Ardern warns of slowing global growth, talks up trade, and announces vocational training sector reform to help plug skills shortages in first major economic speech of 2019

Ardern warns of slowing global growth, talks up trade, and announces vocational training sector reform to help plug skills shortages in first major economic speech of 2019
Jacinda Ardern by Jacky Carpenter

By Jenée Tibshraeny & Stephen Forbes

The Government is planning a major overhaul of polytechnics and the wider skills training sector in a bid to plug skills shortages hamstringing the economy.

Prime Minister Jacinda Ardern made the announcement in her first major economic speech for 2019, delivered at a BusinessNZ breakfast in Auckland this morning (Friday).

She said Education Minister Chris Hipkins would soon release a “far-reaching” discussion document outlining reform options to raise the status of vocational training as a career and better align the sector with what businesses need.

Ardern questioned how at a time the country faces a critical skills shortage, polytechnics and institutes of technology are in many cases going broke.  

“Over the last two years this Government has been forced to spend $100 million to bail out four polytechnics, and that is a pattern that started before we took office," she said.

“We need to move away from the cycle that sees course delivery at institutes boom when the economic cycle turns down and then dive when the economy improves, while on-the-job training providers face the opposite cycle."

Ardern didn't elaborate on exactly how the Government intended to improve the sector, but said she wanted to see institutions "expand their course delivery throughout the country".

National's spokesperson for Tertiary Education, Skills and Employment Shane Reti said industry sourecs had told him the review would include a proposal to centralise some of the functions polytechnics carry out, forcing some to amalgamate into regional hub type structures.

Economic growth warning

The underlying message of Ardern’s speech more broadly was that New Zealand needs to be “realistic” about the effect a global economic slowdown would have on domestic growth.

Pointing out the “strong fundamentals” of the domestic economy, she said the low business confidence she last year dubbed the “elephant in the room” at a similar business breakfast was shrinking a little.

“Perhaps it got to know its company and decided it wasn’t quite as scary as it first thought," Ardern said.

“But there is a shift in mood globally. While global economic growth remains strong, it is beginning to slow.

“The IMF is projecting worldwide growth to ease from 3.7% in 2018 to 3.5% in 2019 due to rising trade tensions, political uncertainty and less stimulatory monetary and fiscal policy.”

Ardern said growth in New Zealand was “relatively strong” at around 3%. She said that being forecast to stay close to that level in coming years, things looked OK compared to the IMF forecasting average growth in advanced economics to be about 2% a year.

“The finger of blame for the slowdown in global trade growth is generally pointed at countries pursuing increasingly protectionist policies, which are naturally affecting confidence and investment plans.

“Trade tensions in the wake of tariffs imposed by the US on Chinese imports dented the strong growth seen in 2017. And the worry for us is that further reductions in Chinese exports could cause a material slowdown in its economy, with adverse effects for New Zealand exporters. 

“And then there is Brexit...

“Expanding free trade with other countries can provide our economy with a buffer against a downturn in any of our markets.

“In particular we will seek to conclude a high quality agreement with the EU, as well as establishing the benchmark for a high quality model agreement with the UK."

The crux of Ardern's message was: "Now is then the time to take the foundations we have and to build on them. Now is the time to ensure we not only build greater resilience into our economy, but that we modernise it too."

In addition to a focus on trade and vocational training, she said the Government’s economic plan included the following:

  • Changes to tax to make the system fairer
  • Addressing our long-term infrastructure challenges
  • Transitioning to a sustainable carbon-neutral economy
  • Investment in wellbeing, because this is inextricably linked to our economic success too.  

Q&A touches on tax, immigration, services, trade & strikes

After concluding her speech the Prime Minister took questions from the audience. Barfoot and Thompson director Kiri Barfoot asked the PM if taxing multinationals was a priority for the Government.

“The OECD has been talking for some time about the tax avoidance of multinationals,” Ardern said.

She said it would be discussed again at its next meeting in June and it’s an important issue which has global ramifications. Ardern said while there was still a lot of debate globally about the best way to tackle tax avoidance the government is keen to address it.

“You will see us saying more on this in the coming months and it was a major theme in the Tax Working Group.”  

BusinessNZ’s Phil Love then asked Ardern about what she thought was the right balance for the Government’s immigration policy. She said New Zealand’s immigration levels had reached a peak of over 60,000 and there hadn’t been enough preparation by the previous government to deal with the pressures that put on infrastructure and housing.

“I won’t put a number on it. But I don’t think we had that number right in the last couple of years.”

Beca chief executive Greg Lowe asked Ardern if she thought the country’s services sector should receive more focus from government as part of its trade strategy. Ardern agreed it was an area for potential growth.

“We have a huge opportunity to explore our services and not just be known as the food bowl of the world.”

Ardern then invited Trade Minister David Parker to elaborate.

“In terms of services I agree with you and we recognise we can do better,” Parker said.

He said he has recently had talks with the Australian Government about the mutual recognition of qualifications between the two countries which would allow for greater opportunities for the services sector.  

There was also a question from Johnson and Johnson general manager Juliet Hull about the disruption to medical services caused by the nurses’ and junior doctors’ strikes.

Ardern said when the Government came into office in 2017 it inherited a number of problems in the health sector, including the industrial action by the nurses. She said at no time have strikes affected the delivery of important medical services. In referring to the junior doctors strike Ardern said it was a reasonably complicated situation, where one union representing doctors had settled while another hadn’t.

“But it’s not the same level of disruption as you’ve stated. Our health services needed investment when we came into office.”

Here is the full text of Ardern's speech:

Good morning everyone. 

I want to start by thanking Kirk and his Business New Zealand team for the invitation.

It’s good to have this opportunity to join you as another year starts. 

While this is my first economic speech of 2019 here at home, there has been plenty happening internationally since the year kicked off. I want to reflect on some of that this morning, but before I do, I’d like to take stock of our economic and business landscape, set out some of the challenges we face here and in an international context, and then outline our Government’s plan to address those over the coming year.   

