We are where we are, and where we are is a bad place. Economic output per person is down 3.9% in two years. That’s as bad as the worst of the GFC.
The Government’s response is to deny there’s any problem. “That’s June quarter data,” they said, “September will be better, promise.” Finance Minister Nicola Willis calls it an “ugly recovery” but still insists it is a recovery – even as the economy slips backwards.
I get that a politician’s first instinct is to deny there’s a problem when something goes wrong. But burying your head in the sand won’t fix what’s wrong with the economy. It’ll just get worse.
Nicola Willis at the Mood of the Boardroom event hosted by NZME earlier this week. Photo / Dean Purcell
Politicians tend to think that any admission of failure or weakness will be punished by voters. That under-estimates Kiwis’ intelligence.
We’re interested in results, not ideology, and we know that, in life, when something’s not working the best thing to do is try a different approach. Voters aren’t going to reward a government for sticking to its guns while it leads us into disaster. They will back a government that realises it needs to change tack, makes those changes, and delivers a better economy.
Real leadership is facing problems head-on and, if the current plan isn’t working, coming up with a new one.
We’ve had two years of this Government’s Plan A. It has failed. It’s time for Plan B.
So, what should Plan B look like?
Focus on energy
Household electricity and natural gas bills have risen by $800 million in the past two years – eating up pay rises. In the Mood of the Boardroom survey, CEOs identified energy prices and security of supply as top concerns. Power-hungry industries are going to the wall.
It’s time to break up the gentailers and supercharge investment in new generation through solar and batteries. The Government should also subsidise households to replace old gas and electric heaters and hot water cylinders with efficient heat pumps – a new study shows that would save households $1.5 billion a year, and free up 15% of gas and 10% of electricity for industry.
Get building
At its peak, the Government house-building programme was building 7000 homes a year. Housing Minister Chris Bishop recently told Parliament that Budgets 2024 and 2025 have delivered just 45 houses so far.
Christopher Luxon looks up as Chris Bishop Minister for Transport moves a crane. Photo / Michael Craig
We need more homes – the families living in cars and garages are proof enough of that. Each house built creates the equivalent of several full-time jobs and helps avoid another house price boom that will make housing even more unaffordable. Time to get building again.
Support higher wages to retain talent
New Zealand is part of an international market for health professionals and teachers. If we want to retain our best talent in these sectors, we need to give them the pay and working conditions that will make them stay, rather than up sticks for Oz.
Offering our doctors, nurses and teachers below-inflation pay increases and characterising them as greedy is a sure way to get them packing their bags. And giving effective pay cuts to nearly 200,000 middle-class workers just makes them tighten their belts and spend less.
Pay people fairly and, not only will they stay and be more productive workers, they will spend that money in the economy and create jobs.
No more tax cut lolly scrambles
The Government has thrown over $20b of tax cuts at landlords, businesses and middle-to-high income families in the past two Budgets. Every cent of it borrowed money. It hasn’t made a jot of difference to the economy, except to direct more money into landlordism, rather than productive businesses. Any more tax cuts need to be carefully targeted at productive investment, not lolly scrambles for the well-off.
The Government can spend the next 12 months insisting nothing is wrong, refusing to change, and praying lower mortgage rates will finally see the middle class feeling better off. Or, it can have the courage to admit the plan isn’t working and try something different.
The path it chooses might be the difference between a second term or being turfed out by disillusioned voters.