It is awkward for a Government, elected to get the economy back on track, to have spent its first full year in office watching output shrink almost $2 billion in inflation adjusted prices.
2024 was a year of recession by any definition of the word, although a more useful definition would show the New Zealand economy has been in a recession since September 2022.
Still, Prime Minister Christopher Luxon and his Coalition partners were supposed to turn things around; not make them worse. And yet, here we are, far from the track.
This may be unfair, but voters can be irrational. Consider the United States: after deciding Joe Biden was too elderly to be president, the electorate chose to replace him with someone who starts his term slightly older than Biden was at his own inauguration.
After a summer reflecting on what was going well (live worker exports to Australia) and what was going poorly (the National Party’s poll numbers), Luxon has returned to the Beehive and declared 2025 to be The Year of Economic Growth.
This began with a Cabinet reshuffle, primarily aimed at moving Shane Reti out of the health portfolio and replacing him with the more politically astute Simeon Brown. It also provided an opportunity for Luxon to signal to the public that he means business on the economy.
Nicola Willis was handed a new economic growth portfolio, which gave her oversight of the Ministry of Business, Employment and Innovation, and Todd McClay was given responsibility for attracting international investment, in addition to signing trade deals.
Bring in the cash
McClay’s expanded portfolio was followed up with the announcement of an expanded agency, Invest NZ, which will act as a concierge service for foreign investors. This function already exists within New Zealand Trade and Enterprise but it will soon be spun out into a stand-alone organisation.
Some critics were not particularly impressed by this announcement. It was all very well to usher investors through an unattractive investment environment, they argued, but much better to make it attractive in the first place.
This might involve reforming the overseas investment act, cutting the corporate tax rate, and slowly transforming the New Zealand economy into a place where you want to put your money.
Others were more enthusiastic. Kelly Newton, the managing director of BCG, said her firm’s research suggested it could be a game changer. Investors typically look at opportunities close to home because it’s easier, but the Government could act as “connective tissue” between that overseas capital and local opportunities.
“New Zealand’s geographical isolation and size can make it cumbersome for serious investors to commit time and resources to investigate and sift through potential opportunities, individually,” she said in an email.
“A one-stop shop approach, delivered and managed in a way that makes it easy for investors to access good investment opportunities, can be a game-changer, not only in attracting capital for individual business but also showcasing NZ Inc as a greenfield investment ecosystem worth paying attention to”.
Watch this space
Whether it will move the dial or not, it is just one part of a wider growth plan slated for release in the next few weeks. Nicola Willis, speaking in her new role as the economic growth tsar, said she would report twice a year on her reforms and their results.
“The publication of our economic growth plan should present a good opportunity for people like you to better understand what we’re doing and to kick the tyres on our priorities: what do you want to see sped-up and added to our agenda and what’s less important to you,” she told the Manawatū Business Chamber on Friday.
Willis said her plan will include quick wins, like getting more tourists and students into the country, and longer-term reforms such as replacing the Resource Management Act.
Last year, a group of left-leaning economists wrote a letter to the Government asking them to rethink their strategy and, more recently, former National MP Simon Bridges sent a similar message in an NZ Herald column.
He said the big issue facing New Zealand in 2025 was “a lack of investment and GDP growth” not balancing the Crown accounts or paying down debt.
“For the Government this means boldness in reform, a strong growth plan, and investing where there is a clear business case for doing so,” he said. As in, not just cutting spending and hoping the private sector is ready to take up all the slack immediately.
Despite perceptions, Finance Minister Nicola Willis is really a fiscal liberal and has held these kinds of views since she was opposition spokesperson. If you actually speak with her, you discover she wants to consolidate spending slowly and is not willing to sacrifice growth.
But without the option of fiscal stimulus, the Government’s economic plan will need much more than just a new investment office and general good intentions.
