Sideshows or 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.