05 October 2020

New Zealand election 2020: Thoughts and issues

A lot has happened since I last wrote much on this blog.  I've moved countries (twice), so I am back in NZ (for a while anyway) and then there is Covid19.  So before I discuss the election, this is my view on Covid 19:

  • It most likely emerged by accident in Wuhan and mishandling in China has resulted in the spread of the virus globally;
  • It isn't just a harsher version of the flu, it is more contagious and more dangerous to those who get it;
  • It isn't "planned";
  • An elimination strategy is all very well from a health perspective, but economically it is unsustainable in the medium term. A highly effective containment strategy appears to be more likely to effectively balance health and economic needs (i.e. NSW has done better than NZ in net terms);
  • Taiwan is the gold standard of Covid19 containment and elimination;
  • Strict border control and lockdowns, when done well, have been effective in containing the virus, but longer term a more effective strategy is regimens of strict personal hygiene and surface cleansing, use of masks in crowded locations (e.g. public transport) and extreme care around health and elderly/special care environments.  (There's no need to micro-manage what people do outside on their own).

New Zealand has ridden out the pandemic, so far, because it is a long way away, can easily control its border and wasn't too late in shutting it (although it almost was).  It has helped that New Zealand has been fiscally in surplus for most years since the 1990s, bringing down public debt below 20% of GDP.  The foundations for this were set by both the Lange/Douglas Government in 1984-1988 and the Bolger/Richardson/Shipley/Birch Governments of 1990-1999, not reversed by the Clark and Key Governments. Fiscal prudence bought the New Zealand Government capacity to borrow to subsidise much business in the interim, although the monetary incontinence (as I like to describe it) of recent years (following in the path of the US, UK, the Eurozone et al) has effectively stopped many with credit from having to face up to debts that would otherwise be unsustainable.

Although New Zealand's exports have largely held up during the pandemic, given international tourism was a significant contributor to GDP (short of 6%) and that has virtually collapsed, New Zealand has a significant drop in income from overseas, yet there is little sign that Government (nor most political parties) think this should affect what they do.  Sure, a small part of this is offset by almost no New Zealanders embarking on foreign travel (there being a great window to visit parts of New Zealand formerly dominated by foreign tourists, such as Queenstown), but this makes only a small difference.  It's difficult to exagerrate how devastating Covid19 has been for the aviation industry, with Air New Zealand operating at less than a third of its capacity and little sign that it is likely to recover much beyond that in the coming year.  

Bear in mind although New Zealand's economy doesn't look like it is facing the worst recessions since the Great Depression, this is predominantly artificial.  It is (like Australia), being kept alive by profligate subsidies for wages which are fundamentally unsustainable.  So when the Prime Minister talks about a tax cut being a "sugar hit", she's not too concerned about providing sugar hits of her own, as long as it is in the "giving people borrowed money to keep businesses alive" rather than "letting people keep more of their own income".  The great hope of the Government is that it wont need to keep the sugar hit going, and that in 2021 there will be, at least, some opening up of the borders to Australia and the Pacific at least (which means tourism, business travel and a pool of skilled labour), and perhaps some of the Asian countries that have contained the virus (Taiwan, Singapore, Japan, South Korea).  It's difficult to see travel from Europe and the Americas resuming soon, but even moreso, it is difficult to see it returning to pre-Covid levels for years.

So what New Zealand faces is an enormous economic crisis.  Sure, looking at the stockmarket and property prices you'd think there isn't one, but both are stoked by cheap money.  Modern Monetary Theory followed by the Reserve Bank means the banks are flushed with almost free money to lend out, and so the money is going to inflate the savings, superannuation and the property portfolios of those who can borrow.  Is this a bubble that will pop one day? Probably, but this bubble is global and is has enormous negative consequences.  One being that just saving is not rewarding anymore, since there is no return to be gained from piling up money that earns no interest.  More important is that it is making housing more and more unaffordable, aided by a broken market for supply - as local authorities constrain both the supply of land to build on, and the permission to build, and central government constrains the rules around construction (albeit all of this has (mostly) good intentions, but some of it is pure protectionism).

