February 2, 2025 • 22 mins
If the theme of 2024 was ‘cutting back’, then 2025 is all about ‘growth’.
The word appears 31 times in Prime Minister Christopher Luxon’s State of the Nation speech – and for good reason.
Luxon said it’s the “key to brighter days ahead” after experiencing the “biggest recession since the early 1990s.”
Finance Minister Nicola Willis has been handed a revised Economic Growth portfolio as part of that planning, working on things like driving up tourism numbers, and international investment.
This week on The Front Page, we’ll be unpacking some of the Government’s plans for the economy, how they’ll work, and if they are right for New Zealand.
Later on, we’ll get some insight into how and whether New Zealand can actually stimulate growth from independent economist Cameron Bagrie.
First up today though, NZ Herald deputy political editor Thomas Coughlan is with to explain why growth is the topic of conversation.
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You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
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Producer: Ethan Sills
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Episode Transcript
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Speaker 1 (00:05):
FOTA.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by The New Zealand Herald. If the
theme for twenty twenty four was cutting back, then twenty
twenty five is all about growth. The word appears thirty
one times in Prime Minister Christoph Luxen's State of the
(00:28):
Nation's speech, and for good reason. Luxon said it's the
key to brighter days ahead. After experiencing the biggest recession
since the early nineteen nineties, Finance Minister Nikola Willis has
been handed a revised economic growth portfolio. As part of
that planning, working on things like driving up tourism numbers
(00:50):
and international investment. Later on, we'll get some insight into
how and weather New Zealand can actually stimulate growth from
Independent Economy Cameron Bagri. First up today as that Harold
Deputy Political Editor Thomas Coglin is with us to explain
why growth is the topic of conversation. Thomas, why do
(01:14):
you think the government has chosen to focus everything this
year on growth?
Speaker 3 (01:20):
I mean a short answer is that because there isn't
any The economy was shrinking at the end of last year,
and a shrinking economy is really bad because it means
that all of us get poorer and life just gets
a bit tougher. And if a government wants to get reelected,
then it wants to make life better for people. So
the short answer is that when the economy is shrinking
is really bad. So we need to get it growing
again to start raising living standards for everyone. Here that's
(01:43):
the living standards that you enjoy when you're not giving
government services. But obviously, as the economy grows, people pay
more taxes, and that means that the government gets more
money and to pay for the public services that we
all enjoy. So if the economy grows by an extra
percentage point of GDP up of what you think it
is growing at now, then that equates to an extra
one point two billion dollars a text revinue the treasury sets.
(02:07):
So if you can actually get the economy growing, it
is a good way of or growing faster. I should say,
it's a good way of making life better for people.
The trouble is like, it's just really hard to get
the kind of economic growth that the government wants. The
long term average of the economic growth is pretty bad.
And if you want to make the economy will grow
this year because interest rates are falling and we're kind
(02:28):
of moving out of that inflation reserve bank induced recession
that we had, So the economy will grow that the
government will want it to grow faster because it's that
faster growth, the bigger growth that won't just get us
back to where we were before. Well hopefully if it works,
and there are some question marks over that and will
hopefully make life better for us and make it life
better than it was before, but that's that's pretty tough.
(02:50):
One of the things that's really important just to finish
that question is that Treasury recently has been revising down
New Zealand's growth forcusts because they think that structurally the
New Zealand economy is just not as strong as we
previously thought it was. So every year from twenty twenty
two to now, every six months, Trutories redes its forecasts,
and each of those forecasts have basically become more pessimistic
(03:13):
than the last forecast. That means that all of us
are poorer. So in real terms, all of us are
about one thousand dollars poorer a year, actually a wee
bit more than that, because that figure uses an older
uninflatent adjusted number, and it also means that there's less
tax revenue for the government. So it's really it is
a good thing that the government's focusing on it. Every
government focuses on it. Every government wants the economy to growth.
(03:33):
But yes, you can see why they are focusing on
it because it's essential to providing a good standard of
living for people.
Speaker 2 (03:40):
National is blamed labor for most of their economic woes. Hey,
is that still a fair argument. But we're about midway
through their term now, aren't we How long do they
have to keep blaming labor.
Speaker 3 (03:52):
That's a very questioner. I've been in the press gallery
long enough to know that labor was still using the
nine long years of neglect long after they took office
in twenty seventeen. I think they'll blame labor for some time,
but I don't think it's it is all labour's faults,
or even partly labour's fault. To go back to your
previous question, those two DP numbers that keep getting revised.
(04:15):
The real problem is that structural weakness in the New
Zealand economy and National's main allegation to who main allegations
against labors that they spent too much money and that
they were anti growth. Now is to spend too much
money argument, Yeah, in some of those budgets that labor
did in the second term, they did spend more money
than in retrospect, it looks wise to have spent, but
(04:37):
not vastly too much money, just probably a wee bit
too much money, and money that they had little concrete
plan of paying for. But in terms of why Labors
left this government such a mess of deficit, the main
reason for that was that revision to those growth forecasts,
the amount of growth that was in the that were
we were expected to get was going to generate more
(04:58):
money and for the government and would mean that the
books would be in much better shape now Because that
growth has not transpired, It's meant that the spending that
labor had done and had planned to do doesn't have
enough revenue coming in to pay for it. The issue
of Labor was not that they spent too much money,
it's that the growth that was meant to pay for
that that spending has not actually transpired now. Equally, the
(05:21):
other relegation, which is that they were anti growth, that
is slightly more complicated. They were certainly they ushered in
a resource management regime where there was a debate about
whether or not that was too restrictive that it wouldn't
allow people to build. They were, I suppose, quite keen
on labor laws. They hiked them in and wange a lot.
