Audio + Report of Brash Speech at AUT

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“Political courage of the highest order” will be required to catch up economically with Australia and keep skilled workers from fleeing across the Tasman, former Reserve Bank Governor and National Party leader Don Brash outlined yesterday afternoon.

But whether he meant courage of the old BBC comedy Yes Minister we'll have to wait to find out. The AUT Adjunct Professor of Banking put his spinning skills to good use in front of an audience of students, stopping short of elaborating a model for closing the income and productivity gap with our neighbours across the Tasman.

Recently appointed the head of the 2025 Taskforce, it was no surprise that Brash considers closing the gap a top priority. “This is arguably the biggest challenge New Zealand has faced since the Second World War,” he said. “Small policy changes here and there won't cut the mustard. Substantial changes will be needed in government spending, in the regulatory framework, in investment, in tax structures”.

Australian workers enjoy a one-third higher income than their counterparts in New Zealand, as anyone who has worked a bum job across the Tasman will know. Unpacking dishwashers and cleaning coffee machines at a Melbourne-based company for a month earlier this year, I earned an eye-watering $1000 a week after tax. And Brash speculated that the gap could increase another ten percent as the Australian economy bounces back faster.

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Brash used the speech to put paid to the widely-held belief that it was Australia's wealth of natural resources that is responsible for the income gap. He cited a World Bank report that stated New Zealand was second only to Saudi Arabia in natural wealth per capita – although much of the iron sands and coal remain out of reach in protected areas.

And neither was locking up our meager savings in housing to blame for the income gap. New Zealanders' investment in between 1990 and 2005 housing are actually lower than the OECD average, and almost a percentage lower than Australia, he said. Nor was our inability to save responsible, pointing to Japan as an example of a country with an embedded culture of saving but with a lack of rapid growth.

To an extent Brash rehashed the arguments of the 2005 election – though carefully avoiding mentioning privatisation. Those who fear him as the far-right bogeyman of “The Hollowmen” will recognise his argument of economic reform = good, softening reforms = bad. It was Helen Clark's and Michael Cullen's reversing the reforms of the 80s and early 90s that saw a drop in productivity during their term, he claimed.

Economists on the other ideological side of the coin say otherwise, and blame the very legislative instruments Brash heralds as being responsible for our lower wages.

Not surprisingly, then, Brash welcomed the Key government's changes to the Resource Management Act, increase in infrastructure funding and commitment to look at the regulatory framework. “Will it be enough? I don't believe anybody – whether in the Government or in the wider community – thinks that it will be, yet. And I'm certainly not going to prejudge the conclusions of the advisory group which I've been asked to chair”.

But keeping up with the Joneses across the Tasman is possible, though it would prove a challenge to achieve by 2025.“We will have to grow consistently faster than Australia for many years, and that means we will need to have better policies than Australia, and better institutions across a broad range of policy areas”.

This did not necessarily include privatising state-owned assets, which Brash said was not a “top priority” when questioned by a member of the audience. However, with New Zealanders spending to maintain a life-style we haven't really earned – to paraphrase - it was an option. “We're overspending... and to fund that overspending we borrow or sell assets”.

Overall, there was little in the speech that we hadn't heard before from Brash, and few clues to pre-empt the findings of the Taskforce. And rightly so, given that it has yet to be appointed. On that, in the spirit of multi-partisanship, Brash said he had recommended a Labour-leaning member. However, he admitted with only five positions available, it was unable to accommodate representatives of all parties.

For me, having very recently returned from across the ditch, there's more to Australia's attraction than higher wages and pleasant weather. In terms of day-to-day life, it's being able to get to work on efficient and cheap public transport, it's about having decent choice in mobile phone and internet providers, it's about being able to even consider about buying a house and it's about more varied career opportunities. So Brash is right in one respect; we've got a lot of catching up to do.

ENDS

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