Over the last few years, the New Zealand economy has been pretty buoyant – the result of the reforms of the late eighties and early nineties, a very low exchange rate in the 1999-2001 period, good export prices, good growing weather down on the farm, and the strong inflow of immigrants, caused in part by security concerns overseas and in part by a weak global economy. The Labour Government can claim credit for absolutely none of these factors.
The likelihood is that over the next year or so the economy will grow quite a bit more slowly than it has in the recent past, as exporters feel the pressure of a rising exchange rate and immigrant numbers gradually decline.
But the serious indictment of this Government is not this short-term slowdown but rather the longer-term outlook.
To put that in perspective, it is worth recalling that, over the last 30 years, GDP per capita has grown by about 1% annually in New Zealand. That compares with per capita growth of about 2% annually in other developed countries.
Over the last 10 years – in other words, in the decade since the reforms of the late eighties and early nineties – New Zealand’s per capita growth was also about 2% annually. Yes, that’s right: the policies which the present Government has the hide to call “the failed policies of the past” succeeded in doubling our per capita growth rate, to the point where, in growth terms, we were roughly keeping up with the growth in other developed countries.
But we still have a long way to grow. Helen Clark used to claim that she wanted New Zealand to regain the top half of the OECD in terms of living standards within 10 years. But that would require per capita growth of more than 4% per annum. And note: what is required is per capita growth of more than 4% annually, not simply total growth of more than 4%. We managed just 2% annually over the last decade.
To reach the top half of the OECD over even 20 years would require per capita growth of more than 3% annually.
And what is in prospect? According to the Treasury – the Government’s own official advisers – we won’t achieve per capita growth of 2% over the next decade. The economy is projected to slow down as compared with the last decade.
And is it any wonder? This Government has been putting obstacles in the way of faster growth at every opportunity – raising the tax rate for those most likely to save and invest; allowing our company tax rate to become almost the highest in the Asia-Pacific region; renationalising the ACC, and thus depriving employers of the benefits of a competitive accident insurance market; pushing up local body rates by dumping additional responsibilities for consultation on local bodies; making employers liable for huge fines for subjecting employees to “stress”; increasing the compliance costs faced by small businesses with a raft of intrusive rules and regulations; and now talking about changes to the Employment Relations Act which will make employing staff still more of a hassle.
No, the longer this Government remains in office the more likely it is that we will continue to slide down the OECD league table. And eventually, this becomes self-perpetuating, as our brightest and best see more opportunities to better themselves by migrating to faster growing economies.
Copyright © 2024 Don Brash.