Kiwi question: What kind of country do we want to be?
The Herald is embarking on a worthwhile effort to open up debate about New Zealand’s future in a non-partisan environment. With the shrinking base of the major centrist parties, the polarisation of opinion, the amplification of these issues by mainstream and social media on a 24/7 cycle, with the hollowing out of the public service and the absence of universities from the public square, it is hard to see where long-term issues can be shaped and implemented in an evidence-based and consensual fashion.
In their book Policy-making Under Pressure, University of Canterbury academics Sonia Mazey and Jeremy Richardson note New Zealand’s policy style is short-term, reactive, and lacking continuity, and argue for longer Parliamentary terms, standing policy commissions, and using non-parliamentarians as Ministers.
This is not a problem unique to New Zealand. In Australia, the Grattan Institute, a bipartisan think tank, reviewed over 70 policy reports issued by the organisation in the decade from 2009, mostly mainstream OECD proposals, and found two-thirds were never adopted. Where these proposals were publicly unpopular, none were taken up. Ideological party lines were also a showstopper. Other reforms were opposed by vested interests, but could get by if the evidence in their favour was strong.
There are a range of commitment devices governments can use to make adoption of policies easier, such as commissions, commissioners reporting to Parliament and royal commissions.
Another approach is through futurefocused think tanks. The Helen Clark Foundation (THCF), of which I am chair, is one such and has been operating for nearly four years, in that time producing 17 major reports and projects and holding 34 public events.
A recent report in the Global Competitiveness series on 37 countries from the World Economic Forum (WEF) suggests we are among a small group of countries able to take full advantage of post-Covid transformative economic and institutional change.
The top-performing countries were almost all small-to-medium social market/social democratic counties with competitive economies and developed welfare states: Denmark, Finland, and Sweden in the first rank, with the Netherlands, Canada and New Zealand not far behind.
In other words, we are on course to maintaining an open economy underpinned by environmental protections and socially cohesive welfare state arrangements.
But there are clouds on the horizon. Treasury, in its forward projections, has identified major funding shortfalls amounting to over 15 per cent of GDP by 2061 for our pension and healthcare arrangements. And these are not matched by any foreseeable funding commitments.
New Zealand has a relatively low level of taxation, skewed towards income tax. Furthermore, our top tax rate is the lowest in the OECD, a higher proportion of income tax is charged on personal (rather than corporate) tax than in all OECD countries bar one.
Alongside Australia, New Zealand is the only country in the OECD that does not have social security taxes.
Across the OECD social security charges account for over a quarter of the tax take. Typically, these charges fund pensions, healthcare and other social protection systems. It is not surprising, then, New Zealand will find itself short on funding pensions and health, although ACC and KiwiSaver provide ready-made social insurance/social security options.
Furthermore, other areas of investment that might be considered, like defence and overseas development assistance, tend to be given lower priority in budgetary considerations, despite heightened regional security issues.
New Zealand has a Fiscal Responsibility Act, which has greatly improved the management of the government’s financial system and has increased fiscal transparency.
Perhaps we need a Social Responsibility Act, which gives governments an equal responsibility to respond to social need.
With luck and good management, we could get to a position where we could do away with the partisan name-calling with changes of government when it comes to accepted indicators of material need, health, education, housing, and labour market policy.
But we would still need broad consensus on economic and institutional policy that could provide the wherewithal to underpin the country we want to be.