The Fair pay agreements gave a lot of rights to workers,
(05:41):
which were obviously great.
Speaker 4 (05:42):
If you're a worker.
Speaker 3 (05:43):
But if you're a foreign investor, you think, well, maybe
we want to go to a country that has your
rights for workers. Pretty grim, isn't it. But that is
that the calculation that's made. Of course, Australia is rich
enough that they tend to have greater workers rights and
they also get foreign investments. So it's very very complicated
and it really depends on it policy area. I guess,
what are.
Speaker 2 (06:01):
Some of the policies and initiatives that the government's actually
announced all ready to try and level up that economic growth.
Speaker 3 (06:08):
The first big one is the Digital Nomad visa, something
that's been in the works for a long time. I
would actually say I don't think that this has been
announced as part of a growth agenda. I think this
is something that the government was looking at that Labour
actually wanted to do as well, and now seems like
a good time to do it, and they've just rebranded
it as a growth as growth policy. I don't regards
on that that is the way the politics works, but
(06:30):
this FEESA basically allows people who can work remotely from
say you're an American and you can work remotely, or
you can just arrive in New Zealand, open up your
laptop and stay here for nine months working for your
American firm, getting paid by your American firm, and traveling
around the country as a tourist having a great time
and hope. The hope is that with policy like that,
it will attract lots of wealthy foreign workers who have
(06:53):
a great time in New Zealand. Seal of our sites
go to restaurants and bars, spend money, be taxed on
their gst of course, and boost the tourism and actually
boots a lot of industries because it will add population
to New Zealand, and a population that life system and
that will stimulate demand. We hope it's a good policy.
I think Australia doesn't have a similar scheme. So I
suppose if you're someone from the rich Northern Hemisphere looking
(07:16):
to escape the northern winter and have a lovely southern summer,
then New Zealand starts to look pretty attractive.
Speaker 2 (07:20):
And we're also looking at this year how fast track.
We've got RMA reform, reform of health and safety laws.
We've got a mining announcement from Shane Jones, less red
tape as well. So there's a lot of things that
the government is angling towards. Do you think any of
it's going to work?
Speaker 3 (07:37):
That is a very good question. I actually think the
more difficult question is how you know it's going to work.
And the government's sort of avoided putting strict targets or
performance metrics around this because this year. One of the
reasons we haven't had growth in the last year has
been at the Reserve Bank piked interest rates really high
to squeeze inflation out of the economy, and that has
meant the economy has shrunk and like I've got pretty
(08:00):
hard as we all know last year. Now this year,
the inflation has largely gone, or the problematic and a
level of inflation's gone, and the Reserve Bank is cutting
interest rates and that will restore growth to the economy.
It will mean that people borrow more, invest more, and
spend more and grow the economy. So there will be
growth this year and the government will of course try
to play and credit for that growth, but a large
(08:21):
part of that of that growth will come from the
fact that you know, we're just we're at a different
point of that interest rate cycle. One would think that
stuff like fast track, it's hard to see with health
and safety it would really depend You'd have to talk
to some companies to and ask them, did you look
at investing in New Zealand and growing a presence in
New Zealand and was it health and safety laws that
stopped you from doing that? I certainly haven't seen cases
(08:43):
of that reported, but you know there might be. But
parsuably stuff like fast tracked, you would think that that
will that that is a tracking foreign investment to New
Zealand to build things, to create jobs, to spend money here,
which will which will grow the economy. So yes, like
those measures probably will mean that there is more growth
than the other wise would be, but it'll be very
difficult to disentangle. Well, you know how much of the
(09:04):
growth is thanks to fast tracking these other measures, and
how much is just thanks to the fact that the
reserve banks cutting interest rates. People are borrowing a whole
lot of money and specificative how we usually grow the economy.
Speaker 5 (09:18):
But I'm telling you recovery isn't enough. We have to
go for growth and driving economic growth is absolutely critical
for improving our quality of life, strengthening our local businesses,
lifting our incomes, and creating opportunity all across New Zealand,
because a growing economy means giving Kiwis more choices and
(09:39):
the confidence to find a new job, or hire a
new staff member, or to open a new business, or
to start a family.
Speaker 2 (09:49):
The other word of the year seems to be the
word no, or they're now being a lack thereover it.
I suppose Luxon has said, there's always a reason to
say no. If we keep saying no, we'll keep going nowhere.
We need larger ports, we need more concerts. What do
you make of this new anti no stance.
Speaker 3 (10:10):
I think it's been it's interesting, it has been quite
well received by people, and certainly I think New Zealand
has has historically had a very restrictive regime when it's
come to stuff like that, even part concerts, stuff like
the resource management. It's been pointed out that's reported. It's
been reported this week I can't remember where that time
that that Christopher Laxon is in a local MP himself
lobbied to say no to a housing development in his electorate.
