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Opinion: NZ’s pragmatic approach welcome
March 19th, 2009By: Hugh Pavletich
The era of nine years of interventionist style government, led by the Labour Party in coalition came to a close in New Zealand November 8 last year and was replaced with centre right parties led by the dominant and pragmatic National Party.
The nine year spell of the interventionist-style Labour-led Government, was really a backlash to the often traumatic and ideologically driven reforms of the Labour and National Governments during the second part of the 1980’s and early 1990’s – following the collapse of the New Zealand economy in 1984, under the leadership of Sir Robert Muldoon and his interventionist National Government.
While the reforms of the 1980’s and early 1990’s were essential – the political rhetoric through this era was heavily ideological – which was in many ways the continuance of a tradition from the time of Premier Richard John Seddon (1893 – 1906), a rough Yorkshire man, who through the sheer force of his personality, started New Zealand on the path of “social reforms”. He often referred to New Zealand as “Gods Own Country”. At that time – New Zealand had the highest GDP per capita in the world. Today it ranks (on a PPP basis) at around 45th, with Australia at 27th.
Due to the too often highly ideologically charged nature of New Zealand politics to date – what this meant was that as one “ideological tribe’ gained power – it ignored and talked over the top of the other ‘tribe”.
While right wing think tanks in America, for example, talked in glowing terms about the “reforms of the 80’s” – most New Zealanders were not enjoying the experience quite as much – and many overseas visitors to this country, were often baffled as to why the political discourse here was so ideological.
New Zealanders by nature could not be described as “ideological” – and are generally tolerant, easy going, with an adaptable “can do” attitude. It has been a case of the “elite extremists” at both end of the political spectrum, too often dominating the political discourse. The “power of the internet” is the major reason why the “extremist elites” are no longer an issue.
This is best illustrated with a quote by Colin James, dealing with the housing issue, incorporated within a recent publication “Growing Auckland Growing New Zealand” (pdf) by the voluntary group Committee for Auckland – where Mr James states on Page 27 –
“We used to say we were egalitarian, one of the most egalitarian societies in the world, by which we did not mean that we were all equal, but that we all equally had a place and we could make something of ourselves. Too many people now do not have that sense of a place. We are not egalitarian, at least not in the way we were.”
“There are two principal ways to think about this new inequality. We can think of it as an ethical issue; we can say it is wrong that some people should be handicapped from living a full human life while others have a great start in life and confidence. That contravenes the principal of a fair go, which use to be a core belief in this country. Alternatively we can think of this new inequality as an economic issue. We will all be the richer if everyone can play a full part in the economy.”
It would appear that New Zealand is now entering a new era of pragmatic centre right government – with a strong commitment to work constructively across the political spectrum.
In large measure this is due to John Key’s leadership of the dominant centre-right National Party.
Key has been extremely successful in the commercial world and seems to be developing considerable political skills, with a particular ability of communicating effectively across the political spectrum. The last New Zealand general election was really about whether or not Key “had what it took” for the role of Prime Minister. Voters overwhelmingly supported him and his National Party – and a coalition government with ACT, the Maori Party and United Future was quickly put in place.
Recently Mary Kissel of the Wall Street Journal – Asia – interviewed Prime Minister Key, where he outlined the general approach the New Zealand Government will be taking going forward, within “You can’t spend your way out of the crisis”. For example –
“ ‘We don’t tell New Zealanders we can stop the recession, because we can’t’ says Prime Minister John Key, leaning forward in his armchair at his office at the Beehive, the executive wing of New Zealand’s parliament. ‘What we do tell them is that we can use this time to transform the economy to make us stronger so that when the world starts growing again we can be running faster than other countries we compete with’ “.
“That idea – growing a nation out of recession by improving productivity – puts Mr Key and his conservative National Party at odds with Washington, Tokyo and Canberra. Those capitals are rolling out billions of dollars in stimulus – with taxpayer money – to prop up growth. ‘That’s risky’ Mr Key says ‘You’ve saddled future generations with an enormous amount of debt that then they have to repay,’ he explains. ‘There is actually a limit to what governments can do’.
