Sideshows or news?

Kapi-Mana News - - OPINION / NEWS -

As busi­ness com­men­ta­tor Rod Oram pointed out re­cently, ex­ports com­prise only 9 per cent of Auck­land’s eco­nomic ac­tiv­ity – with the rest be­ing de­voted to meet­ing the con­sump­tion needs of the city’s 1.4 mil­lion peo­ple.

That’s no way to run an econ­omy, Oram ar­gued, adding that no-one can hope to build a world­class city on the likes of serv­ing lat­tes to one’s fel­low cit­i­zens.

Adding value to ex­ports though, just doesn’t seem to be our forte.

New Zealand’s ex­port trade, for ex­am­ple, re­mains based on much the same low-value agri­cul­tural prod­ucts as it was 100 years ago.

In any given week, such mur­mur­ings from the me­dia side­lines are rou­tinely lost amid the round of photo op­por­tu­ni­ties, sideshows and Bee­hive an­nounce­ments.

Lately the po­lit­i­cal agenda has been dom­i­nated by an­nounce­ments about the re­build of Christchurch, al­le­ga­tions about how men­stru­a­tion af­fects women’s pro­duc­tiv­ity, and by the Prime Min­is­ter’s at­tempts to pur­sue a trade pact with In­dia – which in­cluded a visit to a Bol­ly­wood film set, and a photo op­por­tu­nity with his wife at the Taj Ma­hal.

At home, events of com­pa­ra­ble sig­nif­i­cance were un­fold­ing vir­tu­ally un­no­ticed.

With­out fan­fare, Merid­ian En­ergy – which is be­ing read­ied for par­tial sale next year – paid a spe­cial $521 mil­lion div­i­dend to the Gov­ern­ment, thanks to the sale of its Lake Tekapo as­sets to its fel­low state-owned power com­pany, Ge­n­e­sis.

To fi­nance this pur­chase, Ge­n­e­sis bor­rowed $546 mil­lion from banks and raised $275 mil­lion from in­vestors, and paid Merid­ian $821 mil­lion in all.

De­spite the bor­row­ing, the mar­ket eval­u­a­tion of Ge­n­e­sis rose sharply there­after – and why? As a Ge­n­e­sis spokesman told re­porters, the rise was partly be­cause of ‘‘the com­pany’s longterm view on whole­sale elec­tric­ity prices’’.

In other words, the pub­lic looks likely to be fi­nanc­ing – via higher en­ergy prices – this ex­er­cise in book-value wealth cre­ation. It is wealth gen­er­ated not by pro­duc­tive ac­tiv­ity or by adding value to the nation’s ex­port earn­ings, but by a trans­fer of wealth be­tween state agen­cies, and ex­tracted (ul­ti­mately) from con­sumers.

As Oram has in­di­cated, we seem bet­ter at this than we are at adding value to our ex­ports.

An­other ex­am­ple? Me­dia at­ten­tion fo­cused again on New Zealand’s lack of a tax on cap­i­tal gains, a tax that most other de­vel­oped coun­tries take for granted.

Not only would such a tax raise rev­enue, but it would push in­vest­ment down more pro­duc­tive chan­nels than the buy­ing and sell­ing of houses.

The ar­gu­ment mounted was also one based on fair­ness – namely, that or­di­nary New Zealan­ders have been priced out of af­ford­ing to buy a fam­ily home by prop­erty in­vestors al­lowed to treat the gains from hous­ing spec­u­la­tion as pure profit.

Or­di­nary wage-earn­ers are re­quired to pay tax, but they are ef­fec­tively sub­si­dis­ing prop­erty in­vestors who pay no tax at all on the wealth ac­cu­mu­lated via cap­i­tal gain.

Pre­cious lit­tle of this de­bate fil­tered through un­til talk of Labour’s new pol­icy heated up last week. Even dur­ing an elec­tion year, the agenda of po­lit­i­cal ac­tiv­ity tends to de­vote lit­tle or no time to con­sid­er­ing the struc­tural as­pects of the econ­omy.

And that’s de­spite the fact that, ar­guably, those eco­nomic set­tings im­pact more sub­stan­tially than the pass­ing pa­rade of head­line events on the well­be­ing of the pub­lic.

Gor­don Camp­bell is a po­lit­i­cal colum­nist who has writ­ten for The Lis­tener and Scoop.

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