Key points Rod Oram on the premier’s legacy
John Key’s shock resignation means NZ can assess his administration’s impact.
John Key’s economic legacy is sharply defined by his response to the biggest, fastest, most fundamental changes in the global economy ever. He was highly opportunistic, moderately disciplined and deeply non-strategic.
Each of his three terms presented him with very different, but overlapping challenges.
The first term, 2008-11, was massively shaped by the Global Financial Crisis followed by the euro crisis. The GFC was accelerating from late 2007 and the great scale, damage and dangers of it were obvious by the election in November 2008.
But National was utterly unprepared. It was so consumed by calculations of how to regain power after nine years in opposition, it offered only conventional, traditional policies. Redolent of the late 1990s, these failed to address the fast changing world.
In office it acted decisively on the soaring budget deficits, thanks to the deep knowledge of Finance Minister Bill English. If he becomes Prime Minister, he will enjoy growing surpluses assuming no economic setbacks.
The last year of the first term threw in another enormous challenge – the Christchurch earthquakes. Again, the government responded well tactically, but poorly strategically (nz2050.com/QuakeRO).
Ultra-fast broadband was the only big new idea National had offered in the 2008 election. It took almost two years in government to begin the roll-out.
Meanwhile, the Job Summit in March 2009 produced little of substance. By Christmas 2009, economic strategy consisted of a dozen or so A3 sheets of paper, Colin James reported.
By early 2010, the government unveiled its Economic Growth Agenda. This quickly morphed into the current Business Growth Agenda. It focuses on six ingredients: infrastructure, exports, innovation, capital markets, natural resources, and skilled and safe workplaces.
Economic conditions in Key’s second term 2011-14 were markedly different from the first. Growth was resuming here and abroad. Rebuilding Christchurch, booming global dairy markets and a soaring stock market, gave ample scope for the government to be opportunistic with the likes of the partial selldown of state-owned electricity companies.
The government progressed the regulatory reworking of financial markets and some other frameworks. But it was abysmally slow on others such as workplace safety and the environment.
The BGA was fleshed out with literally hundreds of government initiatives, ranging from the ambitious to the trivial, and new to co-opted from existing activity.
The two most important for developing a more sophisticated, higher value economy are Callaghan Innovation and the Primary Growth Partnership. The jury is still out on both. It took the government four years to establish Callaghan as its central dispenser of R&D funding. While the tech sector is expanding at a decent clip, it’s still not clear how useful Callaghan is. NZ is still lagging on such companies, the Productivity Commission reported recently.
The PGP’s 21 projects to date have attracted $728m of funding from government and the private sector. But the meat sector accounts for 46 per cent of the money.
Likewise, the government’s early targeting of oil, gas, mining and back-office financial services as boom export sectors, have all been busts.
Key’s third term has benefited from big booms in tourism,
Key's third term has benefited from big booms in tourism, housing, construction and migration.
housing, construction and migration. The government has been highly opportunistic, but has lagged on the policies and investment to cope. The RMA, environment and climate are just three crucial areas Key is leaving to others to sort out.
Under 8 years of Key’s leadership, GDP per capita has grown only 7.6 per cent in real terms. Wealth inequality has risen, environmental sustainability has fallen and productivity growth, the factor determining our standard of living and economic resilience, remains among the lowest in the OECD.
On current trends we will achieve none of Key’s 2025 goals: catching up with Australia’s GDP per capita; lifting exports from 30 per cent of GDP to 40 per cent and doubling the value of exports.
So, I rate him 9 out of 10 for effective salesmanship here and abroad, 8 on fiscal discipline, 7 on opportunism and 6 on regulatory improvements; but 2 on deep reforms and 1 on long-term strategy.