Tony Makin, Professor of Economics at Griffiths University followed up in The Australian with “Follow the Kiwi leader, not Obama” as did Janet Albrechtsen in the same publication with “Strangers to Business”.
In Ms Albrechtsens view – political leaders without “real world commercial experience” are seriously handicapped. She states –
“Pick the odd man out: Barack Obama, Kevin Rudd, John Key. Only one of them, New Zealand’s Prime Minister John Key, has any material personal experience of how to make a dollar in the private sector … … This is not to denigrate the public service or community sectors. They do important work. But a lifelong immersion in the public sector creates a government focused cast of mind and blind spots about the private sector.”
“Mish’s Global Economic Trend Analysis (Mike Shedlock) a popular United States website (recent Time magazine article) within a recent article “In Search of Common Sense” stated –
“I have been seeking economic common sense in high places. It’s very difficult to find on either side of the Atlantic … … With the fiscal insanity virus rapidly spreading the globe I had nearly given up hope of finding common sense at a high level anywhere. Nonetheless I am pleased to report that I found an amazing display of honest to goodness common sense in New Zealand … … John Key, New Zealand’s Prime Minister says you can’t spend your way out of a crisis”.
Somewhat surprisingly – I received a rather rapid response from the eminent financial commentator Martin Wolf of the Financial Times with an “Oh yes you can” – to which one can only say “When is the Financial Times going to focus its attention on exploring solutions to Britain’s land use regulatory shambles?”. An “utter shambles” really and the disgrace of the developed world as this recent article from The Independent “The Englishman’s castle in ruins” illustrates.
The United Kingdom National Housing Federation forecast for 2009 is that only 70,000 new residential units will be put in place. Central figures within the industry are even more pessimistic. Tony Pidgley, the Berkshire Group Chief Executive, who is considered the sectors great sage, believes that work will only start on 40,000 units this year.
If Mr Pidgley’s 40,000 unit forecast comes to fruition – this means that the United Kingdom with a population of 61 million, “build rate per 1000 population” will collapse to 0.65 units / 1000 population – the worst … anywhere in the developed world … in recorded history … including through the years of the Great Depression. Only the other “basket case” – California – the epicenter of the global financial crisis – comes close.
If other counties were building at this low estimate (40,000 units annually) United Kingdom rate – the United States annual residential build would be 198,250: Canada 22,750; Australia 13,650 and New Zealand and Ireland approximately 2,730 units annually each.
Not surprisingly – and rather rapidly – political leaders who mislead their publics in their governments ability to “stimulate” an economy – and worse still – the fiction that they are capable of re-inflating their housing markets – are getting appropriately punished by their constituents.
Around last October, UK Prime Minister Gordon Brown – engaging in “splash economics” was seen as the “great saviour” – but in the space of a few short months – is clearly heading for political oblivion. During a recent Washington visit, President Obama “declined” the request for a joint press conference with Mr Brown.
President Barack Obama’s “honeymoon” seems to have lasted less than 50 days, if recent polling is any guide. Americans are belatedly and with justification, becoming increasingly concerned about the effectiveness of the stimulus packages.
Australian Prime Minister Kevin Rudd is slowly slipping in the polls – and would likely have fallen further if the opposition Federal Liberal Party was cohesive. Mr Rudd – with his Housing Minister Tanya Plibersek lack of elementary commercial knowledge – is illustrated by the recent release of what can only be described as a “whitewash report” with respect to Housing Supply. Other than Fig 1.1 Chapter 1 Introduction – illustrating how house prices have moved since 1972 in relation to household income, rents and construction costs – the rest of this report deliberately avoids the real issues.
It appears responsible people from the property industry may need to sit down with Mr Rudd and Ms Plibersek – and explain to them why Australian metro areas should be supplying serviced fringe lots at between $A30,000 – $A50,000 and not the stratospheric $A200,000 and beyond lots / sections prices young Australians are being conned into buying (read closely First-home grant to end | The Australian) with taxpayer financed $A21,000 First Home buyer grants – unnecessarily.
