Catching up with Australia may be impossible

  • Breaking
  • 07/03/2010

By Peter Wilson

When Jenny Shipley was appointed health minister in the previous National government, she confidently told Parliament she would be judged on hospital waiting lists.

This was unwise, because the waiting lists didn't improve and she was indeed judged, loudly and often, by the Labour Party.

As she later became prime minister, this clearly didn't damage her career. The point is that the present National government has fallen into a similar trap and is going to be judged in precisely the same way.

Achieving its goal of catching up with Australia's wage rate is becoming increasingly difficult, if not impossible.

It wasn't a firm election promise - John Key wasn't as reckless as that - but it was an important part of National's campaign and was seen as fundamental to stopping the brain drain which National MPs so readily blamed on the previous Labour government.

Catching up with Australia actually began with Don Brash, when he was leader of the National Party, and was adopted by Key who was equally concerned about the high rate of skilled migrants.

After winning the election and becoming prime minister, Key signed a support agreement with the ACT Party which developed to include setting a deadline for this to be achieved, 2025, and the establishment of a taskforce to find ways to make it a reality.

ACT leader Rodney Hide wanted it to be 2020 but he was persuaded that might be a bit difficult.

Hide appointed Brash to lead the 2025 Taskforce, which presented its first report late last year. That went into the Government's too hard basket, the recommendations for drastic cuts to government spending, selling state assets and huge income tax reductions being considered too radical to implement.

Brash is still very much occupied with his mission, however, and it was the subject of his speech to last weekend's ACT Party conference.

His point was that the longer the Government waits the harder it is going to be to catch Australia where economic growth is actually moving significantly faster than New Zealand's and making the gap even bigger.

Brash figured that to have any chance of closing the gap, the New Zealand economy was soon going to have to start growing at between 4 percent and 5 percent, something it didn't achieve even during the best of times.

The gap, according to OECD figures, is about 30 percent. Statistics New Zealand has now delivered figures, reported in the Sunday Star Times, which confirm Brash's concerns about the rate at which it is growing.

Between December 2008 and December 2009, the average New Zealand wage increased 2.86 percent after being adjusted for inflation, up from $891 a week to $934 a week.

In Australia, from November 2008 to November 2009, the average wage went up 3.6 percent from $1159 a week to $1226.

To make matters worse, Australia's unemployment rate has been coming down and now stands at 5.3 percent compared with New Zealand's 7.3 percent.

Another speaker at ACT's conference was Federated Farmers's president Don Nicolson, He thought New Zealand could not only catch Australia but pass it.

"The more we tread water the more we go backwards," said Nicolson.

"To catch Australia we need bold change and courageous political leadership, all built on the premise that a government can actually make its own popularity.

"What we have instead is continual polling of where public opinion has been, not where it is going."

Nicolson's conclusion was that the means exist to catch Australia -- he listed mineral exploitation, water storage and growing the productive sector, among other initiatives -- but the political will had to be there as well.

"Frankly, the signs have not been encouraging," he said with obvious understatement.

There are actually no signs the Government is prepared to adopt any drastic economic changes such as those recommended in the first taskforce report.

It isn't prepared to cut social services, it isn't going to sell assets, in fact it doesn't seem ready to do anything that it can't implement without what it frequently calls "broad public support".

It is a cautious government, not one driven by reforming zeal. It issues discussion papers -- the latest being Transport Minister Steven Joyce's changes to driver licence and drink driving laws and Building and Construction Minister Maurice Williamson's proposals to amend the Building Act.

It consults, it considers, it takes heed of public response and then it acts.

And it isn't likely to change, because voters clearly like the way it is going about its business. The opinion polls are proof of that.

Key, usually an optimist, is acutely aware of the difficulties involved with catching up with Australia, a task he has likened to trying to lasso a galloping horse. It isn't something the Government voluntarily talks about these days, in the same way the previous government's target of lifting New Zealand's economy into the top half of the OECD became an issue it wished would go away.

National, in opposition, didn't let it go away. It jeered and taunted Helen Clark whenever it got the opportunity and the former prime minister's MPs, most of them still in Parliament, haven't forgotten that.

They are going to hammer the Government with just the same ferocity over catching up with Australia, and with each month that passes they are being given a bigger hammer to do the job.


source: newshub archive