Prime Minister-elect Christopher Luxon speaks about forming a strong government and his experience at the Chelsea Sugar factory.
Video / Alyse Wright
OPINION:
Predicting the future is fraught with peril, so let’s throw caution to the wind and do just that. What will happen to our nation and economy the next three years?
Presently the International Monetary Fund forecasts that New Zealand’s GDP growth will rank 180th out of 189 nations in2024.
The new National-led coalition can only pay for the additional demands on healthcare and pensions coming from the ageing population if it gains far greater tax revenues from rapidly accelerating economic growth.
Cuts to healthcare and pensions will not happen, especially with the influence of New Zealand First. The University of Waikato will get its new medical school.
Consequently, National must engineer a boom, and fast, to pay the bills.
More trade deals, like with India, won’t be done overnight. The party will initially seek growth from tourism, immigration, and construction, the same three drivers of growth when Sir John Key was Prime Minister.
Promoting construction will take the form of re-zoning farmland on city fringes into suburbs and dropping the foreign buyer ban on residential properties.
It will not be enough. Immigration and tourism both went to zero during the pandemic. Construction is subject to property bubbles.
To promote more solid growth foundations, National and Act will go gang-busters, not just on gangs, but on cutting regulations. It’s a good thing to cut back all of the rules imposing costs on our society greater than the benefits. Labour has loved red tape, as much as lawyers have loved making money out of it.
Incoming PM Christopher Luxon will make use of his management credentials to cut waste in Wellington, which he will define as too many bureaucrats.
He will not define waste as corporate welfare and grants to tertiary students from wealthy families, which make up most of them.
Cleaning out the waste that came with the 15,000 additional bureaucrats hired under Labour will be endorsed by most of us who don’t live in Wellington. Labour enabled time-wasting and gave away power to legions of highly-paid, working-from-home, public sector managers who flourished under its lax governance.
National must do so since it has no other room to move on spending.
The Māori Health Authority will be abolished, not because it is divisive, but because it will fail in terms of the objective of improving Māori health outcomes.
Instead, National will seek to empower Māori by decentralising, not centralising, authority. Dame Tariana Turia pioneered such a model, called Whānau Ora, when National was last in power, supported by the Māori Party. The model is one of public funding, yet private provision by iwi-based groups.
Charter schools will be reinstated, also based on the public funding of private operators. Other changes to education will come in the form of changing rules, like the curriculum.
The aim of these reforms will be to promote both equity and efficiency, not solely equity, which has been Labour’s only focus. Meritocracy must be reinstated.
However, National will do little in terms of dismantling the monopoly powers of many large firms across a swathe of industries, from construction, to food, to banking, to domestic air travel, and more.
Robert MacCulloch.
The reason is that it remains a pro-business, not a pro-market, political party.
Labour will rebuild. The party will argue that the only way for us to enjoy world-class health and education systems is to better fund them with such taxes.
In doing so, Labour will win back the voters who left it for the Greens as they touted themselves as the only ones standing for wealth redistribution.
If GDP growth does not start to quickly take off, then the revamped Labour Party will gain traction. Without such growth, National will run short of funding and make the Opposition’s soon-to-be-revised tax proposals look more attractive.
When all is said and done, let’s wish the incoming PM every success, since the country is at an inflection point. Sometimes even Disney movies have a deep meaning. Without Moana’s risky and fraught voyage to save her island, which no one else wished to take, its lifestyle and economy would have collapsed.
The new coalition’s primary challenge is not to engineer faster growth, but a higher quality of growth than under the previous National Government. In a new world, new thinking is required. The new leadership should not look back to those who led the innovation-lacking Key Government for answers.
Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at University of Auckland
