bolster the supply side. And this is what I want to spell out today.

First, let’s open our doors to foreign direct investment (FDI). FDI brings fresh capital, innovation, and know-how. New Zealand must become a magnet for investors, shedding its reputation for being hard to navigate. We need to simplify regulations and foster an attractive business environment for international investors.

Second, we must properly reform our resource management laws. The current system is cumbersome, slow, and discourages development. David Parker’s replacement is even worse. We need a different approach that streamlines planning processes. Doing this would speed up much-needed housing and infrastructure projects, creating jobs and boosting our economy.

Third, it is time to embrace immigration. Migrants bring skills, diversity, and dynamism to our economy. Let’s open our borders, welcome talent from around the world, and design an immigration system that meets our labour market needs.

Fourth, we should rid ourselves of restrictive licensing arrangements. This will encourage entrepreneurship, enabling businesses to flourish and generate employment opportunities. It is madness, for example, that the Nursing Council can obstruct the establishment of additional nursing training capacity.

Fifth, it is time to reward councils for growth. By implementing tax-sharing arrangements with central government, we can ensure local authorities and local communities have an interest in promoting economic development in their regions.

Sixth, we must declutter our bureaucracy. Unnecessary regulations stifle business and create inefficiencies. By eliminating red tape, we can unleash the productive capacity of our economy and empower businesses to thrive.

The focus of economic policymakers must shift to the supply side. New Zealand must enact bold reforms to grow from its current economic crisis.

By embracing FDI, simplifying resource management laws, opening our borders, eliminating restrictive licensing, incentivising councils, and cutting bureaucracy, we can create a more prosperous and resilient future for all.

So, let’s not just talk about economic reform – let’s demand it, especially in this election year.

Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was first published HERE.


Anonymous said...

spot on

Anonymous said...

Thanks Oliver. I think you omitted a point or two.
We need to invest in infrastructure if you want to open the border. Where are the immigrants going to live? And how can we take more patients into the health system? And we have worsening education outcomes...
Tell me if you are concerned about these things. And please tell us what you think we should do about them. I really would like to hear that from you. There is more to having a functioning society than business.

Anonymous said...

Agree with all the above Oliver in terms of shorter term economic fixes but, we do need to have the conversation about who we want as immigrants and, particularly, how many?

Given our vulnerability to earthquakes, tsunami or other inundation, volcanic events, and energy production, not to mention our other failing infrastructure and housing issues, we also need to think about our longer term resilience, and whether we plan and create new cities and what we do for energy? But admittedly, while related, it's off-topic to your well expressed improvement guide.

Anonymous said...

All sounds like new age colonialism to me. What does the treaty say about that?

Robert Arthur said...

I do not entirely agree. Investment from overseas is often vey exploitive and creates limited good jobs or career paths. Immigrants must be of compatible culture. The parents may be industrious but the children observing the cosy lot of beneficiaries in NZ, may not opt for a life of hard toil. And faced with soft crime punishment they may follow the example of maori. Immigrants do to some extent balance the fast multliplying maori/pacifica population and will assist with the welfare payments for those, but we may be establishing a 5th column for invasion. Many immigrants are required to build houses for more immigrants. Any let up and the recession will be severe. Some of the NZ workforce is easy going but not all. Competing with immigrants just released from near slavery conditions and accustomed to work accordingly, is not going to improve the standard of living for many NZers.
Some environment protection laws are necessary, otherwise the country will be covered with scattered developments. The problem seems to be that current restictions seems to near all be avoidable given sufficent legal and maori expenditure.