(10:33):
So you know, everyone is New Zealanders do love saying no.
It's what we do. So I think I think it's
quite a persuasive persuasive message.
Speaker 4 (10:42):
Certainly.
Speaker 3 (10:43):
I think when you look at it as from the
speak to of New Zealand, you look over the ditch
in Australia, which is arguably one of the most successful
economies in the world, and New Zealand's not an unsuccessful economy.
We're just much much less successful than Australia, which makes
Australia look much more successful than it is. But they
are probably better saying yes to stuff like mining. They're
a bit less hung up on, you know, the agricultural sector.
(11:05):
They are a bit more pro growth in those in
those areas and certainly in the past, you know, with
then we're blots of agriculture through the lens of climate change.
It's obviously a very big mess. But agriculture also if
we say, you know, quote unquote yest to agriculture, then
then you would, you know, maybe expect to see more
economic growth the dairy prices that reportize at the moment. Also,
you know, mining, we we do very very little mining
(11:28):
in New Zealand at the moment. Australia obviously does rather
a lot, and and so there's probably rude to grow there.
So if we were to decide to say yes to
mining and then you probably would see more economic growth.
And of course one of the reasons why this is
so difficult is that obviously that you know, the reasons
are saying no are often quite good ones. The agricultural
emissions issue isn't going to go away simply by saying
(11:48):
yes to more agriculture, and you know, environmental degradation aspects
of mining aren't going to go away simply by saying
yes to mining. So there's a really very real trade
off between saying yes to growth enjoying the better living
standards that come with that. You know, they think that's
probably where chrystper Lutson's are being quite innovative with this
REASUREP is saying that by saying yes to economic growth,
(12:09):
you're saying yes to better public services and yes to
better living standards. But of course, the reasons why we
have historically said no, don't go away either, which is
that you know, New Zealand has a beautiful environment which
many New Zealanders love to protect. And it's a difficult
decision and that's why this debate is going to be
such a challenge.
Speaker 6 (12:30):
Chrystper Luction says, the bottom line is that we should
say no less and yes a lot more. What did
they say to delivering new inter island fairies?
Speaker 4 (12:39):
No?
Speaker 6 (12:40):
What did they say to delivering a new to need
an hospital?
Speaker 4 (12:43):
No?
Speaker 6 (12:44):
What did they say to delivering affordable water reform? What
did they say to delivering new state housing? What did
they say to delivering school classroom O brains? What did
they say to delivering improved infrastructure for the care.
Speaker 2 (13:03):
I've been watching a lot of clips out of the
debating chamber this week. Are you sick of hearing both
sides of the chamber just shouting the word no yet?
Speaker 4 (13:13):
Yes?
Speaker 3 (13:13):
Well, actually, this week is my seventh anniversarriend of Press Gallery,
and I suppose the whole time that I have been here,
the economy has been in a pretty challenging state. And
one of the things that, certainly as a journalist you
get quite concerned about is the fact that Parliament has
become a bit of a circus, if an equal opportunity.
Speaker 4 (13:30):
Circus as well.
Speaker 3 (13:31):
I don't think one side of the House is more
or less culpable than the other. But as the long
term economic issues become more and more acute, politicians seem
less and less inclined to debate them seriously, and more
and more inclined to her insults at each other. And that,
you know, that's quite concerning for New Zealand too, And
you think there's a logical reason for this, which is
that those long term issues are difficult to debate, and
(13:53):
they involve everyone making difficult trade offs with what they
believe and compromises on what they believe. And it seems
many of our politicians, not all of them, but many
of them seem to turn their backs on that difficult
debate and would instead prefer to her insults as each other,
which I don't think quits them very well, and it
certainly doesn't doesn't look at the country very well because
(14:14):
because it means that important discussion hasn't really had.
Speaker 2 (14:16):
Thanks for joining us, Thomas, thanks for having me. Now
on the front page, we talk with independent economist Cameron
Bagri for his thoughts on the government's new growth focus.
Speaker 4 (14:42):
Well, it's not just about growth. One of the most
important things across society is one of the big drivers
of growth, and one of the drivers of growth is
productivity growth. Productivity drives living standards, and what we're seeing
over the past decade is a very big deterioration and
productivity growth. I used to average one point four percent
every year the last ten years, the year which has
(15:03):
been zero point two, So that means living standards are
basically stagnant. And if living stands is stagnant, you've got
a pretty big economic percent to leave employ your trade overseas,
which is obviously what we've seen.
Speaker 2 (15:15):
Yeah, I noticed that in a recent column you wrote
for Business Desk. You wrote about a recent speech by
the Reserve Bank's chief economist, Paul Conway. One of his
main points you drew attention to was productivity. Hey, how
concerning are those stats around that?
Speaker 4 (15:31):
Well, we're in serious trump and zero point two percent
per year is basically flat, and what the Reserve Bank
has done of laid is revised down. The estimate of
what's called potential growth, and potential growth is the combination
of labor, capital inputs, along with productivity growth. It sort
of defines how fast economy can grow without unlocking inflation.