Dan Brunskill is interest.co.nz's political and economics reporter based in the Parliamentary Press Gallery. This article was sourced HERE
This may be unfair, but voters can be irrational. Consider the United States: after deciding Joe Biden was too elderly to be president, the electorate chose to replace him with someone who starts his term slightly older than Biden was at his own inauguration.
After a summer reflecting on what was going well (live worker exports to Australia) and what was going poorly (the National Party’s poll numbers), Luxon has returned to the Beehive and declared 2025 to be The Year of Economic Growth.
This began with a Cabinet reshuffle, primarily aimed at moving Shane Reti out of the health portfolio and replacing him with the more politically astute Simeon Brown. It also provided an opportunity for Luxon to signal to the public that he means business on the economy.
Nicola Willis was handed a new economic growth portfolio, which gave her oversight of the Ministry of Business, Employment and Innovation, and Todd McClay was given responsibility for attracting international investment, in addition to signing trade deals.
Bring in the cash
McClay’s expanded portfolio was followed up with the announcement of an expanded agency, Invest NZ, which will act as a concierge service for foreign investors. This function already exists within New Zealand Trade and Enterprise but it will soon be spun out into a stand-alone organisation.
Some critics were not particularly impressed by this announcement. It was all very well to usher investors through an unattractive investment environment, they argued, but much better to make it attractive in the first place.
This might involve reforming the overseas investment act, cutting the corporate tax rate, and slowly transforming the New Zealand economy into a place where you want to put your money.
Others were more enthusiastic. Kelly Newton, the managing director of BCG, said her firm’s research suggested it could be a game changer. Investors typically look at opportunities close to home because it’s easier, but the Government could act as “connective tissue” between that overseas capital and local opportunities.
“New Zealand’s geographical isolation and size can make it cumbersome for serious investors to commit time and resources to investigate and sift through potential opportunities, individually,” she said in an email.
“A one-stop shop approach, delivered and managed in a way that makes it easy for investors to access good investment opportunities, can be a game-changer, not only in attracting capital for individual business but also showcasing NZ Inc as a greenfield investment ecosystem worth paying attention to”.
Watch this space
Whether it will move the dial or not, it is just one part of a wider growth plan slated for release in the next few weeks. Nicola Willis, speaking in her new role as the economic growth tsar, said she would report twice a year on her reforms and their results.
“The publication of our economic growth plan should present a good opportunity for people like you to better understand what we’re doing and to kick the tyres on our priorities: what do you want to see sped-up and added to our agenda and what’s less important to you,” she told the Manawatū Business Chamber on Friday.
Willis said her plan will include quick wins, like getting more tourists and students into the country, and longer-term reforms such as replacing the Resource Management Act.
Last year, a group of left-leaning economists wrote a letter to the Government asking them to rethink their strategy and, more recently, former National MP Simon Bridges sent a similar message in an NZ Herald column.
He said the big issue facing New Zealand in 2025 was “a lack of investment and GDP growth” not balancing the Crown accounts or paying down debt.
“For the Government this means boldness in reform, a strong growth plan, and investing where there is a clear business case for doing so,” he said. As in, not just cutting spending and hoping the private sector is ready to take up all the slack immediately.
Despite perceptions, Finance Minister Nicola Willis is really a fiscal liberal and has held these kinds of views since she was opposition spokesperson. If you actually speak with her, you discover she wants to consolidate spending slowly and is not willing to sacrifice growth.
But without the option of fiscal stimulus, the Government’s economic plan will need much more than just a new investment office and general good intentions.
Dan Brunskill is interest.co.nz's political and economics reporter based in the Parliamentary Press Gallery. This article was sourced HERE
2 comments:
Suggestion to PM: spend less time pandering to Maori Iwi and their endless costly demands. Spend 99.9% on you time supporting hard working NZers - who want democracy and support economic growth ....... Of course if you want the latter's vote - they are tired of being ignored.
Why has National waited until almost half their term to do all this when economic growth was what they were elected for? Trump implemented his policies in a day.
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