Again – Mr Key and the New Zealand National led Government – appear to be “going against the tide” if recent polling is any guide – and as a leading political commentator Bill Ralston outlines within “Bill Ralston: Honeymoon’s still not over – Politics – NZ Herald News”. Mr Ralston states –
“The latest 3 News poll shows National sitting on 60 per cent support, the highest figure ever recorded in that poll and, I suspect, any other survey. Even more remarkable is that TV3’s poll usually skews favourably to Labour. In this one the Opposition could only muster a withering 27 per cent support.”
“Now here is the really weird thing. Even people who don’t back National approve of how it is handling the country. Sixty percent of people might say they would vote National, but 64 per cent say its performance has been strong or very strong. Only 4 per cent of those polled could claim the Government has been weak.”
“It doesn’t get much better than that. Well for John Key it does. The poll showed 52 per cent of people preferred him as Prime Minister but a massive 85 per cent conceded him a capable leader. Seventy five per cent thought he would be good in a crisis (and in case it’s escaped your notice, we are in a crisis) while 77 per cent backed his judgment.”
Following the Australian Federal election in late 2007, Fitch Ratings was commissioned by the Sydney Morning Herald to research why voters switched to the new government – as Stuart Washington explains within “Fear of losing homes drove Labour win”.
The clear message was that voters do not thank politicians for loading them up with excessive debt and making them poorer.
It’s would appear that Mr Key in New Zealand has learnt that lesson – while Mr Rudd in Australia and too many politicians elsewhere, have failed to learn it – as yet.
—————–
Hugh Pavletich, FDIA
Performance Urban Planning
Christchurch, New Zealand
Tags: Australia, Barack Obama, California, Colin James, GDP, Gordon Brown, Hugh Pavletich, Janet Albrechtsen, Kevin Rudd, Labour party, Liberal Party, Martin Woolf, Mary Kissel, Mike Shedlock, National party, Tanya Plibersek, Tony Makin, UK
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March 19th, 2009 at 5:50 pm
Hugh
Less is more.
The RBNZ have in place unprecedented support measures for the banks so they continue lending. The government under Keys has begun raising billions to spend during the crisis created by doing nothing to stop the banks lending.
And Keys the banker is the man of the hour??
March 19th, 2009 at 7:40 pm
I think we finally have a centralist prime minister that represents the majority of NZ and not the extremes of Muldoon, Douglas and Clarke. He has real life experience in business and has children so should know what needs to be done to build a better economic and social future. I hope the government does use this crisis and ‘transform the economy to make us stronger’ Some hard decisions will have to be made however and I hope Key has the courage to actually do it.
March 19th, 2009 at 7:49 pm
That WSJ interview was just another example of Key telling his audience what they wanted to hear. In fact, wasn’t it Key who was recently touting how the stimulatory spending/tax cuts his government was responsible for were the highest in the world (on a per capita basis)? I believe this followed some public disquiet regarding claims the government wasnt doing enough to protect local jobs.
One story for the NZ public, another for the WSJ.
March 19th, 2009 at 7:56 pm
Kieran –
Yes of course because no Prime Minister without children could possibly act in the best interests of the country. Of course not, what were we thinking for 9 years?
And after those “hard decisions” have been made in order to “transform the economy” hopefully you wont be reliant on the unemployment benefit, and have plenty of savings to pay for any medical emergencies that arise, to send your kids to school, to retire comfortably etc, etc. Cause its always “them” who are to blame. Am I right, or am I right?
March 19th, 2009 at 8:32 pm
Scott
Having children gives you a more realistic veiw of life something Helen Clarkes government didn’t have in terms of social policy. Shall I mention anti smacking, electrol reform, prostitution, gay marriage, kyoto and all the other ideologically driven policies that everyday kiwis who live in the real world didn’t want.
He has so far shown himself to be a moderate prime minister not the far right boogy man you seem to be implying. At least his focus is on economic prosperity and not social engineering. Remember he was bought up in a state house with a solo mum and has succeeded in the business world plus raised a family, I beleive this gives him the ability to see the world through more realistic glasses, without any rose tint.
