Economics: Parties square off over growth

Good news, if you were disquieted by the gloomy outlook painted in this column last month or are thinking about emigrating. National’s Paul Goldsmith was among the first MPs to put questions to Ministers when Parliament got down to business last month. It was patsy, of course, and positive answer was inevitable: what progress is the Government making in implementing its economic growth agenda?
More accurately, it was positive answer up to point. The Government believes it is doing nicely, thank you, in terms of creating the conditions for business people to do the things – invest and hire – that will make the economy grow.
Steven Joyce, still settling in as Minister for Economic Development, said the Government was making “very good progress in addressing the barriers that prevent businesses from getting ahead”.
Before the election, National had released its 120-point economic development action plan detailing key steps the Government was taking to build modern, productive infrastructure, cut red tape, bolster industries, innovation, and trade, and build skilled workforce.
“A number” of these steps already had been completed, Joyce said, “and 2012 will be about further progressing them across all sectors”. The agenda was built around the simple premise that if we want more and better jobs for New Zealanders, we need to encourage more businesses to be based here.
Trouble is, progress is being frustrated by people who lack understanding and realism about economic growth. They say they want jobs. In the next breath they say: “But you can’t do that. You can’t build that here. You can’t expand that, you can’t explore for that, you can’t invest in property here, and you can’t do that.”
That attitude had made it much harder for New Zealand to pay its way in the world during the 2000s and – according to the Minister – explains why we went into recession before the rest of the world, in early 2008. If you want economic growth, he said, you have to be prepared to let businesses grow and expand.
Joyce expanded on this theme in an article in the New Zealand Herald in which he made the case for creating an environment that was encouraging to entrepreneurs and ideas people. This didn’t mean handouts. It just meant removing more of the roadblocks that stopped people from doing things.
A small country like New Zealand had to make the best of all its natural advantages to lift incomes and give more people more chances to make it while staying right here. Each time we say “you can’t” cost is incurred.
Labour’s economic development spokesman, David Cunliffe, next day questioned the Government’s strategy. His critique embraced raft of things that (he contended) can’t be done.
“We can’t simply milk more cows, ship more logs, dig more coal and close 40 percent value gap. There isn’t enough water, you run into environmental constraints, there’s not enough arable land, so therefore an alternative strategy is required that will require the migration of parts of the economy to higher value activities.”
Labour differed from National – according to Cunliffe – in being ready to intervene in markets and sectors where they were not working properly (as it had done to challenge Telecom’s dominance of the telecommunications industry last decade).
Joyce, unabashedly, was heralding the Government’s lowering – and perhaps removing – of some regulatory hurdles to pave the way for businesses wanting to explore for oil, dig for minerals and so on. But he insisted this doesn’t mean you don’t take care.
“Big developments need to have the right environmental protections and mitigations, industry needs good health and safety law, and foreign investment should be sought where it adds value. Ensuring those safeguards are in place is far healthier approach than just saying no.”
Cunliffe’s point was to caution that the prosperity from developing some opportunities might be short-term and outweighed by other considerations (such as environmental). Preferring “can” to “can’t” carries its costs, too.

Bob Edlin is leading economic commentator and NZ Management’s regular economics columnist.

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