New Zealand needs shot of confidence
Economy is recovering well relative to other developed nations but complacency could undo us just as we’re getting back on our feet
It is now over a week since Grant Robertson presented his fourth Budget to Parliament, the first Budget produced by a single political party since 1996. Notably missing, therefore, were the sometimes sizeable crumbs thrown to minor coalition partners. This gave the Budget a thematic coherence which has often been harder to discern in some Budgets of the past 25 years.
The centrepiece was obviously the increase in benefit levels which was welcomed by beneficiaries, but less warmly so by those who aspire to speak on their behalf. In that respect, time-honoured traditions in terms of responses were being followed. Almost every other interest group managed to say not enough went their way, which is a Minister of Finance’s signal that he, or she, got it about right.
Of course, this largesse implies the running of a significant deficit. What is not so well understood is that cutting that deficit significantly would be fiscally contractionary: that is, it would tend to shrink the economy just as we are getting back solidly on our feet.
The economic and financial commentators understood this point and most of them even understood that it was more than time for a significant adjustment to benefits overall, which would also help the economy. (I would point out to my friends in Parliament that Working for Families lifted far more children out of poverty than this Budget did as the expenditure was concentrated on families with children.)
The short-term economic outlook for New Zealand is very good compared with other developed economies. Some sectors, such as international tourism, cannot be given firm timelines for when we can reopen our borders to people from a wide range of countries. The somewhat wobbly nature of the transtasman bubble should be a warning and a confirmation that the Government was right to take a cautious attitude to opening up in that respect. The speed with which Fiji has slipped into a Covid crisis is another warning sign. A number of European countries are now facing the possibility of a third wave of Covid, this time the Indian variant.
We have every reason to be confident about our own prospects. A major ongoing threat to our economic recovery at the moment comes from the problems with shipping in the supplies that many parts of our economy need to function at full efficiency.
Many of us have experienced delays in things arriving from overseas. Imagine how much more serious that can be for businesses, especially in construction and manufacturing.
Included in that uncertainty (for other reasons apart from shipping problems) are the supplies of the Pfizer vaccine that many of us are now having and which is a crucial part of our path back to normality. The National Party has tried to blame this on the Government. That is just being silly and reinforces National’s lack of political traction. In any case, Pfizer is now delivering on schedule.
If we can maintain confidence in our own abilities we should be able to fulfil the predictions that in the immediate future we will outperform Australia economically (noting that these forecasts are prepared entirely independently by the Treasury). The rub is that we have to continue to do more to shift our growing economy in a sustainable direction.
The Government has done more to ensure that we will have the skills we need to fill the jobs which are going to be created than any Government has for a long time. Trades and technical training have taken on a whole new lease of life as the Government has assumed much more of the cost. This crucial breakthrough for the New Zealand economy needs to be built on for the future.
Added to all of this is the reputation we have established over the last year or so as one of the few countries to have so far managed the pandemic successfully. This is reflected in increased overseas investment interest, which can hopefully be channelled into greenfields activities with a strong sustainable bias.
The Government has shown strength in resisting many different siren calls to open up prematurely. The Swedish model, advocated by many in the business sector earlier on, came and went amidst thousands of deaths. Even Taiwan is no longer the perfect example we should copy.
We can allow ourselves some confidence about what we have achieved and where we are going at the present time. There have been hiccups along the way. Some have been created by individuals behaving thoughtlessly or stupidly; some have pointed up the problems resulting from the lack of a central operating arm in the health system to sit alongside the ministry’s policy and monitoring functions. Having had two spells in hospital in the last few weeks, I can attest to the fact that the dedication of the staff is not matched by the systems they are working with.
The reform of the health system is a major task the Government has taken on. It is an entirely necessary one.
The immediate threat to our continued success is complacency. I sometimes get the impression many of us are unaware how bad things still are in much of the rest of the world.
The necessity of getting vaccinated has still not been heard by some, while others wallow in fantastical conspiracy theories and delusions about the nature of the vaccine and its side effects. So far the Pfizer vaccine has proved effective against the new variants of the virus that have emerged.
The fact remains that the Indian strain of Covid-19 spreads more quickly and more easily than the previous variants. The example of the Melbourne outbreak shows how much more pressure this could place on the frontline defences that we have created over the last year. It would be folly in the extreme to assume that such an outbreak could not occur in New Zealand. So our confidence needs to be matched by constant vigilance.
The Government has shown strength in resisting many different siren calls to open up prematurely.