March 20th, 2009 at 12:42 am
Not the most impressive of editorials Hugh.
Hero worshipping Key and slagging off the Keynesian response of Martin Wolf with a nonsensical come back about the FT’s lack of focus on uk housing development does your ideas in this area a disservice. Frankly housing development policy is well down the pecking order of economic priorities at the moment.
Furthermore your attempts at building up Key and thrashing his prime ministerial equivalents in other countries for overly large stimulus packages seems to me to be forgetting that the stimulus package under Key amounts to greater than 4% of GDP which puts us well ahead of many nations.
I suggest you stick to your knitting Hugh, your ideas on housing development have some merit but stay away from debating personality based criticisms of other nation’s economic policy.
March 20th, 2009 at 4:40 am
Johny Key the bankers favourite son, no thanks Hugh;
John launched his investment banking career in New Zealand in the mid 80s. After 10 years in the New Zealand market he headed offshore, working in Singapore, London and Sydney for US investment banking giant Merrill Lynch. During that time he was in charge of a number of business units including global foreign exchange and European bond and derivative trading. In 1999 John was invited to join the Foreign Exchange Committee of the Federal Reserve Bank of NY and on two occasions undertook management studies at Harvard University in Boston.
http://johnkey.co.nz/index.php?/pages/profile.html
http://www.nzherald.co.nz/company-taxation/news/article.cfm?c_id=691&objectid=10336608
http://www.belfasttelegraph.co.uk/business/business-news/sarkozy-blames-ireland-for-igniting-bank-deal-crisis-14010815.html
http://www.abc.net.au/lateline/content/2008/s2507657.htm
March 20th, 2009 at 9:36 am
Lets just burn our politicians at the stake, put our heads between our legs and ….
Huge is just doing a summary of what is happening, rightly or wrongly.
Key is just doing those things a Good CEO would do for a company to survive AND THEN grown when things stablise…Fortunatly he also has the ability to motivate, throw out a few popular crumbs the idealists with blinkers on have thrown around over the last few yrs, some that need to be done to achieve the final objective.
Key is not a politician, he is just a man on a mission without idealogical BS doing what is needed for his company…in a similar manner to Churchill lead in the war yrs, Fraser and Beeby did for our education system
And guess what…to date NZ so far is doing quite well under the circumstances compared to other countries run by politicians.
“ ‘We don’t tell New Zealanders we can stop the recession, because we can’t’ says Prime Minister John Key,……….. we can use this time to transform the economy to make us stronger so that when the world starts growing again we can be running faster than other countries we compete with’ …………growing a nation out of recession by improving productivity – puts Mr Key and his conservative National Party at odds with Washington, Tokyo and Canberra. Those capitals are rolling out billions of dollars in stimulus – with taxpayer money – to prop up growth. ‘That’s risky’ Mr Key says
I can see under tones of attitude similar to Churchill, Roosevelt, Lange…Politians on a non political mission for their countries.
At the end of the day, only history will tell, but for now NZ is doing better than elsewhere, and the current direction certainly is looking more attractive than Rudd, Obama and co.
And why is the oppostion not doing well? they are still stuck on idelogic “opposition mentality, not like Key who gives credit where credit is due, no matter where it comes from.
March 20th, 2009 at 9:38 am
Good post Steptoe.
March 20th, 2009 at 10:06 am
I like John Key andthink he is donig a good job – but lets be frank. He never succeeded in business. He suceeded in the gravvy train world of banking. So did lots of mugs during the bubble (hmm – madoff, dick fuld to name a few). trading derivatives has not in balance been a productive activity for the economy – only for bankers. So please dont laud him as a business hero. He is not a Bill gates or even a Sam morgan. Business people create, bankers suck from the teat of created business.
March 20th, 2009 at 10:22 am
A few follow up points -
1) SimonD – can you provide us with a breakout of the 4% of GDP stimulus to date in NZ please?