(15:53):
That number is now between one point five and two percent.
That number used to be up in excess of three percent,
and that's a big wack up cool now, because if
we can't get this economy moving, then unemployment remains high,
people leave to go apply their trade overseas, and this
economic upscreen is not going to look too strong if
we don't get productivity growth up.
Speaker 1 (16:18):
So the government's Going for Growth plan is about accelerating
the immediate economic turnaround while laying the foundations.
Speaker 2 (16:25):
For faster growth in the years ahead.
Speaker 1 (16:28):
And a critical pillar of this plan is looking out
to the world and confidently pursuing greater trade, investment and
international opportunities. We simply won't get rich selling to ourselves. Instead,
we must take practical steps to encourage our exporters, encourage investment,
and critically give people from around the world good reasons
(16:52):
to come to New Zealand to spend and invest.
Speaker 2 (17:00):
How can the government go about improving those numbers? And
do you think any of those growth policies announced by
the government so far can achieve.
Speaker 4 (17:07):
That we're moving in the right direction a bit, But
I guess the biggest shew in my mind is that
whether we're going hard enough and to be fair, lifting productivity, growth,
lifting you can performance is not just going to be
a function of government policy, and the private sector needs
to get out there and lift their game as well.
And one of the big issues that I'm thinking about
at the moment is that whether we've not a lot
(17:28):
of that old traditional entrepreneurial spirit on the head, because
it almost feels like you're in New Zealand's a big
part of the population is entering the retirement zone and
it sort of feels a little bit like the business
community is entering the same zone.
Speaker 2 (17:42):
What can the business community do then, what's it like
a textbook way of improving productivity?
Speaker 4 (17:47):
Investing in technology, investing in AI, investing in your staff,
constantly looking at your cost structure, constantly looking at your
better ways of doing business.
Speaker 2 (17:57):
Cameron, you're also write in your column about how we
need to become a go economy and how we need
to lift risk appetites to drive entrepreneurial behavior like you
just mentioned, then can you expand on that for us?
I mean, is it just the private sector that needs
to make more of these risks in perhaps startups, or
(18:18):
can the government do something to better place businesses to
be able.
Speaker 4 (18:22):
To do this? Well, I guess I'll give you an
illustration of one area we're very poor at. It's called
capital productivity, basically how we manage sets, and capital productivity
for thirty years has pretty well consistently been a negative number.
So we build stuff, then we miss manage it, and
then alarm, behold odds, we've got to build it again. Yeah.
So there's a big debate going on at the moment
(18:43):
in regard to SX sales, and of course society tends
to be against set sales. Yeah, I'm not sure that
local government or central government is actually best placed to
manage a lot of sets that are on on their books.
Let's get those sets out under the private sector. Well,
we can look it running and managing those sets well.
Speaker 2 (19:02):
And do you think New Zealand is actually willing to
take those risks though?
Speaker 4 (19:06):
Well, I guess that's one of the biggessues that I've
been debating with people at the moment. Have we gone
down the risk curve? And when you go down the
risk curve, you're not prepared to take risk, then don't
expect the same returns on the other side. You've got
to both take risk, but you've got to manage risk.
And it just feels like New Zeon's a step back
(19:27):
and lost a little bit of its mojo. You have
that preparedness to get out there and ready have a
crack and drive a bit of economic growth. It's almost
like the economy or society we've just lurched too much
into that safety design and the issue is how do
we get back out of or into an environment where
people are prepared to have a bit of a crack.
(19:47):
Less Government interference is one thing, but ultimately the private
sector needs to be prepared to get out there and
give it a crack.
Speaker 2 (19:55):
Do you think opening up to more foreign investment will
better things for New Zealand in the long run, But
some of those local owned businesses might have a look
at the foreign investment coming into the country and thinking
all right, we can do this.
Speaker 4 (20:08):
It's not just about the foreign investment, it's about the
foreign ideas. New Zealand needs to be far better connected internationally.
There we cd with the near twenty twenty two Economic
Survey in New Zealand made some pretty specific damning comments
on New Zealand's managerial capability, particularly in regard to tech
AI preparedness to take risks that we tended to be
around bordering tables. It tended to be a lot about
(20:29):
governance and not about strategy. They're report way back in
twenty twenty two was a pretty good snapshot of where
we stand. And one of the ways we can improve
there is to improve our connectivity with best practice around
the globe.
Speaker 2 (20:41):
You mentioned that science innovation, you know, the AI advancements
that New Zealand could be involved with, But what about
going back to basics. I'm thinking you know Shane Jones
announcing more mining in the country for example.
Speaker 4 (20:54):
Yeah, Well, New New Zealand's blessed with a pretty good
natural endowment. Whether you look at stuff that could get mined,
give water, it rains. We've got to harness the power
of water in the form of irrigation so we can
produce more food, we can manage the veriability around your
mother nature in New Zealand's sitting on a bit of
a winning lottery ticket. If you think about what our
(21:15):
natural endowment is, and I guess what Shane Jones is
pushing aheadworth is trying to maximize or unlock a lot
of those natural endowment resources so that we can get
ahead a little bit easier.
