Monday, June 17, 2024

Professor Robert MacCulloch: Why did Luxon invite big monopoly firms on his Japanese trade trip

Why did Luxon invite big monopoly firms on his Japanese trade trip - and outfits that don't even trade? He should be helping small NZ business.

What was NZ Trade & Enterprise thinking? Its announcement, "A NZ business delegation, led by Air New Zealand and ASB Chair, Dame Therese Walsh, will join NZ Prime Minister Rt Hon Christopher Luxon on a mission to Japan" is truly remarkable.

Two of our most heavily concentrated, least competitive industries, aviation & banking, top the list. Domestic-monopoly carrier Air NZ doesn't make much from its international routes, like to Japan. It makes most of its money from squeezing local Kiwis on their domestic flights. I'm not sure why the airline & its auditor are not under investigation for not reporting the single most material item in its annual accounts - namely exactly how much profit Air NZ makes out of its domestic, compared to international, flights. Qantas reports that number - Air NZ does not.

Who else got invited? The Big Banks, of course, ANZ and ASB. But why? The Kiwi division of ANZ bank makes little money internationally - most of its dough comes from tapping local Kiwis on their mortgage interest rates. When you're part of a local banking oligopoly, why bother making a buck in Japan? The former CEO & Managing Director of ASB Bank from 2011-18 is Deputy Chair of the NZ Initiative, the National Party's think tank, so I guess it is politically well connected. As for ANZ, its former Chair was John Key, of course. Who else?

Yes, what a strange guest list the Prime Minister drew up to accompany him on his trade trip. The NZ Super Fund is also going to Japan, courtesy of the Kiwi taxpayer. Since when did the Super Fund export anything? It's a fund, for goodness sakes, and this is a "trade mission", led by the Trade Minister. Last time I read an economics book, overseas balance of payments was divided into two types - trade (exports & imports) and capital (money) flows. The contribution of the Super Fund to our trade flows is zero. Why take its managers on a trade trip when they don't sell anything? The contribution of the Super Fund to the NZ economy is actually quite perverse - it takes Kiwis hard earned money and invests it primarily overseas, where the funds are used by other countries to help increase their GDP. Is that what the Super Fund managers will ask the Japanese? How can we provide you with Kiwi money to invest in your infrastructure & help earthquake-proof your country, whilst NZ is starved of funds to be invested in exactly those same kinds of way?

Why did Luxon say, "I am excited to be accompanied by a senior business delegation". When will the elite, tired old business establishment of NZ hand the torch over, in the words of John Kennedy, "to a new generation". Give us up-and-coming junior business types any day over this delegation. National is still not looking like a government that promotes more competition & more small business types to take on the big players. In this sense, it looks far more like a pro-big business, rather than pro-market, government. As competition is practically the only known way of reducing the cost-of-living, what is the Nat's plan?


Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.


K said...

The ZURU owners would have been a worthy addition to this list.

Anonymous said...

Someone who understands.
And on the way to Japan he offers to double the number of RSE workers to come to New Zealand.
This is another big business subsidy as these workers take kiwi jobs and the corporates that benefit are mostly overseas owned.
National don't learn.

Anonymous said...

Didn't the last PM, or certainly his Foreign Minister, take a delegation of Maori entrepreneurs off-shore at the taxpayer's expense? Even they were more deserving than the representatives of two Aussie banks and our Super Fund. What a nonsense, but just underscores the real business acumen and lack of understanding of our PM.

Ray S said...

It is hard to see where value might come from the people traveling with Luxon.
Japanese are not stupid and will see what we see. "Where are the people to really show us what you can do for us and each other, not back patting BS"

Luxon staying in good with these people in case he needs another job come 2027.

Anonymous said...

An excellent commentary but it doesn't inspire my confidence. Luxon is not reading many rooms. The coalition partners will need to be the ones guiding us out of the wilderness that Labour led us into. More specifically, I think National need a new leader.

Anonymous said...

You mentioned in passing our small business owners. They were particularly disadvantaged during Covid when there was no reason. However they are the most independent types and hardest to impose restrictions on because they don't have affiliations to professional associates or corporate controllers. They are the ignored but important pariahs of commerce. Who in the MSM would ask Luxon why he took the corporate giants?

Anonymous said...

The Corporatocracy club.

Robert Bird said...

And don’t forget the kapa haka group that was on the trip. They will bring a huge amount of trade our way. Money well spent, not!!

Robert Arthur said...

Possibly he took th business men so he could evade protracted puerile converstaion with and haranguing from the kapa haka spongers. Little wonder so many are keen to get seriously into maori twaddle.

Anonymous said...

Yes, Robert Bird, the Japanese are particularly enthralled with tatoos - not!