Will Trafford talks to Business reporter Jamie Gray about Rio Tinto's plans to close Tiwai Point aluminium smelter.
COMMENT:
It didn't even take 24 hours. The great and the good living comfortably in Auckland and Wellington have started lining up to pronounce that the closure of the Tiwai Point aluminium smelter "was always going to happen", it's all "for the best", and we can "build back better', whateverthat means.
They really feel sorry for Southlanders, but the smelter going will make electricity cheaper for everyone else. And anyway, it feels really good to give a two-fingered salute to Rio Tinto.
The people of Invercargill and Southland are understandably not so excited about giving the smelter owners a two-fingered salute. They are worried for their community.
Nearly 5 per cent of the Southland workforce will likely lose their jobs — a massive body blow. For Aucklanders having difficulty comprehending what that means, a shock of a similar magnitude in that city would be 40,000 people losing their jobs at once.
The Finance Minister is conveniently trying to hide behind the skirts of Bill English, reminding everyone that Bill said "no more" to Rio Tinto after 2013, and as current minister he's just sticking with the line. It's weird how trapped he feels by an 8-year-old decision.
If it helps at all, the Bill English I know wouldn't have handed out $10 million to a bungy jumping company in Queenstown. If desperate times warrant that much being handed to a single private tourism company, or a ludicrous $280m to support New Zealand Post, Southlanders will legitimately ask why not $30 or $50 million for 2600 jobs in their region?
The smelter has as good a case as the tourism or film sectors, and a considerably better case than what has become a glorified courier company. The international market for aluminium has crashed as a result of Covid-19 decimating the car- and plane-making industries.
More egregiously, the electricity for this and other Southland businesses comes from just up the road at Manapouri, yet Southland is made to pay to have power circulated around the rest of the country. The request for help is more a case for stopping an unfair levy than for a fresh subsidy. Southland is not the only region, and aluminium not the only regional industry that is up against it.
The Finance Minister is conveniently trying to hide behind the skirts of Bill English. Photo / Mark Mitchell
The Marsden Point refinery bankrolls a similar proportion of high-paying jobs in Northland, and the refining company is making near-identical noises about closure.
Meanwhile, Taranaki is continuing to come to grips with the Government's pre-Covid oil and gas exploration ban placing an artificial sunset on its biggest industry, and associated companies like Methanex and the ammonia urea plant.
Outside of heavy industry, the Covid-19 border controls have put on ice a series of other sectors that normally contribute to New Zealand's wealth and jobs.
The $5 billion we earn annually from international education is dwindling to nearly nothing — and that leaves schools, universities and other providers short $1b a year for tuition fees alone.
Tourism limps along on one domestic cylinder, which sparks up in the school holidays but is insufficient to sustain many of the companies reliant on it.
The tech companies that succeed in the world despite our isolated location are wondering how long they can operate from their New Zealand base while being physically cut off from their customers.
And the foresters are suffering from whiplash, feeling alternately loved and loathed, sometimes almost in the same press release, as the Government has somehow got itself to the point where it will decide when forests are planted and where they can be sold. No wonder politicians were belatedly cuddling up to the farmers this week. Food is in danger of becoming our only export sector, so let's call a truce in the regulatory hostilities and pretend all that talk about the need to diversify away from agriculture was just a bad dream.
Which brings us to the bigger problem that the smelter closure underlines. Exactly how do we plan to make money to pay off this huge debt the Government is running up on our behalf?
How will we fill the massive hole in our exports left by tourism, education, aluminium and oil and gas? And exactly how do we plan to magic up 2600 replacement high-paying jobs in Southland?
Our economic response to Covid-19 is looking ridiculously haphazard. If the Government likes you, you get a bucket of money. If they don't, then tough luck.
We first need a level playing field, and then we need to focus on increasing the competitiveness of all our businesses. We also need, to paraphrase a certain Australian Prime Minister, to get out from under the duvet and start re-engaging with the safer parts of the world again.
Right now we are being way too cavalier with our whole economic fabric. We could wake up and find whole regions permanently crippled — the ultimate irony for a Government that claims to "champion the regions".
And, given that our biggest power consumers will have gone, and taken with them their outsized contributions to the costs of the electricity grid, we may not even have cheap power to make us feel better.
- Steven Joyce is a former National Party MP and former Minister of Finance. One of his clients is a Southland company that does some work for the smelter, but his views on the smelter pre-date that relationship.