First though, I want to take a moment to reflect on the events in Tasman. Twelve months after facing a cyclone, the rain in Tasman has been replaced with a fire that when I visited yesterday, was 22km in parameter, and covered 1900 hectares. It has led to the evacuation of hundreds of homes, and roughly 400 people. 

I have been in regular contact with our civil defence team, and evacuations are still happening as they try to predict where the wind movement may take the fire, all the while creating a parameter around it and using fire retardant to try and contain it from spreading across an area that is bone dry, and surrounded by forestry. 

I spoke to a few people who had been evacuated yesterday. They told me what it was like to evacuate with only a few hours warning. But they didn’t dwell on that. 

Mostly they reflected back to me the amazing work being done by emergency services, MPI, council, civil defence and others. So many who I met yesterday were volunteers. One of the coordinators of the many helicopters hauling water over the fire for eleven hours at a time was from Feilding and had travelled through the night to get there. He also happened to be colleagues with my first cousin – it was a true New Zealand moment. 

Situations like this always reinforce to me something that you will intuitively know, we are a nation of extraordinary people. And I don’t separate out situations like this as being a one off example of who we are. The traits we have as a nation are there 24/7, and in many fields of work. 

You see it in our social sector, our business community, and in our young and older citizens. The trick is to remember that, and for us as Government to bring together the many groups who want to tackle the big challenges we face regardless of which sector of our society that they may work within. We are not a nation of discrete compartments, so we should be facing our challenges together.  

And when it comes to the economy, and the business environment, there are challenges. 

There are also good reasons for us to be optimistic though. 

Last year I talked about the elephant in the room. Pleasingly, the elephant has gotten a little bit smaller in the past 12 months. Perhaps it got to know its company and decided it wasn’t quite as scary as it first thought… 

Either way, it’s pleasing progress and it is based on some strong fundamentals.

  • Yesterday’s employment data showed wages are growing and unemployment is at 4.3%, the second lowest in a decade. The lowest was of course last quarter, and we are confident that we’ll reach our 4% target by the end of our term.
  • Growth is relatively strong at around 3% and is forecast to stay close to that level in coming years. That looks particularly strong when compared to the IMF’s recently released forecasts for advanced economies that predicts average growth of about 2% a year.
  • Inflation is tracking at 1.9%, and food price inflation remains low.
  • And it is encouraging that one of the Big Three rating agencies recently gave our economic and financial management the thumbs up. Standards & Poor’s have revised its outlook on New Zealand’s AA foreign and AA+ local currency credit ratings from ‘stable’ to ‘positive’ – its strongest verdict on New Zealand since September 2011.
  • The latest Crown financial statements, released just yesterday, show that core Crown revenue and expenses are in decent shape and delivering a better than budgeted surplus. Running surpluses of course gives us the room to make important capital investments while keeping debt under control and importantly provides a buffer against external shocks and international headwinds.  

 As you can see, on key economic measures the Government is delivering. There is good cause for the elephant shrinking. 

But there is a shift in mood globally. While global economic growth remains strong, it is beginning to slow.

 The IMF is projecting worldwide growth to ease from 3.7% in 2018 to 3.5% in 2019 due to rising trade tensions, political uncertainty and less stimulatory monetary and fiscal policy.

 As I mentioned earlier, advanced economies are forecast to grow at only 2% a year.

 The finger of blame for the slowdown in global trade growth is generally pointed at countries pursuing increasingly protectionist policies, which are naturally affecting confidence and investment plans. 

Trade tensions in the wake of tariffs imposed by the US on Chinese imports dented the strong growth seen in 2017. And the worry for us is that further reductions in Chinese exports could cause a material slowdown in its economy, with adverse effects for New Zealand exporters.

 And then there is Brexit.

 As all of you will have no doubt seen, the final form of Britain’s exit from the European Union is yet to be decided.

 Clearly, the risk of a no-deal scenario remains high. There is a lot of uncertainty around what such a scenario would mean, and while we are doing our best to create a buffer through, for instance, our recently signed mutual recognition agreement, a no deal Brexit could still do harm to EU economies or disrupt financial markets.

 Political tensions are beginning to present serious risks to international institutions and the rules-based order that we rely on for security and prosperity. The World Trade Organisation, for example, and other multilateral organisations, are facing challenges to their legitimacy that undermine their effectiveness.

 At Davos, a significant conversation revolved around how we could ensure the reform of these institutions, whilst not seeing them blamed for the current political environment which, ultimately, they didn’t cause. 

But where does all of that leave a country like New Zealand? We have strong fundamentals and are well prepared, but we need to be realistic that if the global economy slows, it will affect our economic growth. 

Now is then the time to take the foundations we have and to build on them. Now is the time to ensure we not only build greater resilience into our economy, but that we modernise it too.

 This is a message that we have been sharing for some time, but that I recently heard reinforced by the IMF executive director Christine Lagarde.

 We were at APEC in Papua New Guinea when I first heard her reiterate the message that policymakers need to make greater efforts to prepare for the slowdown, and that is a message we are heeding. 

That’s why our economic plan includes the following key planks:

 Doubling down on trade and broadening our trading base to protect our exporters and economy

  • Reform of skills and trade training to address long-term labour shortages and productivity gaps in the New Zealand economy, and to make sure we are prepared for ongoing automation and the future of work
  • Changes to tax to make the system fairer
  • Addressing our long-term infrastructure challenges
  • Transitioning to a sustainable carbon-neutral economy
  • And of course investment in wellbeing, because this is inextricably linked to our economic success too.  

 Trade

On trade, our experiences in the 1970s and early 1980s taught us there are no winners in trade protectionism.   

By taking an active role in WTO reform efforts and by committing ourselves to diversifying our export markets through new and upgraded free trade agreements, we are strengthening our safety net. 

At all the international forums I have spoken at in the last year I have made the case for the retention of an international rules-based trading system. I believe it’s incredibly important that we continue to be a leading voice on this, in order to retain a system that allows New Zealand exporters fair access to international markets.

With the CPTPP coming into force, 65% of our exports are now covered by FTA preferences which buttress and build on the WTO disciplines.

 The Pacific Alliance and RCEP are making steady progress.  

The upgrade of our agreement with China is ongoing and we are about to commence the same negotiations with ASEAN.  

