Trump a useful distraction as Joyce rolls up sleeves
US ruckus making NZ attractive but desired growth path far from assured
The noise out of the US just increases New Zealand’s attractiveness as a destination for both people and investment capital.
S teven Joyce: “I get up and and check Twitter every morning just to see what is going on. “It went from a position of being worried about somebody’s tweets to now being reassured when he is tweeting.
“It’s the days when he is not tweeting that I really worry about.”
No prizes for guessing who the Finance Minister was talking about at the annual “Oscars” for the NZ financial community — the Infinz Awards. There were bon mots aplenty from the politician who will next week unveil his debut Budget, after eight years as Bill English’s understudy.
I’m sure the Joyce sentiment is shared by many US politicians, who have ceased to be either amused or stunned by the relentless @ realDonaldTrump Twitter feed.
But just months into his presidency, Trump is yet to make any real headway on the big- ticket items that should have defined his presidency: taxation reform; refocusing on trade agreements; and jawboning America Inc to place more manufacturing back in the US on the back of lower corporate tax rates. Uncertainty reigns on the policy front. Instead, Trump has diverted himself by scoring political own- goals — the latest the James Comey affair, where former FBI director James Mueller has now been pulled in as special counsel to oversee the investigation into Russian meddling in the 2016 election.
Tweeted Trump: “This is the single greatest witch hunt of a politician in American history!”
Stock markets have not been significantly impacted. But the failure to make headway on the White House agenda — which amounts to healthcare, tax reform and a fiscal stimulus — has undermined the strength of the dollar.
Joyce reckons the United States has lost track of what made it a success on the economic front.
The noise out of the US just increases New Zealand’s attractiveness as a destination for both people and investment capital. Joyce isn’t giving much away about next week’s Budget, instead savouring the relative success of the NZ economy when viewed through a GDP growth lens.
It has been a “pretty good story”, with economic growth in all but one quarter of the past six years. And if projections by the “understated” Reserve Bank governor Graeme Wheeler ( who mentioned that growth record to Joyce) are correct, there are another four years ahead at 3 per cent growth, which could result in New Zealand posting a “decade of growth”.
This would be an exceptional result in the post- global financial crisis environment, and underpins why New Zealand is still a magnet for immigrants.
Yesterday, the latest figures showed that annual net migration reached 71,885 in the year to April 30, versus 68,110 in the same period a year earlier and on a par with the 71,932 in March. That rising immigration is putting pressure on housing and infrastructure and is set to be a major election issue.
But Joyce is endeavouring to paint a different picture to deflect concerns over these persistent pressures. “Just do the maths,” he said. “We’re just not big enough to absorb that economic growth domestically.”
The Joyce construct is that whenever the NZ economy starts to grow, it soon hits capacity buffers: labour shortages emerge, house prices go up and “before too long the Reserve Bank is blowing a whistle”.
This time round, he contends, New Zealand is in a different space: trade is hugely important; there needs to be continued innovation in business; growth in the domestic workforce, including bringing in skilled immigrants; more investment; a balance between growth and the environment in the regions; and a discussion on infrastructure.
On the macro side, it comes down to balance between strong fiscal policy and strong macroeconomic policy.
Trouble is, this approach is not bold enough and big enough to provide the necessary housing and infrastructure for the big upsurge in migration.
I’ve argued that it is time for the Government and the private sector to work jointly as a “brains trust” to solve some of these meaty issues.
This country is behind the pace when it comes to applying financial leverage to fully fund the growing infrastructure gap sparked by rocketing migration.
Spooked by a series of major earthquakes, the Government is wary of accruing too much debt in case it needs to use its balance sheet in the event of another costly natural disaster, or a recession.
But coming back to Trump’s America and Brexit, international perceptions of this country have changed.
Trump is a useful diversion, but it will take a step change to properly underpin Joyce’s desired decade of growth.
If he wants to turn his predecessor’s mantra about the “decade of deficits” English inherited in 2008 to one of a “decade of growth”, he has more work to do.