Speaker 2 (21:25):
Thanks for joining us, Cameron. That's it for this episode
of the Front Page. You can read more about today's
stories and extensive news coverage at enzadherld dot co dot
enz The Front Page is produced by Ethan Sells and
Richard Martin, who is also our sound engineer. I'm Chelsea Daniels.
(21:49):
Subscribe to the Front Page on iHeartRadio or where do
you get your podcasts, and tune in tomorrow for another
look behind the headlines.
FOTA.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by The New Zealand Herald. If the
theme for twenty twenty four was cutting back, then twenty
twenty five is all about growth. The word appears thirty
one times in Prime Minister Christoph Luxen's State of the
(00:28):
Nation's speech, and for good reason. Luxon said it's the
key to brighter days ahead. After experiencing the biggest recession
since the early nineteen nineties, Finance Minister Nikola Willis has
been handed a revised economic growth portfolio. As part of
that planning, working on things like driving up tourism numbers
(00:50):
and international investment. Later on, we'll get some insight into
how and weather New Zealand can actually stimulate growth from
Independent Economy Cameron Bagri. First up today as that Harold
Deputy Political Editor Thomas Coglin is with us to explain
why growth is the topic of conversation. Thomas, why do
(01:14):
you think the government has chosen to focus everything this
year on growth?
Speaker 3 (01:20):
I mean a short answer is that because there isn't
any The economy was shrinking at the end of last year,
and a shrinking economy is really bad because it means
that all of us get poorer and life just gets
a bit tougher. And if a government wants to get reelected,
then it wants to make life better for people. So
the short answer is that when the economy is shrinking
is really bad. So we need to get it growing
again to start raising living standards for everyone. Here that's
(01:43):
the living standards that you enjoy when you're not giving
government services. But obviously, as the economy grows, people pay
more taxes, and that means that the government gets more
money and to pay for the public services that we
all enjoy. So if the economy grows by an extra
percentage point of GDP up of what you think it
is growing at now, then that equates to an extra
one point two billion dollars a text revinue the treasury sets.
(02:07):
So if you can actually get the economy growing, it
is a good way of or growing faster. I should say,
it's a good way of making life better for people.
The trouble is like, it's just really hard to get
the kind of economic growth that the government wants. The
long term average of the economic growth is pretty bad.
And if you want to make the economy will grow
this year because interest rates are falling and we're kind
(02:28):
of moving out of that inflation reserve bank induced recession
that we had, So the economy will grow that the
government will want it to grow faster because it's that
faster growth, the bigger growth that won't just get us
back to where we were before. Well hopefully if it works,
and there are some question marks over that and will
hopefully make life better for us and make it life
better than it was before, but that's that's pretty tough.
(02:50):
One of the things that's really important just to finish
that question is that Treasury recently has been revising down
New Zealand's growth forcusts because they think that structurally the
New Zealand economy is just not as strong as we
previously thought it was. So every year from twenty twenty
two to now, every six months, Trutories redes its forecasts,
and each of those forecasts have basically become more pessimistic
(03:13):
than the last forecast. That means that all of us
are poorer. So in real terms, all of us are
about one thousand dollars poorer a year, actually a wee
bit more than that, because that figure uses an older
uninflatent adjusted number, and it also means that there's less
tax revenue for the government. So it's really it is
a good thing that the government's focusing on it. Every
government focuses on it. Every government wants the economy to growth.
(03:33):
But yes, you can see why they are focusing on
it because it's essential to providing a good standard of
living for people.
Speaker 2 (03:40):
National is blamed labor for most of their economic woes. Hey,
is that still a fair argument. But we're about midway
through their term now, aren't we How long do they
have to keep blaming labor.
Speaker 3 (03:52):
That's a very questioner. I've been in the press gallery
long enough to know that labor was still using the
nine long years of neglect long after they took office
in twenty seventeen. I think they'll blame labor for some time,
but I don't think it's it is all labour's faults,
or even partly labour's fault. To go back to your
previous question, those two DP numbers that keep getting revised.
(04:15):
The real problem is that structural weakness in the New
Zealand economy and National's main allegation to who main allegations
against labors that they spent too much money and that
they were anti growth. Now is to spend too much
money argument, Yeah, in some of those budgets that labor
did in the second term, they did spend more money
than in retrospect, it looks wise to have spent, but
(04:37):
not vastly too much money, just probably a wee bit
too much money, and money that they had little concrete
plan of paying for. But in terms of why Labors
left this government such a mess of deficit, the main
reason for that was that revision to those growth forecasts,
the amount of growth that was in the that were
we were expected to get was going to generate more
(04:58):
money and for the government and would mean that the
books would be in much better shape now Because that
growth has not transpired, It's meant that the spending that
labor had done and had planned to do doesn't have
enough revenue coming in to pay for it. The issue
of Labor was not that they spent too much money,
it's that the growth that was meant to pay for
that that spending has not actually transpired now. Equally, the
(05:21):
other relegation, which is that they were anti growth, that
is slightly more complicated. They were certainly they ushered in
a resource management regime where there was a debate about
whether or not that was too restrictive that it wouldn't
allow people to build. They were, I suppose, quite keen
on labor laws. They hiked them in and wange a lot.
