23 May 2006
Because of our relative sizes, Australia will always be more important
to New Zealand than we are to it. Yes, we are strategically significant
to them, and a small market for their goods; amongst that rich
smorgasbord of Australian migrants, we provide their best-educated;
sometimes we can even be a serious challenge on the sports field. But
apart from that, most Australians scarcely give New Zealand a second
thought. Yet, they have always been vital to us; a source of our
immigrants in earlier times, until our economy began to sour in the
1960s. They have links to the wider world that we can only dream about.
They are net energy exporters, while we depend on imported energy.
Australia has ridden the mineral export boom since World War Two so
successfully that it is a factor in their superior standard of living.
But Kiwis deceive ourselves if we think that Australia’s greater
prosperity is due to luck. Successive Aussie governments have adopted
policy settings likely to produce better and more consistent economic
outcomes than ours. For the most part their politicians understand that
maximising growth via the market does more for ordinary folks’ living
standards than any amount of political tinkering, regulating,
subsidizing or social work. We’ve occasionally had politicians of
talent; Australia has had grown ups at the helm for most of the last
half century. It shows. In the early years of the twentieth century New
Zealand’s standard of living was higher than Australia’s. Our currency
was worth more. It’s only relatively recently that we started to slip
behind. The migration of New Zealand skills to Australia picked up in
the late 1970s as Robert Muldoon’s economic controls and regulations,
coupled with a bloated exchange rate, slowed our growth. Workers’ real
incomes fell. It was Kiwi muddle, not Australian luck that let them pull
ahead. Yet the seesaw tipped again with New Zealand’s bolder economic
reforms of the 1980s. They didn’t guarantee Kiwi superiority, but they
gave us a fighting chance, so long as we didn’t get the stitch. For a
decade New Zealand had one of the fastest-growing economies in the OECD,
slightly better than Australia’s.
It’s been the last six years that saw us start to lose ground rapidly.
High export commodity prices kept things buoyant here, but a collection
of Labour’s student agendas have taken the shine off New Zealand’s
economic performance. Pushing up the top rate of income tax in 2000,
pulling a larger number into the bracket, reverting to old-style labour
practices, fiddling with employment laws, refusing to fine-tune the
Resource Management Act, introducing the Kyoto Protocol without
sufficient thought, and the re-introduction of regulations in several
key sectors of the economy have seen the gloss wear off New Zealand’s
superior performance. Another 8,000 more bureaucrats since 1999 are
testament to this Labour Government’s long discredited obsession with
the belief that governments can do more for people than they can do for
themselves. I was recently in Australia for ten days. There are faint
signs their economy is slowing. They are staring at 3% growth this year
and 10% over three years. We will be lucky to get 1% this year after a
couple of contracting quarters, and it will require divine intervention
to reach Michael Cullen’s forecast 7% over three years.
So the gap in living standards that was about 20% in
Australia’s favour in 1999 is now 33%, and will soon top 40%. Instead of
being Australia’s rich friend, New Zealand has become its poor country
cousin. Of course our brightest are choosing one-way tickets to
Australia. Does it matter? In some ways, not as much as it once did. Our
economies since NAFTA in 1965 and CER in 1983 have entwined themselves
to an extraordinary extent. Individual Kiwis with spare cash now invest
in Australia. Some Australians take advantage of our lower wage
structure to manufacture here, creating jobs. Our best performing
companies have either placed a foot in Australia or have some Aussie
liaison. Banking has also developed a high degree of symbiosis. Such
deals, however, keep being negotiated from a position of New Zealand
weakness.
Far from leading the closer relationship, Helen
Clark’s government bobs along behind like a cork in search of a safe
haven. Treasurer Michael Cullen invites those who think New Zealand can
do better to emigrate. Which too many talented have been doing for too
long. The internationalist Prime Minister Peter Fraser’s brave new New
Zealand of the 1930s is becoming an irrelevant Australian off-shore
appendage in the hands of smug people. They have a nerve to claim they
belong to his party.