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New Zealands Pragmatic Political Approach Welcome

New Zealands Pragmatic Political Approach Welcome

Hugh Pavletich FDIA
Performance Urban Planning
New Zealand

March 19, 2009

The era of nine years of interventionist style government , led by the Labour Party in coalition came to a close in New Zealand 8 November last year and was replaced with centre right parties led by the dominant and pragmatic National Party.

The nine year spell of the interventionist style Labour led Government , was really a backlash to the often traumatic and ideologically driven reforms of the Labour and National Governments during the second part of the 1980’s and early 1990’s – following the collapse of the New Zealand economy in 1984, under the leadership of Sir Robert Muldoon and his interventionist National Government.

While the reforms of the 1980’s and early 1990’s were essential – the political rhetoric through this era was heavily ideological – which was in many ways the continuance of a tradition from the time of Premier Richard John Seddon (1893 – 1906), a rough Yorkshire man, who through the sheer force of his personality, started New Zealand on the path of “social reforms”. He often referred to New Zealand as “Gods Own Country”. At that time – New Zealand had the highest gdp per capita in the world. Today it ranks (on a PPP basis) at around 45th with Australia at 27th.

Due to the too often highly ideologically charged nature of New Zealand politics to date – what this meant was that as one “ideological tribe’ gained power - it ignored and talked over the top of the other ‘tribe”.

While right wing think tanks in America, for example, talked in glowing terms about the “reforms of the 80’s” – most New Zealanders were not enjoying the experience quite as much –and many overseas visitors to this country, were often baffled as to why the political discourse here was so ideological.

New Zealanders by nature could not be described as “ideological” – and are generally tolerant, easy going, with an adaptable “can do” attitude. It has been a case of the “elite extremists” at both end of the political spectrum, too often dominating the political discourse. The “power of the internet” is the major reason why the “extremist elites” are no longer an issue.

This is best illustrated with a quote by Colin James, dealing with the housing issue, incorporated within a recent publication "Growing Auckland Growing New Zealand" (pdf) by the voluntary group Committee for Auckland – where Mr James states on Page 27 –

“We used to say we were egalitarian, one of the most egalitarian societies in the world, by which we did not mean that we were all equal, but that we all equally had a place and we could make something of ourselves. Too many people now do not have that sense of a place. We are not egalitarian, at least not in the way we were.”

“There are two principal ways to think about this new inequality. We can think of it as an ethical issue; we can say it is wrong that some people should be handicapped from living a full human life while others have a great start in life and confidence. That contravenes the principal of a fair go, which use to be a core belief in this country. Alternatively we can think of this new inequality as an economic issue. We will all be the richer if everyone can play a full part in the economy.”

It would appear that New Zealand is now entering a new era of pragmatic centre right government – with a strong commitment to work constructively across the political spectrum.

In large measure this is due to John Keys leadership of the dominant centre right National Party.

At just 47, Key has been extremely successful in the commercial world and seems to be developing considerable political skills, with a particular ability of communicating effectively across the political spectrum. The last New Zealand general election was really about whether or not Key “had what it took” for the role of Prime Minister. Voters overwhelmingly supported him and his National Party – and a coalition government with ACT, the Maori Party and United Future was quickly put in place.

Recently Mary Kissel of the Wall Street Journal – Asia - interviewed New Zealand Prime Minister John Key, where he outlined the general approach the New Zealand Government will be taking going forward, within “You cant spend your way out of the crisis”. For example –

“ ‘We don’t tell New Zealanders we can stop the recession, because we can’t’ says Prime Minister John Key, leaning forward in his armchair at his office at the Beehive, the executive wing of New Zealand’s parliament. ‘What we do tell them is that we can use this time to transform the economy to make us stronger so that when the world starts growing again we can be running faster than other countries we compete with’ “.

“That idea – growing a nation out of recession by improving productivity – puts Mr Key and his conservative National Party at odds with Washington, Tokyo and Canberra. Those capitals are rolling out billions of dollars in stimulus – with taxpayer money – to prop up growth. ‘That’s risky’ Mr Key says ‘You’ve saddled future generations with an enormous amount of debt that then they have to repay,’ he explains. ‘There is actually a limit to what governments can do’.

Tony Makin, Professor of Economics at Griffiths University followed up in The Australian with “Follow the Kiwi leader, not Obama” as did Janet Albrechtsen in the same publication with “Strangers to Business”.

In Ms Albrechtsens view – political leaders without “real world commercial experience” are seriously handicapped. She states –

“Pick the odd man out: Barack Obama, Kevin Rudd, John Key. Only one of them, New Zealand’s Prime Minister John Key, has any material personal experience of how to make a dollar in the private sector……………This is not to denigrate the public service or community sectors. They do important work. But a lifelong immersion in the public sector creates a government focused cast of mind and blind spots about the private sector.”

