AN END TO SOFT OPTIONS
Delivered in Tauranga on 28 September 1978
New Zealand is heading for bankruptcy. It's not going to happen overnight but by the end of next year, every economic indicator will be pointing in the wrong direction, unless radical new policies are implemented.
The Government's deficit before borrowing this year will exceed $1400 million.
For the following year, the deficit will hit an astonishing $2000 million.
Treasury has told the Government that it's not going to be possible to cover this year's deficit by internal borrowing,
And further, Treasury have told Government that this will result in increased inflation and demand for imports. Government ignores the needs of the country for short-term political expediency.
The response to the television advertising campaign for Government loans has been pathetic.
I predict we will have a massive devaluation immediately after the election - close to 25 percent.
Government departments are already recommending that this be done, only the Prime Minister and Treasury, who want other measures as well, are holding out as long as they can for political reasons.
In any case this will be no more an answer now than it has been before.
I also predict that the Government will try to collect more funds by increasing interest rates even further. But all this will do is force up private sector interest rates and the cost of borrowing for local bodies, which means higher rates for homeowners.
I also predict if National is returned New Zealanders will be hit by large increases in sales taxes. The consumption led recovery of the economy will then collapse late next year.
This is inevitable, because as the economy is stimulated, imports will rise, as will domestic prices.
Unemployment however, will not fall much because manufacturers are being cautious.
They do not want to take on staff this year and fire them when the downturn comes late next year.
They are opting instead to under-supply the market and are concentrating on making higher profits and import any shortfall instead of simply increasing production.
The situation next year will be grim.
Given present trends, by the end of 1979, we will have record unemployment, higher inflation and a rising balance of payments deficit.
The Government should have the guts to admit that what I say is true and act now in the interest of the country.
It's exactly the advice they have received from their Treasury staff.
It's the truth and the public is entitled to know the facts.
These are the short-term problems, but no Government is going to be able to solve them all at once.
It's just not possible. Fix one and you make the others worse. What we must do is look ahead, develop a long-term strategy and then stick to it. That's our only viable option.
Short-term tinkering will get us further into the mire.
The New Zealand Planning Council has proved to be just another planning disaster. It has been totally ineffective. What difference has it made to one New Zealander? It has become the great neutraliser of creativity; it soaks up new ideas and brings them forward in a bland way. Forget it do away with it.
If we allow present trends to continue, in a decade's time we will be hopelessly in debt; our population will have shrunk, taxation per head will have risen, production will be stagnant, living standards will have slumped, a large section of the workforce will be out of work.
The Welfare State will have crumbled and the nation will be despondent.
I am not a doomsayer, but I am totally convinced that unless the people of New Zealand can grasp the fact that our present difficulties are not a passing phase, then the slide will continue.
The responsibility for our plight cannot be blamed on any one person or group of individuals, but those in positions of influence must bear a major share of the blame and that basically means the National Party that has been Government for fifteen of the last eighteen years.
We have arrived at this point because for more than a decade we have ignored the warning signs.
We have become a 'Soft Option Society'.
Governments have taken the easy way out of difficult situations; instead of using resources carefully they have pandered to vested interest groups.
In fact, I believe New Zealand is being strangled by the actions of these vested interest groups.
Virtually every New Zealander belongs to, or associates himself with, a Trade Union, an Employers' Group, a Retailers' or Manufacturers' Organisation, a City Council or Hospital Board.
New Zealand is dominated by these sorts of pressure groups that pursue their interests in a totally selfish manner, regardless of the welfare of the rest of the community. It seems everyone wants just about everything.
Universities want more faculties, more Government money for buildings, more staff. Hospital Boards want bigger buildings, more expensive technology and more staff.
If no one said 'no' from time to time, we would have expensive cardiac units all over the country, competing for business. We would have container ports up and down the coast all with expensive loading equipment. We would probably have half a dozen international airports, and motorways criss-crossing the country, linking every provincial centre.
That's the way good old aggressive parochialism works in New Zealand. It's wrecking New Zealand.
As a consequence of parochial pressure, we have spent far too much of our resources on what can broadly be called 'infrastructure'.
We do need airport terminals, but they don't add to the wealth of the nation.
I very much doubt that one extra tourist will come to New Zealand because Auckland now has as brand new $31 million airport terminal.
I don't believe Wellington is getting any extra tourists because it now has a new international terminal alongside its very shabby domestic facilities.
It's dead easy to get everyone to agree that productivity must be increased, the volume of exports stepped up, and that belts must be tightened from time to time.
This has been the conventional wisdom for the past ten years. But getting results, however, is another matter.
I believe we will not get the results until New Zealanders change their attitudes towards each other. While we continue with the 'Dog in the Manger Approach' we will get nowhere.
While we continue to expect that the Government can somehow solve all our problems with a few kicks and an occasional tightening of the belt, we will get nowhere.