New Zealand has a whole host of social crises. There is a persistent underclass of poverty of means and in some cases aspiration, where alcohol and drug use, domestic violence and sexual abuse, and chronic poor educational performance, combine with criminality generates communities and families with intergenerational despair. None of this is solved by easy answers (tougher on crime or more benefits or pay all teachers more), nor does critical race theory offer answers or explanations.  It is a mix of many answers, but continuing to throw money at the problem, selectively take children away from abusive families and locking away perpetrators for periods of time (and then letting them return to continue the cycle) is a failure. More devolution of power to address problems locally might help, but nonsense around "eliminating child poverty" is an easy slogan than betrays a host of problems - one of which is housing price inflation that few politicians care about (because most of their voters think they are beneficiaries of it).

More recently the Christchurch massacre gave rise to fear that there might be some surge in support for fascist, white supremacist views (albeit the views expressed by the killer ranged from racial and religious bigotry to environmental extremism and admiration for the Communist Party of China), but that has proven to be largely unfounded. Moreover, any fears of an Islamist backlash have also proved unfounded.

So what should matter?

  1. The recession: It doesn't seem like one now, because of the twin "sugar hits" (hey Labour doesn't own that term) of wage subsidies and monetary looseness.  The wage subsidies will be phased out, and the monetary looseness is a copycat policy (largely to avoid the NZ$ from inflating against its rivals).  There a large numbers of people employed based purely on borrowed taxpayer funds to prop them up, this is going to end and a different approach is needed.  New Zealand's international tourism market is dead and within a year at best it could have recovered by 40% (Australia and some others), the loss of this income is currently concealed except in observing property markets in a few locations.  Tax cuts can help, but need to be matched by significant reductions in government waste.  Close scrutiny should oversee all spending to ensure it meets public good intentions, rather than being a transfer for private gain.  New Zealand's economy cannot be sustained if it is trying to bolster a growing welfare state and a growing corporatist state of patronage (see racing). 
  2. Covid19:  Yes the health response has been successful, but is it sustainable? New Zealand could open up to Australia and perhaps Taiwan, Japan and Singapore in the coming year, but what if there is a small outbreak in Australia again?  Does New Zealand swing from being open to closed repeatedly, or does it accept that there needs to be containment and a clever approach to managing risk of travellers?  One observation comparing Australia (ACT/NSW) with New Zealand is that social/physical distancing is almost completely ignored in parts of NZ now, as is use of sanitisers and the contact tracing app.  These habits have become normal in much of Australia and are keeping transmission rates low, but if New Zealand reverts to being lazy about hygiene then it risks transmission if any more cases emerge.  New Zealand needs to be cleverer as it opens up to the world, and it cannot afford long term not to open up as it becomes safer to do so.
  3. Housing:  The failure to grapple the issue of house price inflation is the single biggest policy failure of the past three governments.  The policy of a "big New Zealand" which emerged under the Clark Government has not seen planning and building policies alter to accommodate large numbers of immigrants.  Socialists like the Greens want a large part of the solution to be for more people to be tenants of the state, whereas some on the right see replacing the RMA as the answer.  Few failures have challenged capitalism and free market economics like this, because it looks like a free market, but actually local government constrains both land supplies and consents to build, and central government constrains what and how houses can be built.  Given immigration on the scale of recent years is unlikely to be practicable for several years, there is a chance to reform both planning and building on a transformative scale that focuses on private property rights, clearly defining their limits and potential, and reforms building regulations to meet what is necessary rather than what is deemed "socially desirable".
  4. Education: The long term trend in performance is downwards and statistics about bullying should be a disgrace, and indicative of how a Prime Minister preaching kindness isn't a realistic policy to deal with those who fear being at school.  The education system performs much better for girls than boys, but there is little sense of priority given to addressing this.  Performance for Maori and Pasifika students continues to be below the national average.  New Zealand has one of the most centrally controlled education systems in the world, and much of it is beholden to two powerful unions (NZEI and the PPTA).  Part of the answer is to give schools much more freedom to adapt curricula to meet local needs, including the backgrounds of the students and encourage innovation at the school level, but as long as teachers' employment conditions and pay are governed centrally, reform has to be done on the terms of the unions, which are closed shops and fundamentally protectionist.  Charter schools are a start, but funding should follow students and it should be easier to set up schools, get them approved and for each student to be funded regardless of whether it is a state, private, integrated or any other school.  Labour wont do it, because it represents the status quo and National essentially flinched when it had to chance to reform in the 1990s.