But a top trade priority this year is a positive conclusion to the EU free trade negotiations and the launch of free trade talks with the UK in the event of Brexit occurring. 

On my recent trip to Europe I received assurances from the EU leadership of their desire to conclude an agreement by the end of this year. It’s an ambitious plan, and one we will pursue whilst also being mindful of getting a quality deal.   

In the UK, Prime Minister Theresa May expressed her desire for New Zealand to be amongst the first nations they negotiate with, and for our part we made the case that given New Zealand’s expertise in this space we would make a logical partner to establish a benchmark for a high quality model agreement for the UK. 

As importantly as the political assurances I received we also got positive backing from leading British business leaders for a high quality free trade deal as soon as practical after Brexit. 

And at home, we are working to rebuild the social licence for trade. The Trade for All Advisory Board will continue meeting this year to look at how our trade policy works with other economic policy to deliver the benefits of trade to all New Zealanders. 

Through this combination of trade and foreign policy initiatives we will strengthen our resilience to the risks we face from the uncertain global economy. 

Of course it is not just in the international scene that our economy faces challenges. 

Domestically we are seeing both short and longer-term issues that could constrain economic growth if left unaddressed. 

Education and training

One such issue that the Government has big plans for in 2019 is around skills training. 

Whenever I talk to business I hear a recurring theme around skills training and the gap between what business needs and what our training organisations provide. 

Businesses are facing a constant struggle finding the people with the right skills at the right time to do the jobs that need to be done. Many of you here today have spoken to me about this issue. 

In the past our economy has been too reliant on buying skills through immigration. Immigration is vital, but we need to get the balance right. I want us to focus on how we can be better at growing the skills our economy needs. 

Without change, the challenge for businesses and Government is only going to increase. 

We know the future of work will look very different than it does today. 

A future when, by some estimates, a full one third of jobs in New Zealand are likely to be significantly affected by automation. That’s a million jobs. 

For us as a government and you as a business community we cannot afford to let the skills gap continue to drift. 

We need to act now. 

The Coalition Government has already taken steps to make post-school education and training more accessible, with our fees free programme, which provides 2 years of free industry training and apprenticeships, or one year of free tertiary education. 

We also announced changes to allow greater use of micro-credentials to ensure our system is more accessible and responsive to business needs. 

My Business Advisory Council has also set skills as one of its key priorities. One of the ideas it has put forward which we are working through is how business themselves can take the lead in committing to reskilling their workforces. 

The Government has also done some deep thinking on reforms that are urgently needed to the vocational education system. 

The Minister of Education will next week announce proposals for consultation. They are far reaching. But we firmly believe they must be. 

We currently have a vocational education system that is in many cases, struggling.

Take the building sector for example. We know we need more tradies and they are just not coming through fast enough. 

That’s absolutely no reflection of the people who are involved in the sector – far from it. What it is, is a damning statement that the system has been left to drift, to muddle through. 

How is it, for example, that at a time when we’re facing critical skill shortages, our polytechnics and institutes of technology are in many cases going broke? 

Over the last two years this Government has been forced to spend $100 million to bail out four polytechnics, and that is a pattern that started before we took office. 

That is not the sign of a healthy and sustainable sector. 

We need to move away from the cycle that sees course delivery at institutes boom when the economic cycle turns down and then dive when the economy improves, while on-the-job training providers face the opposite cycle. 

Instead of our regional polytechnics and institutes of technology retrenching, cutting programmes, and closing campuses, we need them to expand their course delivery throughout the country. 

We want a sector that meets the needs of our economy. But the current system faces three major structural issues we need to fix. 

It is not well coordinated or integrated. It is not easy for business to engage with and it delivers variable results across the country. 

We have a duplication of courses and lack of consistency across the sector. 

Many of the institutes face an issue of scale and insufficient capital to grow and respond. All of this is unsustainable. 

Here is our vision – I want the vocational training system to be the backbone of our productive economy, and of our regions. I want students and parents to proudly choose a career in the trades and I want businesses to have confidence that the system is flexible and preparing a workforce for the future of work. 

We need a model where businesses, iwi and local government in every region play an active role in driving skills development. We need a system of training and skills development that is more flexible and more nimble so we can get people with the rights skills into the right jobs much faster. 

As I mentioned, we will be putting out some significant ideas in this area in coming weeks. Alongside our education sector, you have a crucial role to play in this matter and I do look forward to hearing your response to what will be some big new ideas. 

But we haven’t just looked to the education sector to upskill our workforce, we have also looked for ideas to support you directly. 

We are providing assistance in this regard through the Mana in Mahi training initiative, which provides a wage subsidy to businesses who employ as apprentices young New Zealanders who have been on a benefit for six months or more.

This policy is constructive for both businesses and workers, linking employers who need labour with young people in need of a career path. 

I’ve met some of the young people in programmes like Mana in Mahi and He Poutama Rangatahi. They are our best salespeople for these types of initiatives.

Recently in Kaikohe a young woman told me all her friends want to join the course she was on. She is learning and earning and it was, in her own words, better than the street. Especially since she had become a supervisor.

Building a sustainable economy

In addition to skills the Government will use 2019 to contend with bigger, longer-term trends that will have a transformational affect on our economy.

As I have said before, climate change is the defining issue of my generation.

We know that we all have to adapt now to avoid catastrophe for the generations to come.

We have a plan for a just transition to a low-emissions economy based on a more sustainable growth model. We want to ensure that this transition is phased and signalled early to give businesses and workers certainty and flexibility.

The Government will soon announce plans for legislation to establish an enduring institutional framework for managing the long-term transition to a low-emissions economy.

This legislation will contain legally binding emissions’ reduction targets and it will see the establishment of an independent Climate Change Commission, which will recommend emissions reduction budgets and provide advice on policy development and initiatives in transport, energy and primary industries.

The Government’s Just Transition work programme will assist New Zealand to successfully transition to a low-emissions economy.

The work programme includes looking at energy, regional economic development and workforce planning. It has a strong connection to education and skills development to create new jobs.