2) The Annual Demographia Surveys cover the 6 countries of the English speaking world – and in population terms – NZ represents just 1% of that. I have no hesitation commenting on these other countries – and stand by the comments I have made wirthin this particular article and earlier ones.
3) I have not always spoken in positive terms of the NZ National Party – and they certainly know that. But one in fairness must give credit where its due – and all in all I am strongly of the view – particularly when I consider other countries performance to date – that Key and the Coalition Government people to date have done an outstanding job. Polling would suggest most New Zealanders share my views in this regard.
4) I also hold Goff, Jones and Cosgrove of the Labour Party and Russel Norman and Sue Bradford of the Greens in high regard as well.
5) I have no hesitation in being highly critical of the situation in the UK – and with respect to the issues I deal with – the feedback I get from senior people in the construction industry there is that the Conservatives are no better than Labour. The Conservative Housing Spokesman spoke to the industry people there early in the week – and those attending were “disgusted” with what he had to say.
6) I have been disapointed with the UK Financial Times over recent times – and do wish they would give the real structuraL land use regulatory problems the UK has experienced for years – a far better airing.
Hugh Pavletich
March 20th, 2009 at 10:32 am
And Simon D you can rest assurred that Im certainly not in the habit of “hero worshipping” ANY politicians – and I would suggest you link through to the Ralston Herald article where the comment is made that if Key becomes any more popular – they might have to get on to the Vatican to beatify him.
Wouldnt it be painful if we had a Saint Sir John Key as Prime Minister of this country!!!!
Which brings me to the point – how the hell did the dopey idea of bringing back the feudal British honours come about? Are there any readers out there who can enlighten us on that?
Hugh Pavletich
March 20th, 2009 at 2:55 pm
I am just so gutted at the opportunity NZ lost by NOT having Don Brash and the whole productivity-boosting, housing-bubble-diminishing agenda in 2005. John Key and “softly, softly, don’t scare the mollycoddled big government nanny-state loving voters”, in 2008….! just does not compare.
I must also say that I agree with the people who point out that several years getting very wealthy in financial trading does not necessarily make someone sympathetic with the economy’s real wealth creators.
Nevertheless, I wish John Key all the best. His positive leadership is a material benefit in times like these. For all my criticism of John Key as “Helen Lite” in so many policy areas, I think there is a chance that John Key will ultimately be regarded as one of NZ’s greatest ever leaders. He has to get NZ-ers to trust him, and then make us listen to sense. The whole problem is that NZ-ers won’t listen to sense and no-one who talks it will get anywhere, in spite of the country going to hell in a handcart meanwhile.
I have insisted that Her Majesty’s loyal opposition, in these circumstances (meaning the Nats from 1999 onwards) should stick to talking sense and getting proved right ultimately. The trouble with going along with leftwing nonsense to win elections, is that the nonsense is then legitimised and institutionalised and it becomes that much more difficult to change perceptions from then on. But maybe John Key being PM now, even under these conditions, is preferable to what Helen and Mikhael would have done to the economy, with a crash that they would of course have blamed on “free markets” as their excuse.
Small comfort, though, compared to the tough productivity-boosting leadership we needed all along, could have had, and still don’t have.
March 20th, 2009 at 4:10 pm
“Which brings me to the point – how the hell did the dopey idea of bringing back the feudal British honours come about? Are there any readers out there who can enlighten us on that? ”
Old fashioned common sense, It is a popular move, and any true leader in a tight spot, bet it a war or ecumenics, needs to have the populous behind them…
Key is not just a PM he knows good old fashioned motivation stuff, used well get have great leaders used bad we have Hitlers.
Lets face it its popular…who want to see Colin meads with a few letters that mean squat after his name …Or Sir Colin Meads??
I covered it in more detail on the thread about the unemployment think tank…another motivational exercise.
“3) I have not always spoken in positive terms of the NZ National Party – and they certainly know that. But one in fairness must give credit where its due -”
I was just down right hammered Key…then with days after the elections actually listened carefully what he said, and thought thru the whys.
