I’ve just finished a bit of a barnstorm tour of New Zealand giving two presentations with a similar title to that above and a talk on Govt 2.0 which funded the visit. I must say I’ve loved it. Having checked out Auckland and Wellington for the first time in forty years, I can report that they are lovely cities beginning life, as all Australia’s glorious capital cities did, as British provincial cities. The French are generally lionised for the beauty of Paris, and it’s got to be admitted it’s got a lot over London, but did anyone plan more glorious modern cities than the British and did anyone get a better deal than us antipodeans. I’d love to know who.
In the meantime, everyone seemed engaged in the talks I’ve given and it’s generally been a great visit.
My talk on the NZ economy echoes my findings in this essay I posted a while ago, and the numbers that have emerged since I wrote it don’t change anything much. I expected to run into a fair bit of ideological argy bargy, this presentation being rather more recognisably partisan (though not party political) than most of my stuff – I think the right in NZ are much more ideological than the right in Australia. As the New Zealand Business Roundtable (NZBR) boasts on its website, it’s “A unique and extraordinary business organisation”. I couldn’t agree more.
As I said to the audience, I couldn’t think of another industry association like it. There are lots of right wing think tanks funded by business – like the CIS and the IPA, but the NZBR is an industry association which is an ideological think tank. I don’t regard the BCA as a paragon of clear thinking, but it mucks away trying to do what industry associations do, which is advantage its members and ‘position’ them in the debate, as we say these days.
I told my audience that in Australia we just don’t have mainstream business lobby groups lecturing the community on the sanctity of property rights or the urgent need to lower the size of government – yet we’ve got slightly smaller govt than NZ and property rights that are at least as sacred. Why? Because we’re at a reasonable political equilibrium. People don’t like paying taxes so they stay roughly where they are. Lectures by the business community on how much better off we’d be if we had a govt of 1-2% of GDP less (a proposition that has scant empirical support) wouldn’t be a good use of the BCA’s political capital. So they talk about more constructive things – health, education and skills and getting their members mitts on carbon subsidies. Perhaps the NZBR had ideological decency and consistency to argue against its members being ‘compensated’ for polluting the planet – in which case I will humbly praise this stance to the skies – it would make them truly unique in a worthwhile way.
Anyway what surprised me was the heads nodding in the audience. If this was a result of the audience that had been attracted to the talk in Auckland one of the nodders was a director of the CIS. He was quite complimentary after the talk even though the whole presentation was an attack on this study in tendentiousness that first drew me into this.
In Wellington the audience were mainly Ministry of Economic Development people and a few Treasury folk. There seemed to be a general relief in both venues that I was arguing that NZ should move on from the 1980s style Rogernomics rhetoric – and the class warfare.
Just going over the differences in the two reform periods – say the ten years after 1983, Australia’s reform was focused on solving problems – negotiating a reduction in wage costs, building the social wage, solving under saving (not solved but NZ’s parlous state is the scary counterfactual to not having compusory super, in Australia we solved the tax haemorrhage problem with CGT and FBT and targeted welfare with the mean test. As a ‘positive’ part of the tariff reform agenda we also handed out big subsidies to R&D.
By contrast the New Zealanders solved any problem they had in the competitiveness of labour with a Darwin comes to the bottom end of town strategy, cutting welfare, radical labour market reforms, and massively cutting the top marginal rate of tax for good measure. Treasurer Paul Keating cut our top rate from 62% to 49.5%. Treasurer Roger Douglas’s effort cut top rates from 66% to 33% though someone who’d advised him at the time told me he went for 21%. Instead of moving on the hemorrhaging of the personal income system, NZ went for the GST (is it such a great tax with compliance costs equalling 7% of the revenue raised?) when it wasn’t solving a noticeable problem and have yet to introduce CGT or means testing on pensions. NZ finally caught up to us with tax benefits for R&D in 2007 – no that’s not a misprint. And, just as Howard halved the subsidy when he came into office, in NZ the conservatives knocked it off altogether.
Yes folks its a very different approach.
And unfortunately for the poor New Zealanders, it didn’t work.
I don’t think there are any recordings of my talk, but there are slides of the second presentation on the NZ economy here.