The Bluff smelter is a classic case of having too many eggs in one basket. Photo / Getty Images
The Bluff smelter is a classic case of having too many eggs in one basket. Photo / Getty Images
COMMENT:
New Zealand is just nine weeks away from the completion of voting in this year's general election. National is increasingly resembling a television reality show. That image is reinforced by Judith Collins becoming leader: she is National's Kim Kardashian, famous for being famous but noted for very little excepttalking tough and crushing three cars.
The public at large remains concerned about the Covid-19 pandemic but grateful to be in New Zealand. Although "going hard and going early" meant our incidence and death rates were very low by international standards, the impacts were still severe in other ways.
Our little world in the southwest Pacific has been turned upside down. Industries which were thriving at the start of the year, notably international tourism and education, are all but non-existent.
Tourism can make up some of the loss by substituting Kiwis unable to travel overseas. International education has no such simple answer — it cannot suddenly invent a lot more students from within New Zealand.
Or can it? We are just turning our minds to how to emerge from the Covid-19-created recession. Rushing to reopen our boundaries, as some suggested, now looks foolish given Victoria's status as the pariah state of Australia.
The team of 5 million is largely onside with the idea of long-lasting border controls. Thousands of Kiwis coming home have stretched our capacity to control safe entry. Yet, out of the tens of thousands who have entered New Zealand since lockdown started, only four covidiots have left quarantine without permission.
Whoever is in government after the election is going to have to make difficult decisions.
Rio Tinto plans to close the smelter next year. Photo / Gregor Richardson
Some sectors of the economy will require long-term support. The problem is how to distinguish between those which have a real chance of survival and those which will remain on life-support, until someone turns off the money machine through which they are enabled to breathe.
A good example of how not to make those decisions is to compare the current support for many sectors — including sport and the arts — with the denial of further subsidies to the Tiwai Point aluminium smelter. The latter produces a high-quality product and provides jobs for a lot of Southlanders. But it has been clear since long before Covid-19 hit us that the smelter's days were numbered. This was signalled by the owners, Rio Tinto, last year.
New Zealand cannot compete with very low-cost producers of aluminium elsewhere; we are far from the primary markets for the product, and the plant is old and would need substantial investment if it were to remain open. One way or another, the smelter would require ongoing, and substantial, subsidies to keep it anywhere near competitive.
Announcing the future closure at this time might be seen by some as a cynical, but failed, attempt by Rio Tinto to take advantage of the Government's wish to crank up the economy. I see it as no more than an inevitability.
Tiwai is the classic case of having too many economic eggs in one basket — just like international education's dangerous dependence on Chinese tertiary students. Southland does not need crocodile tears; it needs assurances that Rio Tinto, our Government and the Southland Institute of Technology (and others) will co-operate to support retraining of the workers affected by the closure and to facilitate locally-identified opportunities.
In the long term the Manapouri hydro station will not be a stranded asset: a second Cook Strait cable was going to be needed in any case. In the meantime, we should be looking at ways in which southern users of electricity can be weaned off carbon-intensive energy sources onto the surplus hydro power which will become available.
That would be one example of what could be done to build a more sustainable and wealthier economy.
This year's Budget made a great start on investing more in retraining and upskilling. Much more needs to be done over the next three years. We need to take a hard-headed approach to ensuring that boosting investment in training and education is directed to those areas which will provide the skills we need. There is also ample scope for central government to give more support to local government to deal with the poor state of much of our urban infrastructure.
The primary sector industries — the current stars of our economy — provide further large opportunities to accelerate the shift to a sustainable economy. That can be our big point of difference in the international marketplace.
Our response to Covid-19 has lifted our international reputation; people overseas ask whether they can borrow our Prime Minister. The answer to that question is a lot more straightforward than answering where we go to from here.
- Sir Michael Cullen is a former Labour MP, Minister of Finance and Deputy Prime Minister.