A Just Transition Summit in May this year will kick-start a national conversation about what the Just Transition means for New Zealand. 

But it won’t just be a local conversation. We will be testing ideas that the world is interested in too. The conversations I had in bilateral meetings and conferences increasingly demonstrated to me that the world is not only looking for ideas, it is hunting for them. And New Zealand is on its list.

We recently announced a $100 million capital injection to New Zealand Green Investment Finance Ltd to stimulate new private sector investment in low-emissions industries. More and more investment dollars globally are looking for clean, sustainable ventures to invest in.

New Zealand Green Investment Finance Ltd positions New Zealand to attract its share of that investment capital, and will provide businesses with a pathway to being part of efforts to confront the greatest challenge facing the planet.

Another issue currently confronting the Government is inequality, and our commitment to bring fairness into our tax system.

We have long foreshadowed that we will deliver this year a response to the Tax Working Group.

There has been a lot of speculation on this topic of late, some of it feverish and not always accurate.

But my message to you this morning is succinct.

Yes, we have received the report of the Tax Working Group and, as we have shared publicly, it will be released on Thursday 21 February.

That report is now being pored over by officials, and discussed with Coalition and Confidence and Supply partners. Our plan is for the Finance and Revenue ministers to release the Coalition Government’s full response to the report in April.

Importantly though, the Working Group’s report will be shared with the public. There will be time for everyone to see that work, to debate what they have said and to share views. Anything we subsequently decide will also go through a consultation process before legislation and ultimately will be put to voters at the next election before it comes into force.

As we enter into a period of discussion and debate, I hope it’s guided by the overriding goal of fairness, and building an economy and system that works in the best interest of New Zealand and its people.

The Wellbeing budget

Finally though, a few words on what has become a significant topic of debate and discussion internationally. In fact I saw just yesterday the issue of wellbeing economics being discussed in a Swedish newspaper. I can’t tell you what it said but I am sure it was eminently sensible.

Our starting point for the Wellbeing Budget is that while economic growth is important, it alone does not guarantee improvements to New Zealanders’ living standards.

We want to take a much broader approach that uses the full range of factors that affect the quality of people’s lives.

So there will be measures that track the progress of our country based on what enables people to live fulfilling lives – things like material wealth; our capability as individuals, families and communities; and the health of our environment, such as the cleanliness of rivers.

We can all agree that New Zealand has seen solid rates of GDP growth over the past few years, and of course no one is suggesting we get rid of this indicator. But we also need to ask questions about the quality of that growth. An everyday New Zealander - hearing of the “rock star economy” while their housing costs are skyrocketing, or they can’t afford to send their kids to school with a proper lunch or their mental health is strained - tends to have their faith in the system and in institutions undermined.

So embedding wellbeing will require us to shift to a wider definition of success for our country, one that incorporates not just the health of our finances but also our natural resources, people, and communities.

It will represent a shift away from government departments thinking of their Budget bids in terms of their own appropriations, towards a focus on the outcomes they can achieve in collaboration with others.

All Ministers and departments have been asked to consider what they can contribute to the delivery of each of the Budget priorities.

This in itself is different and was the source of great interest when I was at Davos.

While deep reform will take time, the Government has already made significant strides. Treasury has created the Living Standards Framework, we are reforming the way the state sector works to give effect to a more collaborative way of working, and we will amend the Public Finance Act so that priorities around wellbeing are set each Budget. We are giving effect to the new approach in this year’s Budget.

The five Budget priorities this year are:

  1. To create opportunities for transitioning to a sustainable low emissions economy;
  2. Lifting Maori and Pacific incomes and opportunities;
  3. Supporting a thriving nation in the digital age through innovation;
  4. Reducing child poverty, improving child and youth wellbeing, including addressing family violence; and
  5. Supporting mental wellbeing for all New Zealanders, particularly those under 24.

In Davos the OECD Secretary General advised the Finance Minister and me that they would be reviewing the Government’s wellbeing approach and Budget in their country review this year, an indication of how closely the rest of the world is looking at this new model and what it can offer other countries.

The Wellbeing Budget is not only about improving the livelihoods of New Zealanders, it is key to ensuring we are protected from the international headwinds the economy may face. It will ensure that those closest to the margins are protected and that no one is left behind.

I want to conclude today by affirming the Government’s strong desire to continue partnering with business wherever we can. We will be using forums such as the Small Business Council, the Future of Work Tripartite Forum and my own Business Advisory Council to develop and test initiatives that can help improve business productivity and workers’ wellbeing. But more than that, to continue to work together.

As a country we face challenges on a number of fronts, but in these challenges the Government sees opportunities to build a more resilient economy and I know we are not alone in that.

By diversifying our trade opportunities, upskilling workers, leading the transition to a low carbon economy, ensuring fairness in the tax system and delivering our Wellbeing Budget we have a clear plan that will protect and improve the wellbeing of our people, our businesses, our communities and our environment.

I look forward to working with all of you in delivering on this in 2019. And perhaps along the way that elephant might keep getting a little bit smaller.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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83 Comments

Very impressive. I do get the feeling that this coalition government are more focused than the former National-led government was on laying foundational plans for structural change - and there is an overall 'vision' backed up by individual policy/agenda items. I do think that Key's government by necessity had to focus on EQ disaster recovery efforts, on the back of the GFC fallout, hence didn't have the chance to really consider a big picture 'vision' as a whole for the country. It's good to have the 'space' to get back to this big picture thinking.

Skills which contribute to resilience have been lost, partly due to the echelon which had them, shuffling off to rest-homes. Increasingly curtailing legislation (the trend towards complexity that Tainter warned about) may need to be addressed too.

Any move to increase practical skills in the younger cohort, will put us in a better place to wear what is coming - that which I'm sure the PM is well aware of. The trade moves are incidental. And we ought to be looking at self-sufficiency - particulary in energy. A whole echelon has to learn that personal communication devices don't actually do anything. Plenty of scope there for young-un's.

Couldn't agree more, particularly on the need for a plan that addresses the need for greater self-sufficiency.

