What Ought the PM be Worrying About?
VIEWS FROM OUTSIDE THE APIARY: IAN FLETCHER
By Ian Fletcher
So, we have a new Prime Minister. He’ll be focused on winning the election later this year – his career and reputation depends on it. I think he’s going to find that hard (unless the Opposition makes some monumental mistakes). Meanwhile, we will be treated to a lot of ostentatious ‘listening’ by politicians who really only care for the sound of their own voices, some cliché-ridden speeches, and (already signalled) a massacre of a lot of the government’s pet sacred-cow projects. The exception is probably Three Waters, which will be decapitated (removing the co-governance bit) while it staggers on, zombie-like into a bankrupt future.
What ought Chris Hipkins actually be worrying about, if he’s to really have a plan for a full term (or more) after October? Here’s what I think:
Higher inflation and interest rates around for a lot longer. The Reserve Bank has failed. There are two related challenges here: an economy where inflation will likely settle at around 4 per cent, interest rates at say 5 per cent and mortgages higher than that. Underneath that are some big global demographic shifts (we live in one of the few developed countries with a rising population), and some big current and future dislocations following the pandemic, the Ukraine war, as well as likely future pandemics or wars (taken together, they’re a certainty over the coming decade).
Related to that is the Reserve Bank itself will need reform (as will most other central banks). Independence is over, active economic management (and political involvement) is back. The US Inflation Reduction Act (so-called – really a subsidy act) shows the way. The sooner New Zealand starts that debate, the better.
The Government will need a lot, lot more money. Some will be because the days of low tax, low wages, low investment are over. So, any government will need to have a bigger health workforce being paid more, a better police and justice system, being paid more, and so on. Some will be for investment (this week’s Auckland deluge shows what’s ahead). And we know that in future we will need a bigger navy/air force. Not to mention housing and other social needs. So, higher taxes and more borrowing ahead. Will the new PM have the courage to re-open the capital gains tax issue? I hope so.
Australia will be a big headache. Not because it’ll do bad things (like the 501 deportations), but because its new government will do good things: watch for Australia to give Kiwis in Australia a better deal on welfare and citizenship, making migration to Australia even more attractive. That’ll mean wages here go up further, which will mean both higher taxes (for public sector wages) and a real crisis for our low-productivity companies.
Secondly, Australia will almost certainly vote to become a republic in about 5 years’ time. That will ignite the same debate here. That will, in turn, put the Treaty of Waitangi firmly on the table: who among us wants to be part of a republic where citizens are not all equal? Māori social, economic and health disadvantage is real and intolerable, but we may need to find other ways of tackling it than through the Treaty framework. The republic debate will be quite a crisis for New Zealand.
Local and central government are both too weak to face the future with confidence. Local government in New Zealand is weak politically and financially, and we are over-centralised. We justify this by seeing New Zealand as a small country. But actually, it’s big in geography, relatively small in population, and immensely diverse socially and economically. All the evidence is that countries with strong, well-run and financially independent local/regional governments are better than over-centralised ones (OECD evidence on this goes back decades). Some sort of federal system would be ideal, I think. Governments hate giving up power, so it’s unlikely to happen. But it would be better subject for debate than the current co-governance story (which is organised subject by subject, not community by community, and so is always going to be a haven for the incompetent and unaccountable office-seeker). We could do better.
Central government is worse. I believe that governments need legitimacy (ie regular proper elections) and competence. We do OK on the former. But badly on the second. Our public service has too big a gap between experience and policy. The reality is that good government needs close, critical contact with the user/citizen to allow policies and services to be improved quickly and to be effective. The examples of failure are many – health, housing, roads, policing, MPI, NZTE all show dangerous isolation from the realities of the people, companies and communities they serve. Again, we could do better.
Finally, biosecurity deserves a special mention, as it is a special risk. Wars, pandemics, financial crises and the successes of Australian policy can all be blamed on others. But a major, damaging biosecurity incursion will be our fault and only our problem. I don’t think MPI is up to it. If I was advising Chris Hipkins, that’s where I’d suggest he start. We must do better.
Ian Fletcher is a former head of New Zealand’s security agency, the GCSB, chief executive of the UK Patents Office, free trade negotiator with the European Commission and biosecurity expert for the Queensland government. These days he is a commercial flower grower in the Wairarapa and consultant to the apiculture industry with NZ Beekeeping Inc.