Date posted: 9/08/2017 12 min read

New Zealand's economy as good as gold

Ask New Zealand’s National Government’s “finance guy” about his vision for the New Zealand economy and Steven Joyce will tell you you’re soaking in it.

In Brief

  • NZ’s finance minister Steven Joyce says a successful economy “looks a bit like New Zealand”.
  • Private sector investment is one of the strategies to tackle unemployment.
  • Joyce says the major risks to the export-focused New Zealand economy are weighted not to domestic hazards, but to the international situation.

by Adam Bennett

After five years as economic development minister and five months as finance minister, Steven Joyce says a successful economy, “looks a bit like New Zealand”.

It’s sunny in his Beehive office as the perennially affable minister breezes through the top line numbers.

“We’ve had a pretty good period post GFC and we’ve been better than most developed economies over that period.”

He points to just one quarter of negative growth in the past six years and projections from Treasury and the Reserve Bank of another four years of continued expansion of around 3.5%, easing back towards three over that time.

“If that happened, that ten-year period would be one of the longest periods of continuous expansion New Zealand’s had since the end of the Second World War.”

What Joyce doesn’t mention – he is a politician after all – is the role of immigration in powering much of that growth, and per capita GDP growth is somewhat more modest.

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Nevertheless, that headline growth “is delivering some really good things for us as a country”. “It’s about investing in the things that will sustain that and expand that further and also deal with that challenge of productivity as well over time,” he says.

“That comes back – from a government perspective – to the right public infrastructure and investment in skills and that continuing growth in innovation in the economy more broadly.”

Mr Fixit

Joyce has been active across many portfolios in his cabinet career and was once known as Mr Fixit and the Minister of Everything.

His impact includes bolting together several portfolios to create the commerce focused “super ministry” – the Ministry of Business, Innovation and Employment (MBIE) – embarking on a vigorous road building programme as transport minister, steering universities and other providers towards providing courses tailored to the demands of business as tertiary education minister, and re-purposing Industrial Research Ltd as “business enabler” Callaghan Innovation when science and innovation minister.

All pretty conventional economic strategy, but how is this working for everyday New Zealanders? “Ultimately it’s about their job opportunities, their incomes and their ability to provide for their families and the security of that,” Joyce says.

Well yes, but what is his government doing to ensure those opportunities are realistically available to everybody including those not blessed with the circumstances of birth, upbringing or the immediate inclination to enjoy or embrace them?

Joyce points to the regions, where his political opponents sense many people don’t feel they are sharing in the economic growth he’s so proud of.

“Most of the regional areas now are feeling pretty strong” he confidently asserts. “But for me that’s the first stage.”

Private sector solutions

The next step is private sector investment, “which means confidence,” and from the vantage point of nine years in government, that’s now starting to happen, Joyce says.

He cites Kawerau, Invercargill and Dunedin as examples of regional economic success stories. “You’ve got to sustain that over a period of time to change the future of those regions, it can’t just be a couple of years, and that’s sort of where the focus is now.”

And he sees thriving businesses as the key to tackling entrenched unemployment such as that in the far north, where Joyce says a lack of jobs is not the problem.

“That’s one of the sort of fallacies of the debate. When we started our regional action plan in Northland we sent our lead official [Ministry for Primary Industries Deputy Director General] Ben Dalton up there. He spoke to the eight big private sector employers about what it would take for them to hire people and all eight said they’d hire people tomorrow if they could find them. Yet at the time Northland’s unemployment rate was 10%.”

Joyce says the answer lies in initiatives modelled on the successful GROW programme in Kaikohe. Instigated by Dalton, he says the scheme got good results, with two thirds of about 60 young people initially recruited by the Ministry of Social Development and the police successfully steered into employment or vocational training over two years.

In a story three months ago about the programme being expanded to take 500 youth, The Northern Advocate newspaper reported a third of 34 recruits got into work or training over one year.

“The employer has to have an approach which is actually about doing some good for the community and not just about filling a role.”

Joyce says the only way these programmes are going to succeed is with businesses committed to working with the vocationally challenged.

“They are going to miss work. There are going to be days where they just don’t turn up and it’s going to be two steps forward and one step back. So the employer has to have an approach which is actually about doing some good for the community and not just about filling a role.”

Instilling confidence

Putting tens of struggling Northland youngsters into gainful employment or training is great, but are there enough of these public-spirited businesses to make a material difference in Northland and elsewhere?

“Not all of them will do it because every business is in a different phase. So if businesses are only just struggling to get by, they’re less likely to be as altruistic.

“But other businesses are doing well so they’re more prepared to do some things and, yeah, they’re there and they’re big employers too.”

Promoting confidence is, again, his prescription for lifting productivity.

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“The most important thing the government can do is provide a consistently positive economy because ultimately it’s about encouraging investment and capital that improves the productivity of every unit of labour.”

He points to the tourism sector, which has been growing strongly on the back of increasing visitor numbers to the point where just recently it eclipsed dairy as New Zealand’s biggest export earner.

“That’s all good, but in terms of ‘where next?’, they’re probably going to have to invest more in things like attractions and higher-end accommodation, the sort of things which improve income per unit of input. And that involves confidence – how confident does the sector feel that this sort of expansion is going to be sustained.”

Job insecurity?

Joyce expresses his own confidence that investment in improving productivity won’t snuff out more jobs than it creates.

“Some people write this up as if change has never occurred and it’s all about to happen. Take the example of accountancy. Forty years ago it was a hell of a lot about calculators, pencils, ledgers and doing the books and today most of that is automated.

“Accountancy’s become consultancy. You spend a lot less effort as an accountant or as a business generating the books but that gives you a lot more time to work on what the books tell you, and I think that’s just the simple reality of technology change over the last century.

“Technology is going to continue to change and it’s likely to get a bit faster. But that just comes to the quality of the education people have and the need to adapt through your working lives to different roles.

“Those roles will be more about the things that automation can’t do like judgement and assessment and that sort of stuff, and I think that’s why it’s really important that our education sector continues to evolve, and I think it is.”

Housing matters

On a far more present challenge, Joyce is also pretty upbeat about the turgid Auckland housing market.

Constraints on land supply for new homes, historically low interest rates and immigration driven by the relatively lacklustre economies of our close neighbours have created a housing affordability crisis. But those indicators are on the cusp of heading in the right direction, he says.

“What’s going to play out is you’re going to see the supply response come on stream and that’s going to balance the demand side. The second thing you’re going to see is interest rates return to more normal levels – it’s just a matter of when. The third thing is the rest of these countries are going to start to grow at more normal levels again like we have, and so that relativity between us and Australia will probably even up.

“Those three things together will definitely balance the housing market over time.”

World markets

Joyce says the major risks to the export-focused New Zealand economy are weighted not to domestic hazards, but to the international situation.

“On one hand the world economy is recovering but, on the other, political risk is something that everybody is concerned about.”

The embodiment of much of that political risk is US President Donald Trump, who pulled out of the New Zealand-initiated, tortuously negotiated Trans-Pacific Partnership within days of sitting down in the Oval Office.

Trump has followed that up with more protectionist rhetoric.

“But what’s been interesting is nothing’s changed yet and the question is can the US execute that, and do they really want to as a country?”

New Zealand goes to the polls on 23 September.

Illustration by Paolo Lim

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