They indeed are. . They should make fees free for vocational courses only

Yes, and they already are moving in that direction, in terms of 2 years fees-free for trade training vs 1 year fees-free for university training;

The Coalition Government has already taken steps to make post-school education and training more accessible, with our fees free programme, which provides 2 years of free industry training and apprenticeships, or one year of free tertiary education.

And subsidisation of apprenticeship wages, providing the apprentice has been out of work for the prior 6 months.

Student cohorts coming out of secondary will hopefully respond to those incentives.

Jacinda is a credit to NZ
She sees & does ( elsewhere in the world destruction reins in UK Brexit USA Trump Canada can’t get pipelines built & even Australia with its multiple PMs in only a short period )
Strangely it was a past Labour government that irresponsibly systematically destroyed the old trades apprenticeship system
It saddens me that the man responsible was later knighted & also was responsible for destroying wage growth
in NZ while Australian workers kept their unions and rocketed ahead My cousin losing the family farm due to
this finance ministers slash & burn approach
There was a exodus of many NZ families to Australia in the 1980s (with mortgage rates at 23%) which also stole away the youth of NZ to Australia
Little wonder the requirement for immigrants to recharge NZ today
NZ has lost so many of a generation of its youth to Australia & beyond
Jacinda offers hope & a better way forward I wish her luck

Good effort NL

Is Kiwibuild mentioned. ?

She does acknowledge the problem of "skyrocketing" housing costs;

We can all agree that New Zealand has seen solid rates of GDP growth over the past few years, and of course no one is suggesting we get rid of this indicator. But we also need to ask questions about the quality of that growth. An everyday New Zealander - hearing of the “rock star economy” while their housing costs are skyrocketing, or they can’t afford to send their kids to school with a proper lunch or their mental health is strained - tends to have their faith in the system and in institutions undermined.

Whereas for the previous government, that skyrocking asset class were indicative of strengths in our economy.

On that score, the philosophical difference between the two is pure black and white. And moreover this coalition is chipping away at asset class deflation in many ways: foreign buyer ban, rental accommodation regulatory changes, tax equity considerations and such like.

If residential housing asset depreciation went down to the same degree as wage inflation went up, within a decade we might become affordable again. And that slowly but surely intention is really the best option for everyone.

Kate I did note the rocket but home ownership rates continue to fall and rents continue to rise, and have done so in the last year. Globally low interest rates have led to asset price inflation , New Zealand is no exception. For two decades our growth has come by way of real estate , banking , insurance.and migration. If asset prices fall there are the inevitable consequences.

Yes, so far the 'chipping away' measures taken are only hinting that certain lead indicators are looking promising. I agree that sudden asset class price deflation (i.e., a crash), such as we are seeing across the Tasman, has its own - very real - problems.

John Key also acknowledged the housing problem back in 2007...
https://thestandard.org.nz/keys-powerful-speech-on-the-urgent-housing-cr...
Id suggest that the philosophical difference between the 2 parties is not Black and white, but shades of grey.

I'd also suggest that Labour will leave power ( being the Govt. ) , without , in any way, solving the fundamental issues in regards to housing..

Same applies to education and skills.... My favorite example ifs Rocket Labs..
How do we produce young adults like Peter Beck..??? Politicians and the education system, itself, might not have the answers for this. In fact, i'm guessing their solutions might end up counter productive...???
( my answer lies in nurturing kids to be original thinkers. .. ie. individuals)

there u go... my little bit of negativity for the day. ( I dont have much faith in politicians or bureaucrats.... I believe they need to learn to see themselves as servants...kind of )

It is not possible for asset price deflation and wage inflation to happen at the same time to the same degree.
The fundamental structure of our economic system is defined by the term ...""debt capitalism".
ie.. GDP growth thru credit growth... without that we fall into recession/depression.... and that is a FACT.

Yes, but once in power, JK changed his tune to the idea that (as you say) debt/credit and hence asset price growth ("debt-capitalism") was a good thing. And like you, once out of power he also pointed out that his "rock star" economy was due to high immigration, more private debt, insurance payouts (on the EQ) and asset price inflation.

It's why we need to expand our economic metric beyond GDP. And I quite like what I've read on TSY's wellbeing budget model. Any step is a better direction.

kate,
I suspect that Key realized that the current structure/system is intractable.
I recall Bill English stupidly saying that High house prices was a sign of success, but I dont recall Key saying that.
I do remember him admitting ( after he resigned ) that GDP growth had a lot to do with debt growth and immigration. ( Does Jacinda know that this is how NZ grows..?? )
Do you think Jacinda or Grant Robertson know that running chronic current acct deficits , is part of the problem of asset price inflation....??? etc..etc..
https://www.interest.co.nz/opinion/64724/lowell-manning-says-problem-hou...
I dont see how using new metrics will change much at all..

We are all passengers in the same bus ( ie. Politicians are not driving the bus )... and because of populist politics, nothing, fundamentally, will change until the bus actually crashes...
Labour, essentially, only know how to tax and and spend and redistribute... in my view..
(Shane Jones $1billion fund comes to mind... https://www.newsroom.co.nz/2019/02/05/429963/pgf-creates-more-jobs-in-we...)
Might sound like I'm a National Man... ... I see them as a kinda..."head in the sand " Party... At least Labour have the balls to change things.... so.. like I said I see labour/national being shades of grey rather than being black/white apart

I don't agree that any step is a better direction..

Out of interest Roelof - what would you do if you were in power and had the ability to change things with disregard to polling numbers?

IO.. The big thing I'd do is reform our monetary system... My view is that one of the biggest drivers of wealth inequality has been the credit based Monetary system, that was largely unleashed with the ending of bretton Woods and also in the reagan/thatcher era.
Part of that would be the idea of Steve keens debt jubilee..