There is no fairy godmother who can solve everything with a quick wave from her wand, although, one man, after ten years, would still have us believe he can.
We face a simple choice. Either we continue fighting each other for a greater share of a diminishing cake or we declare a cease-fire and tackle the problems together.
I believe we will not make real economic progress until the spirit of the nation is revived. We must start talking to each other instead of shouting at each other. We need a short period of self-examination.
A time when everyone can honestly say what they think without the fear of being clobbered or attacked by certain politicians or other individuals representing interest groups. To achieve this the political temperature will have to be lowered to allow people to relax and start an honest dialogue with each other.
From the self-examination of our country, and ourselves we could, and must, usher in a 'decade of co-operation'.
We need at least a decade of co-operation to get New Zealand back on its feet. A decade in which New Zealanders work for New Zealand and not just for their own vested interest group. A decade in which people will accept that survival means change and change is often inconvenient to some people.
Without this spirit of co-operation any Government is pretty much impotent to deal with the problems. It can only succeed to the extent that the people will allow it to succeed.
It calls for a leader with tolerance, common sense and understanding.
There is no real need for New Zealanders to be despondent about the future. We have major economic problems but they are small compared to those faced by most nations. Our natural advantages are enormous. We have a good climate, soil, education and health systems and generally speaking, our people are well housed.
We must build on these and other strengths and resourcefulness. We don't need more vast assembly lines that inevitably are less efficient than automated plants overseas. The mass volume field is not ours. We must concentrate on well-designed quality products, based on our natural resources.
If that means importing a few Italians skilled in leatherwear design and manufacture, let us do that. We have the raw materials - the skins - and should be developing at a much faster rate a quality leatherwear industry. Mediocrity is not good enough. Our products must be top flight so that they can carry high freight costs and still be competitive in overseas markets.
There is another reason why we don't need more assembly line factories. The work in them is invariably repetitious and very boring. There is no work satisfaction and this manifests itself in industrial unrest and a host of other social problems.
The baby boom of the 1960s plus the desire to re-enter the work force of many married women means that we must create jobs at a much faster rate than in the past. Unemployment is not going to disappear in the next up-cycle in the economy. We have dived into a structural unemployment problem which cannot be eliminated overnight.
Our economic policies must be changed to place the emphasis on the employment of people rather than plant which imposes an additional strain on our overseas funds.
We should be employing more people on the land to increase production. This in itself would see a revival of rural communities. As farms have been amalgamated, fewer people have farmed larger units. This trend has caused the stagnation of farm production.
If it is presently not economic for farmers to take on more labour, then Government should alter the economics of the situation to make it worthwhile.
In the towns and cities we should be placing the emphasis on smaller manufacturing units producing quality products for New Zealand and the export market. Production that requires skilled labour rather than expensive machines.
At the same time, we must re-examine the role of the state and remove it from areas where it's not really necessary. I seriously wonder whether any good purpose is served by our shop trading hours legislation, the Liquor Licensing Commission, The Planning Council, dozens of other statutory bodies and much of the red tape that requires so many bureaucrats to operate.
Far too many people have to waste time going to Wellington, filling in forms, making requests of, and generally dealing with, state bureaucracies. A similar situation exists with Local Bodies. The cost of all this regulation is passed on to the consumer in the form of higher prices.
Solid evidence exists to show that home section prices are boosted by the inordinate number of bureaucratic hurdles the developer must surmount before getting his sections on to the market.
We must wipe all the unnecessary red tape and bureaucracy because it costs too much. It consumes resources that should be put to more productive use. If this offends a vested interest group, that's too bad.
The only relevant criteria must be 'what is the public interest?'. If the overall public interest justifies a regulation or law then it should be kept. But if all it does is service the interests of a pressure group, then it should be wiped.
This year the Government will be spending 45 percent of the GNP. That's a record for New Zealand and it's far too high.
J.K. Galbraith coined the phrase "Private Affluence and Public Squalor".
In New Zealand we are heading towards "Public Affluence and Private Squalor" which will quickly be followed by public squalor as the private sector collapses under the weight of the State.
The ordinary New Zealander finds his living standards have slipped below what they were a decade ago. The public sector has grown but this growth has not benefited the ordinary New Zealand worker. Through taxes he pays more for his health services but the service has not improved and his health is no better.
The people who have benefited from this growth are the professionals in the business. The doctors are doing fine but the patients find that the system has become bureaucratic and more expensive.
The State Sector must work out ways of using its resources more effectively. Its share of the GNP will have to be cut before it collapses the entire economy. The adjustments I am talking about will have to be made.
The only question is whether New Zealanders can get together, study what has to be done and do what has to be done with an enthusiasm and determination. We cannot continue taking all the soft options.
The policy of appeasement of pressure groups has caused the present structural weakness in the economy. We can dig our way out but first we have got to learn how to work together.