New Zealand needs some serious changes to increase its productivity growth, which is hopeless. Some of the things I can see are:
- Reducing government expenditure (since the state is not the best in terms of productivity)
- Removing road blocks caused by RMA, health and safety and council policies
- Looking at economic dis-incentives like working for families and welfare dependency
- Improving communications infrastructure (I am not sure about the benefit here, but it can't be bad and everyone is talking about it)
- A general review of the law books, which seem to be stuffed with unnecessary regulations
- Building more roads and upgrading those which are close to capacity
- Building more power stations and a concerted effort to reduce the cost of electricity (by more supply) and the certainty of future electricity
- Turning New Zealand around sideways so it can encompass more time zones
More particularly it is clear that we could have a massive minerals boom here in oil and coal, and we should get into this as soon as possible.
But my real question is this, taken from Antidismal quoting from Forbes.com:
Key's hope is that building good relations now with the Maori Party will pay dividends in later elections where the Maori Party may well play kingmaker. Key may also be hoping that moving slowly with a broader coalition is a better recipe for longer-lasting economic reform than moving quickly with fewer allies. Our hope is that he remembers to move at all.
In my limited experience of reform in New Zealand, the fast approach seems to have worked best. Roger Douglas transformed a number of parts of the economy overnight. When car duty was abolished slowly, at the rate of 5% a year for 5 years (from memory), the industry asked that the duty be abolished immediately, as they could not sell any cars.
While it is nice to think that you can signal a change and then slowly move there, the result is often more uncertainty, less business investment and more consumer pain than if you move quickly. Perhaps the short term pain in this regard is unemployment, which has a bit of a lag. But New Zealand's labour market is significantly more flexible than it was in 1984.
If John Key has a prescription for improving New Zealand's productivity, and I hope he has, then he needs to move on this quickly. He should announce major measures before Christmas to give people time to think over the holidays. He should legislate early and often.
By April next year, we should all feel as if we have been punched in the stomach, and moving forward in some new direction. It would not be good if by then we were vaguely aware of a slight twinge in the lower abdomen, and unsure whether it will develop into a healthy appetite or appendicitis.
People say business craves certainty. It is true that businesses can't / won't invest when they can't form a reasonable view of what is going to happen in the future. National needs to create that certainty, but on its new track.