I would bring in a "land" tax... , which is a metaphor for all the natural resources that belong to a nation.
(Hopefully, this would be the only tax we had )
I do not like the way we have "financialised" everything. Hudson terms it the FIRE economy..
(Jane Kelsey has written a book called "The fire economy ).
I would also bring in an exit tax for foreign investors who repatriate profits offshore .( not too big a tax )

I would make Govt much smaller... ( both state and local ). ie.. less rules and less people. eg.. Govt spending should be no more than 20% GDp.
eg.. I'm replacing an existing freestanding fire. This requires 8-10 pages of documents + $200-300 , to get a building consent. I find this insane.. ( How did our forefathers manage..?? )

I embrace the idea that the wealth and success of a nation is based on work ethic, creativity and innovation.
I would bring in Gareth Morgans idea of "the Big Kahuna".... and rather than private sector Banks creating new money thru debt , I would introduce new money, if and when needed, as part of this Big Kahuna idea.

In terms of economic ideology, I suppose I'd be a bit of a social market economy type.
I believe in simple regulatory systems that are strongly enforced......

I would incentivise Equity investment as the primary form of Capital formation. ( Maybe no longer allow interest as a tax deductible expense). this way, maybe people would end up with more of a share in ownership of the "means of production".... i'm starting to think out loud here...so I'll stop here.

How about you..What would you do..???

ps.. I forgot to add ... I would phase most of these things slowly in .... over a period of time.

Can't argue with any of that, or put another way... I'd support all of that. But I do wonder whether a tiny little sovereign at the far south end of the globe would actually be able to implement such radical reform without the 'Davos crowd' deciding to knee cap us.

JK denied there was a housing crisis
https://www.radionz.co.nz/news/political/271023/key-denies-akl-housing-c...
In one TV interview he suggested NZers liked their houses going up in value - I.e. a good thing.

But in power he claimed homeowners liked their house prices rising, & welcomed Chinese buyers.
“Prime Minister John Key has told a talkback audience in Auckland that non-Aucklanders have told him they would like to have more Chinese buyers in their regions to push up their house prices and wealth.”
https://www.interest.co.nz/property/76953/pm-john-key-says-non-aucklande...

Actually, we need to question 'that indicator'. GDP is a measure, but it counts as positive stuff which is negative, and it avoids some counts completely. It's a tool but we treated it as a Holy Grail.

It is so very easy to talk -- I want this and that; my dream is this and that; things should be like this and that.

Just confront them with a simple question: how would you achieve what you've just said?

They will be just to repeat what they've said again, and give a almost brainwash impression that if I am in power things will get sorted out magically.

NZ politicians are really good at telling everyone what their Utopian world looks like and how wonderful it would be, BUT, almost none knows how to achieve them.

Yes, all big pictures/visions sound great, but that's no excuse for not having one. Visions are the embodiment of our values, so without them we lack a moral compass.

You are right though, the 'how' question needs to be addressed. And she addresses that in two separate statements of specific initiatives;

Doubling down on trade and broadening our trading base to protect our exporters and economy

- Reform of skills and trade training to address long-term labour shortages and productivity gaps in the New Zealand economy, and to make sure we are prepared for ongoing automation and the future of work
- Changes to tax to make the system fairer
- Addressing our long-term infrastructure challenges
- Transitioning to a sustainable carbon-neutral economy
- And of course investment in wellbeing, because this is inextricably linked to our economic success too.

And

The five Budget priorities this year are:

1. To create opportunities for transitioning to a sustainable low emissions economy;
2. Lifting Maori and Pacific incomes and opportunities;
3. Supporting a thriving nation in the digital age through innovation;
4. Reducing child poverty, improving child and youth wellbeing, including addressing family violence; and
5. Supporting mental wellbeing for all New Zealanders, particularly those under 24.

3. Supporting a thriving nation in the digital age through innovation;

This is meaningless garbage. No party is going to come out and say they're against innovation.

A good way to do that would be to drop company income tax to say 5% and use Land Value Tax instead.

lol - we might all of a sudden see a whole lot of agribusinesses that are making wildly better incomes/ROIs.

As opposed to whom - the dictatorship of the CCP, the EU bureaucrats or the dysfunction of the US President / Senate / House. While our system ain't perfect - if you don't like it, you can always go home / leave NZ. No one is holding you here. Stop whinging.

By the time students reach polytechnics it may be too late to teach students pride in their skills.
Secondary schools should be actively promoting skills based careers in conjunction with the industry training organisations from the time students arrive.

Yes. When my husband attended secondary, they used to divide the students into two streams: trade training and professional. Only problem he identified with that was that which 'stream' you went into largely depended on your family background, as opposed to your own individual preferences and capabilities. If we could improve on the methods of how those 'streams' were determined, that would be great. We have a grandson just entered secondary this year and presently he simply wants to be a sportsman :-)... of course, we don't want to burst that aspirational bubble as he is indeed a good all-rounder, but he does soon need a more realistic career path.

Kate, so sports are not a realistic career path. If I were to give that advice to my daughters ..

They are more so in the US, where many, many athletes get scholarships to attend both universities and (their version of) polytechnics. Some go on to be professional sportspeople, others just get a good education for free. It's an ideal we ought to aim for here, but club play seems to be the recruiting ground of professional sport, more so than higher educational institutes.

Kate NZ schools actively recruit for sports, often with substantial scholarships. Each year US universities actively recruit NZ school students on athletic scholarships,across many sports. Being a female has advantages, given the weighting towards American football.

Yes, I've heard of some of that from US universities here, particularly in sports that aren't the big professional ones in the US (e.g., softball, rugby), but the offshore intake by them is extremely small in comparison to their local recruiting - as one would expect. My thought is that we need to develop/encourage more local sports scholarships here in NZ. That said though, we ought to have more academic and trades scholarships as well, or those that we do have ought to be made more visible to prospective students. Iwi who have settled Treaty claims need to do a lot. lot more in this regard.

There's any amount of vocational training in secondary schools (at least the one we used) - they had NCEA available in hospitality, early childhood education, automotive engineering, electrical engineering and horticulture (off the top of my head, there were probably more).

The kids spent part of their time at school and some outside of school getting work experience.

As per Switzerland and Germany. They also have average incomes roughly double ours. My working children would love to double their wages while working slightly fewer hours - in other words be reincarnated as Swiss (a small green country full of mountains and cows).

The secondary system of academic elitism has a lot to answer for.
Not so you say?
Well they do reward good academic performance and if that fails then being a good sport.
I don’t remember awards for being a prospective artisan of any type.
We should hold up Bob Dylan for example, poet, painter and quite a good welder.