March 21st, 2009 at 7:09 pm
PhilBest – Good points regarding Dr Don Brash – who in my view has made enormous contributions to this country. He was simply an outstanding Governor of the Reserve Bank – clearly a global leader in this regard. I think it would be fair to say that the rough and tumble of politics was more difficult for him.
Key needs to realize and no doubt he does that as National Party Leader “he stands on the shoulder” of Brash – and needs to build on what Brash achieved for the National Party. If Key has a weakness – it appears to be in the ability of policy development – and the great test for the National Party going forward, will be whether other senior peoople can fill that gap adequately. If they cant – they will soon get themsel;ves in to serious political difficulties.
And Sir Steptoe – Im broken hearted about the NZ publics support for the British honours system. It weakens what I have to say about our egaliterian culture eh !!!
Hugh Pavletich
March 22nd, 2009 at 6:18 pm
Readers are urged to read what Professor Steve Keen of the University of Western Sydney has to say today on “Debtwatch” regarding the Australian First Home Buyer Grant fiasco…………………..
March 23rd, 2009 at 12:05 am
Hugh – it was not difficult to agree with Brian Gaynor, June 28 2008, before the change in government:
Brian Gaynor: Big picture doesn’t mean a 45-inch TV
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10518774&pnum=0
where he said:
“The New Zealand economy is rudderless, there is no consensus on the direction it should take.”
(Some other useful ideas in this article too.)
Notwithstanding the short time period since the change in governent and distractions caused by the GFC however, what evidence to correct this problem have we seen? Or are we likely to see?
March 23rd, 2009 at 12:44 pm
Les Rudd – you bring up some important points above – and I must congratulate Brian Gaynor for the excellent article from mid last year you highlight.
The first important point I think to realize is that Parliament” is quite rightly the “House of Representitives” – and its job is to represent the peoples views. It is NOT a “House of Little Dictators” having visions – or even worse still a “House of Geniuses”.
I get fed up to the back teeth with people constantly saying “the Government should do more” – and particularly the business / professional organisations constantly whining and failing to articulate clearly and effectively SOLUTIONS that people are prepared to accept – thus allowing politicians to act on them.
POLITICIANS CAN ONLY ACT WITH THE CONSENT OF THE GOVERNED IN A DEMOCRACY. Their “currency” is votes.
So as a “citizen” i have a responsibility to participate in the areas I have siome knowledge of – housing / local government / infrastructure. And if what I am suggesting has merit – no doubt the politicians will make the appropriate decisions WITH THE CONSENT OF THE GOVERNED.
I happen to think New Zealand is a tremendous little democracy – and that if we “iron out the wrinkles” in the areas I deal with and others – that this place could perform extremely well – far quicker and better than most realize.
Hugh Pavletich
March 23rd, 2009 at 1:18 pm
Hugh – I agree with your passionate response, but given you’ve conducted some appropriate research, alluded to above, just to reiterate:
“what evidence to correct this problem have we seen? Or are we likely to see?” – do you think?
March 23rd, 2009 at 3:27 pm
Les Rudd – many thanks for your response..
Starting with a little history……….
Back in early 2007 the Planning Instiute came out publicly supporting the Demographia Survey. that Institute is particularly fortunate in having a CEO of the calibre of Keith Hall.
Through 07 National Party Leader John Key gave important speeches to the Contractors and National Party people regarding housing / local government and infrastructure – and Phil Heatley got the Housing Inquiry underway and completed housing study tours of the US and UK. Key and Heatley through 08 spoke to many other groups regarding these issues.
The National Party following the election pulled together other parties rather quickly to form a government – and either got a wide range of initiatives in place or underway.
Refer to the respective Ministers websites for recent speeches and releases. It is most important readers refer to these – to get a sense of the activity and the actual progress being made. It is way too much for me to cover within this brief response.
I am extremely impressed with the amount of ground these people have covered in a very short time – particularly when one considers that in this MMP environment, it takes time to settle in.
I expect to see substantial progress over coming months on a wide range of fronts.
Hugh Pavletich