Mish's Global Economic Trend Analysis (Mike Shedlock) a popular United States website (recent Time magazine article) within a recent article “In Search of Common Sense” stated –

“I have been seeking economic common sense in high places. It’s very difficult to find on either side of the Atlantic………With the fiscal insanity virus rapidly spreading the globe I had nearly given up hope of finding common sense at a high level anywhere. Nonetheless I am pleased to report that I found an amazing display of honest to goodness common sense in New Zealand…….John Key, New Zealand’s Prime Minister says you can’t spend your way out of a crisis”.

Somewhat surprisingly – I received a rather rapid response from the eminent financial commentator Martin Wolf of the Financial Times with a “Oh yes you can” – to which one can only say “When is the Financial Times going to focus its attention on exploring solutions to Britain’s land use regulatory shambles?”. An “utter shambles”really and the disgrace of the developed world as this recent article from The Independent “The Englishman's castle in ruins” illustrates.

The United Kingdom National Housing Federation forecast for 2009 is that only 70,000 new residential units will be put in place. Central figures within the industry are even more pessimistic. Tony Pidgley, the Berkshire Group Chief Executive, who is considered the sectors great sage, believes that work will only start on 40,000 units this year.

If Mr Pidgley’s 40,000 unit forecast comes to fruition – this means that the United Kingdom with a population of 61 million, “build rate per 1000 population” will collapse to 0.65 units / 1000 population – the worst……..anywhere in the developed world……….in recorded history……including through the years of the Great Depression. Only the other “basket case” - California – the epicenter of the global financial crisis - comes close.

If other counties were building at this low estimate (40,000 units annually) United Kingdom rate – the United States annual residential build would be 198,250: Canada 22,750; Australia 13,650 and New Zealand and Ireland approximately 2,730 units annually each.

Not surprisingly – and rather rapidly – political leaders who mislead their publics in their governments ability to “stimulate” an economy - and worse still – the fiction that they are capable of re - inflating their housing markets – are getting appropriately punished by their constituents.

Around last October UK Prime Minister Gordon Brown - engaging in “splash economics” was seen as the “great savior” – but in the space of a few short months - is clearly heading for political oblivion. During a recent Washington visit, President Obama “declined” the request for a joint press conference with Mr Brown.

President Barack Obama’s “honeymoon” seems to have lasted less than 50 days, if recent polling is any guide. Americans are belatedly and with justification, becoming increasingly concerned about the effectiveness of the stimulus packages.

Australian Prime Minister Kevin Rudd is slowly slipping in the polls – and would likely have fallen further if the opposition Federal Liberal Party was cohesive. Mr Rudd – with his Housing Minister Tanya Plibersek lack of elementary commercial knowledge - is illustrated by the recent release of what can only be described as a “whitewash report” with respect to Housing Supply. Other than Fig 1.1 Chapter 1 Introduction – illustrating how house prices have moved since 1972 in relation to household income, rents and construction costs – the rest of this report deliberately avoids the real issues.

It appears responsible people from the property industry may need to sit down with Mr Rudd and Ms Plibersek –and explain to them why Australian metro areas should be supplying serviced fringe lots at between $A30,000 - $A50,000 and not the stratospheric $A200,000 and beyond lots / sections prices young Australians are being conned into buying (read closely First-home grant to end | The Australian) with taxpayer financed $A21,000 First Home buyer grants – unnecessarily.

Again – Mr Key and the New Zealand National led Government – appear to be “going against the tide” if recent polling is any guide – and as a leading political commentator Bill Ralston outlines within “Bill Ralston: Honeymoon's still not over - Politics - NZ Herald News”. Mr Ralston states –

“The latest 3 News poll shows National sitting on 60 per cent support, the highest figure ever recorded in that poll and, I suspect, any other survey. Even more remarkable is that TV3’s poll usually skews favourably to Labour. In this one the Opposition could only muster a withering 27 per cent support.”

“Now here is the really weird thing. Even people who don’t back National approve of how it is handling the country. Sixty percent of people might say they would vote National, but 64 per cent say its performance has been strong or very strong. Only 4 per cent of those polled could claim the Government has been weak.”

“It doesn’t get much better than that. Well for John Key it does. The poll showed 52 per cent of people preferred him as Prime Minister but a massive 85 per cent conceded him a capable leader. Seventy five per cent thought he would be good in a crisis (and in case it’s escaped your notice, we are in a crisis) while 77 per cent backed his judgment.”

Following the Australian Federal election in late 2007, Fitch Ratings was commissioned by the Sydney Morning Herald to research why voters switched to the new government – as Stuart Washington explains within "Fear of losing homes drove Labour win".

The clear message was that voters do not thank politicians for loading them up with excessive debt and making them poorer.

It’s would appear that Mr Key in New Zealand has learnt that lesson – while Mr Rudd in Australia and too many politicians elsewhere, have failed to learn it – as yet.

For further discussion of the matters raised go to interest co nz blog


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