I'm sure I recall my high school introducing Dux Artium to match Dux Litterarum and Dux Ludorum.

We could promote the tradesmen as artisans eligible for Dux Artium.
Their motto is Nil bastardum carborundum...

I know some superb tradesmen, older, who never went near anything like a polytech. Time to get the education outfits out of the picture, and organise the industries themselves.

That is the aim of the industries and they have a new weapon called microcredentials.
The PM touched on that.
As you all know they are short courses of skills inserted into NCEA
The industries offer them and they can lead to offers of apprenticeships.

One thing we could address is the surfeit of knowledge wasting away in rest-homes, which should be being passed on to youngsters. We broke the inter-generational link when we monetised everything, our loss as a society.

The funding system has been structured such that when a domestic student is enrolled in an ITP the institute will run at a loss, most institutes then recruit international students to cover the deficit caused by educating local students. This can not be changed without a restructure of the entire sector to reduce the cost of education. How institutes have dealt with this is by closing down courses and extensive recruitment programs for international students.
Immigration has meant that the population increased by nearly 50% in 25 years or so however the tertiary education sector did not expand sufficiently to meet this demand and therefore to service the 50% population increase from immigrants, immigrant doctors etc.. were employed. During that 25 year period only 1 new university was opened up, by contrast in Australia during the period where Australias population grew by 50% (over the last 40 years or so), Australia doubled the number of Universities (by addition of new Universities) and doubled the number of medical schools.
Currently there are less students enrolled in all the public ITPs than the total number of students enrolled in The University of Auckland and this is the cause of the skills gap.
Kiwis have not been training their own people and they are now importing teachers, medical doctors, etc.. directly from overseas that have English as a second language.
Auckland is starting to resemble many African countries in that the Auckland Council bureaucracy is staffed by Indians bureaucrats.

Yes, can't wait to see if Chris Hipkins' discussion paper raises these issues.

Our education has also suffered from the malady of running anything and everything "as a business", prioritising numbers and revenue over research and education.

It runs much deeper than what you've quoted, Nig, but I agree with everything you say. The rot sets in at secondary, where NCEA promotes a 'least effort for most points' ethic in students. This distorts their priorities and subject choices, foobars their work ethic, and spews out a surprisingly large percentage of innumerates and illiterates, who then have to be remedied, at tertiary level, or who simply fall by the wayside. STEM and the trades suffer in particular, because the soft options of anything Cultural, anything media/music/arts-focused don't need much of the background. Feelz is enough to coast through in too many of these options. And our Gubmint is expert at Feelz.

None of this will be fixed by a top-down, structural or funding approach. It's a cultural thing, which, in true MBA fashion, will be changed only when a lot of the personnel are swapped out.

The TEC ‘investment model’ for tertiary and many years of underfunding tertiary means that all the universities and ITPs are completely dependant on international students for financial survival.
So new degrees, Masters, courses are now all created and adapted mainly to attract international students not for local students or local industry. Domestic students are really a low priority in this environment as they are not viable.
So the whole system has been perverted into an ‘enrolment scheme’ rather than an authentic partnership for local families, local industry, and authentic programmes. Fortunately many lecturers and coordinators are still able, under duress and within this system, still able to run real world authentic courses and connect students to industry.

The current system is a perverse system where local students are underfunded and is now resulting in discrimination of kiwi students. Institutes have realised that by only educating international students they run at a very healthy profit but by only educating kiwi students they go broke so if a kiwi student is marginal they fail them but if an international student is marginal they pass them. At the end of the day its about the bottom line and running at a profit and teaching kiwi students is bad for the bottom line. The regional ITPs that draw on kiwi students as they are heavily invested in their local communities have subsequently gone broke under this model and many kiwi students have become immigrant and international student haters because of the discrimination kiwi students face in the current system.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11850829

Hadn't read the linked article before. Thanks. The polytechs should never have been put in this position regarding the need for int'l student funding in the first place - that's for sure.

And moreover, electrical engineering degrees (what I would call a professional degree qualification given I assume there is likely professional registration, possibly via IPENZ or another professional association post-qualification?) should only be offered at universities to my mind.

If I recall correctly, didn't we have a number of int'l student nurses who assumed having gained an NZ degree qualification that that would give them automatic registration to work as an RN here in NZ? ... but it doesn't work quite like that, as there is the professional examination to become registered that follows?.

How much is pandering to students vs. pandering to parents, though?

Hearing friends of mine who are teachers recount stories of parents' reactions to their precious having her/his grades lower than expected...well.

Its just more waffle. The scorecard on which Labour will be judged at the next election needs to be able to point to something they have delivered.

Otherwise the report card is going to read something like this "Jacinda has been a outgoing, friendly and well liked classmate with positive and optimistic outlook. Jacinda would be advised to focus on setting clear and achievable short term goals and ensuring they are met. B+ for effort, D for Achievement."

So true, but sadly, we will have to pick between Jacinda and whoever National decides to push to the front.(Whoever fails to take a step backwards fast enough?)

Its a choice between three day old salmon sandwiches and the steak and cheese pie left in the warmer overnight,.

Yes and of course one of the biggest deliverables will be implementation of / commitment to the TWG recommendations. Big task to "sell" that one, and Simon's already said that whatever it is he'll repeal it. What a way to do politics, eh?

Andyb - focusing on short-term goals is what has got us into the trouble we're in, globally and (even as unpoulated as we are) locally.

We need to be focusing on much, much longer goals. We also meed to be focusing on the big picture. Doing so may well falsify much of our current narrative, of course. Sooooo inconvenient.....

Can't help but be a little cynical. In about 2001 The then HC Labour Govt gave UCOL $40 Mil. to fix a $12 mil hole in the whanganui Polytech. the result was that UCOL gutted the Poltech of all the high value courses it could and moved them to Palmerston North. It failed on a couple for different reasons. Having watched UCOL being run since then i do wonder about the management's competence.