The Fair pay agreements gave a lot of rights to workers,
(05:41):
which were obviously great.
Speaker 4 (05:42):
If you're a worker.
Speaker 3 (05:43):
But if you're a foreign investor, you think, well, maybe
we want to go to a country that has your
rights for workers. Pretty grim, isn't it. But that is
that the calculation that's made. Of course, Australia is rich
enough that they tend to have greater workers rights and
they also get foreign investments. So it's very very complicated
and it really depends on it policy area. I guess,
what are.
Speaker 2 (06:01):
Some of the policies and initiatives that the government's actually
announced all ready to try and level up that economic growth.
Speaker 3 (06:08):
The first big one is the Digital Nomad visa, something
that's been in the works for a long time. I
would actually say I don't think that this has been
announced as part of a growth agenda. I think this
is something that the government was looking at that Labour
actually wanted to do as well, and now seems like
a good time to do it, and they've just rebranded
it as a growth as growth policy. I don't regards
on that that is the way the politics works, but
(06:30):
this FEESA basically allows people who can work remotely from
say you're an American and you can work remotely, or
you can just arrive in New Zealand, open up your
laptop and stay here for nine months working for your
American firm, getting paid by your American firm, and traveling
around the country as a tourist having a great time
and hope. The hope is that with policy like that,
it will attract lots of wealthy foreign workers who have
(06:53):
a great time in New Zealand. Seal of our sites
go to restaurants and bars, spend money, be taxed on
their gst of course, and boost the tourism and actually
boots a lot of industries because it will add population
to New Zealand, and a population that life system and
that will stimulate demand. We hope it's a good policy.
I think Australia doesn't have a similar scheme. So I
suppose if you're someone from the rich Northern Hemisphere looking
(07:16):
to escape the northern winter and have a lovely southern summer,
then New Zealand starts to look pretty attractive.
Speaker 2 (07:20):
And we're also looking at this year how fast track.
We've got RMA reform, reform of health and safety laws.
We've got a mining announcement from Shane Jones, less red
tape as well. So there's a lot of things that
the government is angling towards. Do you think any of
it's going to work?
Speaker 3 (07:37):
That is a very good question. I actually think the
more difficult question is how you know it's going to work.
And the government's sort of avoided putting strict targets or
performance metrics around this because this year. One of the
reasons we haven't had growth in the last year has
been at the Reserve Bank piked interest rates really high
to squeeze inflation out of the economy, and that has
meant the economy has shrunk and like I've got pretty
(08:00):
hard as we all know last year. Now this year,
the inflation has largely gone, or the problematic and a
level of inflation's gone, and the Reserve Bank is cutting
interest rates and that will restore growth to the economy.
It will mean that people borrow more, invest more, and
spend more and grow the economy. So there will be
growth this year and the government will of course try
to play and credit for that growth, but a large
(08:21):
part of that of that growth will come from the
fact that you know, we're just we're at a different
point of that interest rate cycle. One would think that
stuff like fast track, it's hard to see with health
and safety it would really depend You'd have to talk
to some companies to and ask them, did you look
at investing in New Zealand and growing a presence in
New Zealand and was it health and safety laws that
stopped you from doing that? I certainly haven't seen cases
(08:43):
of that reported, but you know there might be. But
parsuably stuff like fast tracked, you would think that that
will that that is a tracking foreign investment to New
Zealand to build things, to create jobs, to spend money here,
which will which will grow the economy. So yes, like
those measures probably will mean that there is more growth
than the other wise would be, but it'll be very
difficult to disentangle. Well, you know how much of the
(09:04):
growth is thanks to fast tracking these other measures, and
how much is just thanks to the fact that the
reserve banks cutting interest rates. People are borrowing a whole
lot of money and specificative how we usually grow the economy.
Speaker 5 (09:18):
But I'm telling you recovery isn't enough. We have to
go for growth and driving economic growth is absolutely critical
for improving our quality of life, strengthening our local businesses,
lifting our incomes, and creating opportunity all across New Zealand,
because a growing economy means giving Kiwis more choices and
(09:39):
the confidence to find a new job, or hire a
new staff member, or to open a new business, or
to start a family.
Speaker 2 (09:49):
The other word of the year seems to be the
word no, or they're now being a lack thereover it.
I suppose Luxon has said, there's always a reason to
say no. If we keep saying no, we'll keep going nowhere.
We need larger ports, we need more concerts. What do
you make of this new anti no stance.
Speaker 3 (10:10):
I think it's been it's interesting, it has been quite
well received by people, and certainly I think New Zealand
has has historically had a very restrictive regime when it's
come to stuff like that, even part concerts, stuff like
the resource management. It's been pointed out that's reported. It's
been reported this week I can't remember where that time
that that Christopher Laxon is in a local MP himself
lobbied to say no to a housing development in his electorate.
(10:33):
So you know, everyone is New Zealanders do love saying no.
It's what we do. So I think I think it's
quite a persuasive persuasive message.
Speaker 4 (10:42):
Certainly.
