The problem with government economists is their language is constrained by the necessities of convention. They would describe an invasion of Orcs pouring over the balustrades howling with bloodlust as an incoming negative external shock with the potential for adverse economic outcomes in the short to medium term.
Last week Conway gave a typically measured, carefully worded talk on productivity. “Sustained gains in purchasing power require higher productivity driven by structural reforms. Indicators suggest that the quality of structural policies in parts of New Zealand’s framework now lag behind OECD best practice.”
Last year he gave a similar speech where he made the point that “Improving productivity requires investment in R&D, education and skills, organisational know-how, and managerial capability. These are all areas where New Zealand tends to lag.”
Last year he gave a similar speech where he made the point that “Improving productivity requires investment in R&D, education and skills, organisational know-how, and managerial capability. These are all areas where New Zealand tends to lag.”
Let me remove the layers of linguistic plaque that ossifies the writing of people whose paycheck relies on saying the obvious without ever giving offence.
New Zealand does not possess the people, the capital, or the institutional settings to maintain our first world status. We are moving from the bottom of the OECD to the top of the developing world.
The importance of productivity isn’t new. Nobel winning economist Paul Krugman wrote in 1994; “Productivity isn't everything, but in the long run it is almost everything.” Krugman is wrong on most things these days but he was great in the 90s.
Conway drives home the extent of the problem, pointing out that the price of construction is the highest in the OECD, more than double the average, and that the cost of capital formation “…which covers machinery, equipment and construction – is 70% above average in New Zealand and also the highest in the OECD.”
Meanwhile, global rating agency Fitch confirmed Conway’s gloomy assessment by downgrading the outlook for New Zealand from dismal to hopeless. I am paraphrasing. They noted that our promised return to fiscal surplus is perpetually delayed due to weak economic growth and expenditure proving more persistent than anticipated.
Serendipity being what it is, on Thursday night I was a guest at Northcote MP Dan Bidois’ annual fund raiser, with the Prime Minister as the guest speaker. National really should not invite me to their events and Mr Luxon did not seem delighted to see me sitting calmy at the front with my knitting needles and cell phone with a prepared question.
Still. He was gracious and gave an excellent answer that showed he understood both the enduring problem with productivity, had read some of Conway’s work and understood the risk posed by our sovereign debt being placed on a negative watch.
The Botany MP has been consistent. He is ambitious for New Zealand, is committed to a turn-around and understands the nature and scale of the challenge before the country. I have been consistent in my scepticism that the skills that resulted in an outstanding commercial career would translate to a successful premiership.
Being great at basketball does not mean you have the skills to perform a successful appendectomy.
The impending fuel shortage has the potential to be more disruptive than Covid. Will this be the moment that the MP for Botany forces me to eat my words? I hope so.
Luxon understands global supply chains, has the international contacts and relationships to navigate this crisis within the constraints of realpolitik. His challenge will be domestic. To resist the calls to regulate supply and restrict demand; the price mechanism will efficiently allocate dwindling fuel supply if it is allowed to operate.
But this crisis represents a greater opportunity. It is chance for the Prime Minister to explain that we cannot borrow our way out of every economic shock. That the path back to fiscal solvency and economic vitality lies not in leveraging the sliver of headroom on the Crown’s balance sheet to avoid addressing our structural deficiencies but in aggressively dealing with those deficiencies.
I do not mean to diminish the real progress his administration has been achieved but the underlying structural issues of over-regulation and lax fiscal discipline mean all we are doing is slowing the rate of decline.
Leadership is about telling the electorate what they do not want to hear but need to understand; and that extends well beyond the prospect of a temporary fuel shortage.
Last December, Luxon told an interviewer he is a better Prime Minister now than when he stepped into the role. “Yeah, I think you learn all the time in this job.”
Despite my contrarian nature and temperamental cynicism I remain optimistic that Luxon has the ability to fulfil his own and the countries’ potential; but to do this he will need to take risks. Risks that may cut short the length of his premiership even as it increases its impact.......The full article is published HERE
The importance of productivity isn’t new. Nobel winning economist Paul Krugman wrote in 1994; “Productivity isn't everything, but in the long run it is almost everything.” Krugman is wrong on most things these days but he was great in the 90s.
Conway drives home the extent of the problem, pointing out that the price of construction is the highest in the OECD, more than double the average, and that the cost of capital formation “…which covers machinery, equipment and construction – is 70% above average in New Zealand and also the highest in the OECD.”
Meanwhile, global rating agency Fitch confirmed Conway’s gloomy assessment by downgrading the outlook for New Zealand from dismal to hopeless. I am paraphrasing. They noted that our promised return to fiscal surplus is perpetually delayed due to weak economic growth and expenditure proving more persistent than anticipated.
Serendipity being what it is, on Thursday night I was a guest at Northcote MP Dan Bidois’ annual fund raiser, with the Prime Minister as the guest speaker. National really should not invite me to their events and Mr Luxon did not seem delighted to see me sitting calmy at the front with my knitting needles and cell phone with a prepared question.
Still. He was gracious and gave an excellent answer that showed he understood both the enduring problem with productivity, had read some of Conway’s work and understood the risk posed by our sovereign debt being placed on a negative watch.
The Botany MP has been consistent. He is ambitious for New Zealand, is committed to a turn-around and understands the nature and scale of the challenge before the country. I have been consistent in my scepticism that the skills that resulted in an outstanding commercial career would translate to a successful premiership.
Being great at basketball does not mean you have the skills to perform a successful appendectomy.
The impending fuel shortage has the potential to be more disruptive than Covid. Will this be the moment that the MP for Botany forces me to eat my words? I hope so.
Luxon understands global supply chains, has the international contacts and relationships to navigate this crisis within the constraints of realpolitik. His challenge will be domestic. To resist the calls to regulate supply and restrict demand; the price mechanism will efficiently allocate dwindling fuel supply if it is allowed to operate.
But this crisis represents a greater opportunity. It is chance for the Prime Minister to explain that we cannot borrow our way out of every economic shock. That the path back to fiscal solvency and economic vitality lies not in leveraging the sliver of headroom on the Crown’s balance sheet to avoid addressing our structural deficiencies but in aggressively dealing with those deficiencies.
I do not mean to diminish the real progress his administration has been achieved but the underlying structural issues of over-regulation and lax fiscal discipline mean all we are doing is slowing the rate of decline.
Leadership is about telling the electorate what they do not want to hear but need to understand; and that extends well beyond the prospect of a temporary fuel shortage.
Last December, Luxon told an interviewer he is a better Prime Minister now than when he stepped into the role. “Yeah, I think you learn all the time in this job.”
Despite my contrarian nature and temperamental cynicism I remain optimistic that Luxon has the ability to fulfil his own and the countries’ potential; but to do this he will need to take risks. Risks that may cut short the length of his premiership even as it increases its impact.......The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective
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