And the same HC government introduced "closing the gaps" between Maori/Pasifika and European NZ. That made no lasting impression either. I keep returning to the idea that Iwi who have had their Treaty settlements really need to step up and close those gaps within their own people. We need to have a more transparent/visible system of monitoring/reporting in that regard - given the collective "we" the taxpayer have funded those claims where monetary compensation is concerned.

Willie Jackson has pointed this out time and time again.

And if my old and creaking memory serves, one of the Wanganui Poly's C-suite guys is now AC CEO....

"Ardern said growth in New Zealand was “relatively strong” at around 3%. She said that being forecast to stay close to that level in coming years, things looked OK compared to the IMF forecasting average growth in advanced economics to be about 2% a year".

We probably need politicians who understand compound math. Voters too. Although, if they all did they'd be torching the banks.......

To finish the day Simon Bridges has quoted a leaked report , saying there will be a thousand redundancies.

Have you got a link to the bridges quote from the leak?

https://www.radionz.co.nz/news/political/382045/national-leaks-far-reach...

The four hubs thing sounds like the Irish solution, not a Venezuelan solution, that is on the tec web site as recommended reading...I think.. they formed four hubs out of 14 polytechnics.
But it may be just coincidence
https://www.tec.govt.nz/focus/our-focus/itp-roadmap-2020/

TAFE system with golden handshakes for outgoing CEOs

There is a discussion paper on that as well on the tec site, comparing the Victorian and NSW systems, they are quite different
NSW sounds appalling. Victoria, haphazard but effective.

oops

oops

40M of the 100M Jacinda Adern mentions can be attributed to one institute in Auckland. Funds from a property venture were misallocated into the salaries of senior executives at the institute. There is a fine line between misallocation and misappropriation, as the senior executive at the institute were intimately involved in misallocating the funds to the senior executive it could legally be interpreted as misappropriation which could carry a prison sentence- this would be very embarrassing to the TEC - gone are senior executives with the numbers being reduced in the regional hub model.

Sadly, behaviours that could be described as mismanagement have been common, Tutu dancing, instant golf, it on cd, the list goes on.
The competitive model failed

To quote Gordon Gekko ' greed is good' and qualified by 'if you can get away with it'.

What strikes me is why get someone from Massey's Engineering School to write an influential report talking about this monopolistic Hub structure. Massey is suffering massive problems, they lost their Engineering School in Wellington and nearly lost their School at Albany. Someone from Massey will write a report tinged with all students need to be directed to Massey from its catchment and this should be made the 'Law' and neglect to take into consideration that Massey's Engineering School was voted the worst engineering School out of all the Universities.
Such a report from Massey will rubbish the idea that perhaps we should have Engineering Schools in Universities that compete and some where only the very very top students can gain entry perhaps like MIT, UC Berkeley, UCLA, CalTech, Oxford, Cambridge and the like and other providers (such as Massey) can take the less academically able students. I don't see a report on the world of student recruitment drafted at Massey being the same as a report drafted by The Engineering School at The University of Auckland. I assume a report drafted at Auckland would allow for more diversity of recruitment requirements and competition among Engineering Schools to attract the top students (based on stature and standing as opposed to regional monopoly) and options in streaming of students (as opposed to monopolizing anything that breaths within your Hub at Massey) so that Auckland can provide a student experience comparable to its international competitors at MIT, Caltech, UC Berkeley, UCLA, Oxford and Cambridge.

Perhaps the more telling report is that of the Productivity Commish on TertEd: here:

Regulation does the opposite of what it does in other sectors.
In most parts of the economy, government has an important role to play in controlling market power, limiting monopolistic behaviour, and preventing cartels. The reason for such regulation is to protect the public by facilitating new entrants, lowering prices, improving quality, and encouraging innovations to better serve existing and prospective customers.
In tertiary education, government regulates with the opposite effect: government regulations bestow market power, grant local monopolies, and require cartel structures. The results should not be surprising: significant barriers to new entrants, rising costs, and a lack of innovation in serving current or prospective students.

Eyesight problems

Well if it is that simple why Is the university sector thriving and respected and the polytechnic sector floundering and plagued by mismanagement, under the same assumptions, pray tell.

Yes, quite.

Implementation of the structure proposed E2E report (made publicly available in 2017) for TEC on an ITP restructure into regional hubs based on the Irish experience written by Massey University is going to result in 1000 to 2000 job losses, across the sector in public ITPs. Interestingly PTEs will be significant beneficiaries by the proposed structure. I would go as far as to say the net result will be a further transfer of students from the ITP sector to the PTE sector (which would constitute a further privatisation of tertiary education). The report is limited in that the impact of the proposed structure doesn't take into account the market impact on PTEs. This will be a big boost for PTEs and result in a massive privatisation of tertiary education; if this is what has been planned?
Where is a Comandante Vallejo when you need one?

Oh for goodness sake - what a load of twaddle. I suppose that's why we have only two major supermarket chains here - becuase government was doing what it is supposed to do in controlling market power? That's laughable - how come the textbook didn't work on that one, I wonder?

Another disccussion paper,lets hope those trees that theLabour led coalition plant are fast growers.

They’re planting Wilding Pine.

The report is going to talk about the ITP sector as feeders into the universities or the workforce.

I think the Polytechnics were caught between a rock and a hard place.
Born from vocational training but expected to fill the unreal expectations of vocational undergrad degrees.
They also took the employment conditions of secondary schools into an environment largely based on the
university system. Yet they had no commitment to the university goals of research, publish or perish.
Doomed from the start, they need to reinvent and fill industry needs for training.
It will be painful.

Whats your pick on the model they are going for?
A Irish structure as championed by academics from the UK or a TAFE system. There are a whole heap of other that they looked at but I've heard TAFE however the language sounds very Gaelic in origin?

Well, I have Irish ancestry so I like the Irish solution ...pragmatic, inspirational and probably won’t happen.

What do you pick as the timeframe for implementation?
It took 3-5 years for Ara?

Consultation will determine the final form and that will determine implementation time, so I’ll just watch with interest. ( no pun intended)

Regional hubs should be easy, just hire lots of overpaid civil servants.
Seeing any benefits could take a long time and possibly never.
You have to laugh...government is so inept.

....and it will only get worse.