Speaker 3 (10:43):
I think when you look at it as from the
speak to of New Zealand, you look over the ditch
in Australia, which is arguably one of the most successful
economies in the world, and New Zealand's not an unsuccessful economy.
We're just much much less successful than Australia, which makes
Australia look much more successful than it is. But they
are probably better saying yes to stuff like mining. They're
a bit less hung up on, you know, the agricultural sector.
(11:05):
They are a bit more pro growth in those in
those areas and certainly in the past, you know, with
then we're blots of agriculture through the lens of climate change.
It's obviously a very big mess. But agriculture also if
we say, you know, quote unquote yest to agriculture, then
then you would, you know, maybe expect to see more
economic growth the dairy prices that reportize at the moment. Also,
you know, mining, we we do very very little mining
(11:28):
in New Zealand at the moment. Australia obviously does rather
a lot, and and so there's probably rude to grow there.
So if we were to decide to say yes to
mining and then you probably would see more economic growth.
And of course one of the reasons why this is
so difficult is that obviously that you know, the reasons
are saying no are often quite good ones. The agricultural
emissions issue isn't going to go away simply by saying
(11:48):
yes to more agriculture, and you know, environmental degradation aspects
of mining aren't going to go away simply by saying
yes to mining. So there's a really very real trade
off between saying yes to growth enjoying the better living
standards that come with that. You know, they think that's
probably where chrystper Lutson's are being quite innovative with this
REASUREP is saying that by saying yes to economic growth,
(12:09):
you're saying yes to better public services and yes to
better living standards. But of course, the reasons why we
have historically said no, don't go away either, which is
that you know, New Zealand has a beautiful environment which
many New Zealanders love to protect. And it's a difficult
decision and that's why this debate is going to be
such a challenge.
Speaker 6 (12:30):
Chrystper Luction says, the bottom line is that we should
say no less and yes a lot more. What did
they say to delivering new inter island fairies?
Speaker 4 (12:39):
No?
Speaker 6 (12:40):
What did they say to delivering a new to need
an hospital?
Speaker 4 (12:43):
No?
Speaker 6 (12:44):
What did they say to delivering affordable water reform? What
did they say to delivering new state housing? What did
they say to delivering school classroom O brains? What did
they say to delivering improved infrastructure for the care.
Speaker 2 (13:03):
I've been watching a lot of clips out of the
debating chamber this week. Are you sick of hearing both
sides of the chamber just shouting the word no yet?
Speaker 4 (13:13):
Yes?
Speaker 3 (13:13):
Well, actually, this week is my seventh anniversarriend of Press Gallery,
and I suppose the whole time that I have been here,
the economy has been in a pretty challenging state. And
one of the things that, certainly as a journalist you
get quite concerned about is the fact that Parliament has
become a bit of a circus, if an equal opportunity.
Speaker 4 (13:30):
Circus as well.
Speaker 3 (13:31):
I don't think one side of the House is more
or less culpable than the other. But as the long
term economic issues become more and more acute, politicians seem
less and less inclined to debate them seriously, and more
and more inclined to her insults at each other. And that,
you know, that's quite concerning for New Zealand too, And
you think there's a logical reason for this, which is
that those long term issues are difficult to debate, and
(13:53):
they involve everyone making difficult trade offs with what they
believe and compromises on what they believe. And it seems
many of our politicians, not all of them, but many
of them seem to turn their backs on that difficult
debate and would instead prefer to her insults as each other,
which I don't think quits them very well, and it
certainly doesn't doesn't look at the country very well because
(14:14):
because it means that important discussion hasn't really had.
Speaker 2 (14:16):
Thanks for joining us, Thomas, thanks for having me. Now
on the front page, we talk with independent economist Cameron
Bagri for his thoughts on the government's new growth focus.
Speaker 4 (14:42):
Well, it's not just about growth. One of the most
important things across society is one of the big drivers
of growth, and one of the drivers of growth is
productivity growth. Productivity drives living standards, and what we're seeing
over the past decade is a very big deterioration and
productivity growth. I used to average one point four percent
every year the last ten years, the year which has
(15:03):
been zero point two, So that means living standards are
basically stagnant. And if living stands is stagnant, you've got
a pretty big economic percent to leave employ your trade overseas,
which is obviously what we've seen.
Speaker 2 (15:15):
Yeah, I noticed that in a recent column you wrote
for Business Desk. You wrote about a recent speech by
the Reserve Bank's chief economist, Paul Conway. One of his
main points you drew attention to was productivity. Hey, how
concerning are those stats around that?
Speaker 4 (15:31):
Well, we're in serious trump and zero point two percent
per year is basically flat, and what the Reserve Bank
has done of laid is revised down. The estimate of
what's called potential growth, and potential growth is the combination
of labor, capital inputs, along with productivity growth. It sort
of defines how fast economy can grow without unlocking inflation.
(15:53):
That number is now between one point five and two percent.
That number used to be up in excess of three percent,
and that's a big wack up cool now, because if
we can't get this economy moving, then unemployment remains high,
people leave to go apply their trade overseas, and this
economic upscreen is not going to look too strong if
we don't get productivity growth up.
Speaker 1 (16:18):
So the government's Going for Growth plan is about accelerating
the immediate economic turnaround while laying the foundations.
