Editorial: National needs new policy for closing the gap

Emigration to Australia can be cyclical. Photo / Filephoto

Opinion

One of the less convenient aspects of being elected to high office is being held to account over promises and criticisms made from the safety of Opposition. Not long after melodramatising the problem, a politician can end up owning it.

The National Party made much, in its bid for power, of the numbers of New Zealanders emigrating to Australia and the economic and societal challenges this would cause. It accused the Clark Government of waving lamely as 800 Kiwis a week departed for higher wages and better futures. What was needed was a prescription for growth here that would motivate the skilled and mobile to stay in New Zealand and help close that economic gap with Australia.

Two years on, after a fall resulting from the global financial crisis, the move westward is growing again, up 16 per cent from 2009 to last year according to the statistics department. And National, too, is reduced to waving at the departees, our economy marooned in low growth and higher unemployment than across the Ditch. The number of New Zealanders returning from Australia is relatively static.

Little is being achieved in catching up with Australia and it is possible that no policy setting, short of changes that would spark far more serious social upheaval than a brain drain will deliver parity in the foreseeable future. National probably regrets its political hyperbole.

New Zealand's options for revival are relatively limited by lower productivity, high private foreign debt and an almost cultural aversion by the state and individuals to cutting spending in favour of saving and productive investment.

The political talk of closing the gap with Australia has so far been just so much hot air. As the gap stays wide and prospects at home stagnate, a Weekend Herald analysis of Statistics NZ data shows many middle-tier workers are going where the opportunities increasingly lie, for their own work and for their children's jobs.

Was National right in Opposition to apportion blame for such a vexing problem? It knew, and knows now, that comparative success against Australia would require bold and disruptive interventions. Even improving economic growth rates to match those of Australia does nothing to close the gap; we would be better off but still not as well off as our transtasman cousins.

In government its answers have been limited: reducing company tax, shifting some direct income tax to indirect GST, tinkering with labour and planning laws, trying to hold the annual increase in state spending rather than cutting it, but ruling out big ticket changes such as to Working for Families, interest-free student loans and raising the entitlement age for superannuation.

For a time, with net migration boosted by returning New Zealanders, the National prescription might have seemed encouraging. Yet its own 2025 productivity task force, headed by former leader Don Brash, twice predicted that major change was needed, and was given an almost unseemly short shrift. Dr Brash's prescription suffered from a political tin ear, unaware or unpersuaded by the risks of a voter backlash to wholesale cuts to welfare programmes and taxes and sales of state assets.

Emigration to Australia can be cyclical, albeit each time the tide goes out it goes a little further. National now knows that the departures it so criticised were not just of a Government's making. The economic growth and prospects of a small, primary-produce-exporting nation are not directly comparable to those of a big, diverse, less indebted neighbour.

For its own sake, New Zealand needs bold economic initiatives that will position the country for sustained growth. It might not happen immediately and it might see Australia move further ahead for a time, but that should not be the concern. Once financial and social prospects improve, both citizens and immigrants will want to be part of the solution.