Speaker 2 (16:25):
For faster growth in the years ahead.
Speaker 1 (16:28):
And a critical pillar of this plan is looking out
to the world and confidently pursuing greater trade, investment and
international opportunities. We simply won't get rich selling to ourselves. Instead,
we must take practical steps to encourage our exporters, encourage investment,
and critically give people from around the world good reasons
(16:52):
to come to New Zealand to spend and invest.
Speaker 2 (17:00):
How can the government go about improving those numbers? And
do you think any of those growth policies announced by
the government so far can achieve.
Speaker 4 (17:07):
That we're moving in the right direction a bit, But
I guess the biggest shew in my mind is that
whether we're going hard enough and to be fair, lifting productivity, growth,
lifting you can performance is not just going to be
a function of government policy, and the private sector needs
to get out there and lift their game as well.
And one of the big issues that I'm thinking about
at the moment is that whether we've not a lot
(17:28):
of that old traditional entrepreneurial spirit on the head, because
it almost feels like you're in New Zealand's a big
part of the population is entering the retirement zone and
it sort of feels a little bit like the business
community is entering the same zone.
Speaker 2 (17:42):
What can the business community do then, what's it like
a textbook way of improving productivity?
Speaker 4 (17:47):
Investing in technology, investing in AI, investing in your staff,
constantly looking at your cost structure, constantly looking at your
better ways of doing business.
Speaker 2 (17:57):
Cameron, you're also write in your column about how we
need to become a go economy and how we need
to lift risk appetites to drive entrepreneurial behavior like you
just mentioned, then can you expand on that for us?
I mean, is it just the private sector that needs
to make more of these risks in perhaps startups, or
(18:18):
can the government do something to better place businesses to
be able.
Speaker 4 (18:22):
To do this? Well, I guess I'll give you an
illustration of one area we're very poor at. It's called
capital productivity, basically how we manage sets, and capital productivity
for thirty years has pretty well consistently been a negative number.
So we build stuff, then we miss manage it, and
then alarm, behold odds, we've got to build it again. Yeah.
So there's a big debate going on at the moment
(18:43):
in regard to SX sales, and of course society tends
to be against set sales. Yeah, I'm not sure that
local government or central government is actually best placed to
manage a lot of sets that are on on their books.
Let's get those sets out under the private sector. Well,
we can look it running and managing those sets well.
Speaker 2 (19:02):
And do you think New Zealand is actually willing to
take those risks though?
Speaker 4 (19:06):
Well, I guess that's one of the biggessues that I've
been debating with people at the moment. Have we gone
down the risk curve? And when you go down the
risk curve, you're not prepared to take risk, then don't
expect the same returns on the other side. You've got
to both take risk, but you've got to manage risk.
And it just feels like New Zeon's a step back
(19:27):
and lost a little bit of its mojo. You have
that preparedness to get out there and ready have a
crack and drive a bit of economic growth. It's almost
like the economy or society we've just lurched too much
into that safety design and the issue is how do
we get back out of or into an environment where
people are prepared to have a bit of a crack.
(19:47):
Less Government interference is one thing, but ultimately the private
sector needs to be prepared to get out there and
give it a crack.
Speaker 2 (19:55):
Do you think opening up to more foreign investment will
better things for New Zealand in the long run, But
some of those local owned businesses might have a look
at the foreign investment coming into the country and thinking
all right, we can do this.
Speaker 4 (20:08):
It's not just about the foreign investment, it's about the
foreign ideas. New Zealand needs to be far better connected internationally.
There we cd with the near twenty twenty two Economic
Survey in New Zealand made some pretty specific damning comments
on New Zealand's managerial capability, particularly in regard to tech
AI preparedness to take risks that we tended to be
around bordering tables. It tended to be a lot about
(20:29):
governance and not about strategy. They're report way back in
twenty twenty two was a pretty good snapshot of where
we stand. And one of the ways we can improve
there is to improve our connectivity with best practice around
the globe.
Speaker 2 (20:41):
You mentioned that science innovation, you know, the AI advancements
that New Zealand could be involved with, But what about
going back to basics. I'm thinking you know Shane Jones
announcing more mining in the country for example.
Speaker 4 (20:54):
Yeah, Well, New New Zealand's blessed with a pretty good
natural endowment. Whether you look at stuff that could get mined,
give water, it rains. We've got to harness the power
of water in the form of irrigation so we can
produce more food, we can manage the veriability around your
mother nature in New Zealand's sitting on a bit of
a winning lottery ticket. If you think about what our
(21:15):
natural endowment is, and I guess what Shane Jones is
pushing aheadworth is trying to maximize or unlock a lot
of those natural endowment resources so that we can get
ahead a little bit easier.
Speaker 2 (21:25):
Thanks for joining us, Cameron. That's it for this episode
of the Front Page. You can read more about today's
stories and extensive news coverage at enzadherld dot co dot
enz The Front Page is produced by Ethan Sells and
Richard Martin, who is also our sound engineer. I'm Chelsea Daniels.
(21:49):
Subscribe to the Front Page on iHeartRadio or where do
you get your podcasts, and tune in tomorrow for another
look behind the headlines.
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