Beyond that what matters to me is ensuring government does not erode personal freedoms.  Yes I'll be supporting the legalisation of cannabis and the End of Life Choice Act referenda, because both enhance personal freedoms.  Sure the bill to legalise cannabis is far from ideal, but taking it out of the criminal justice system is something any libertarian should support.  It doesn't mean cannabis isn't damaging to your health (it absolutely can harm you, whether it is respiratory or neurological), and there needs to be a serious campaign about the destructive impacts regular use has on brains.  However, the answer isn't to criminalise people for what they choose to ingest. 

I'm less bullish on euthanasia than I once was, but the End of Life Choice Act has very defined and limited application and so it deserves to be supported, by giving choice to a small number of people whose lives are terminal and the symptoms they suffer are unbearable to them.  It's their choice, and I'd want to be careful before anyone suggests going beyond the legislation. 

There are much bigger issues out there as well, including the attacks on freedom of speech which are basically well intentioned (i.e. stop dickheads abusing people on the basis of religion), but are easily translated into a new blasphemy law.  There are much more disturbing trends in the UK and the USA on speech that New Zealand should not follow, but which are broadly supported by leftwing academics and politicians, and which see trends in undermining academic freedom.  Related to this, are the attempts by supporters of the People's Republic of China (PRC) to bully others who wish to campaign for Hong Kong independence or to oppose policies of the PRC, to get them silenced (see Australia).  New Zealand must be resolute on free speech, not least because there are calls from various circles to narrow the scope of speech.  Whether it be from the PRC, from hard-left academics, to religious fundamentalists.

Internationally, the world seems very introspective because of Covid19, but geopolitics have changed forever. The benign environment in the Pacific is increasingly not so, because the PRC is seeking to push the limits of what it can get away with in international behaviour and challenge the dominance of the US and its allies. From essentially incorporating Hong Kong almost fully into the PRC, to threatening Taiwan, annexing disputed territory in the South China Sea and border scuffles with India, the PRC wants to reshape the international order to suit its needs and engages in Yuan diplomacy to buy allies at the UN.

Then there is climate change, which is the single-minded focus of the Green Party.  Covid19 has gutted the aviation industry, reduced much international trade and done much more to reduce emissions than any other measure, because it has kneecapped so much economic activity.  I'm not opposed to government policies that either stop subsidising or protecting activities that generate CO2 emissions, or taxing or restricting access to technologies or options that have lower emissions, but adopting policies that have no net impact on the climate (but a negative net economic impact) are an exercise in vanity that is not needed nor achieves anything useful.  Environmental policies that effectively export economic activity to other countries that are not adopting similar restrictions, achieve little other than enriching others.  New Zealand is one of the most energy and environmentally efficient producers of food in the world, so it should be encouraging opening of global markets to its products, not hindering its own capabilities.  As a country with a small population, much of it dispersed in smaller cities and towns, and far away from the rest of the world, its per capita emissions are going to be higher than those in densely populated countries close to markets.  It is not a time to increase costs to businesses and the public just to show off that New Zealand can reduce its infinitesimal proportion of emissions slightly faster than before, with an effect on global warming in the order of delaying increases by a few hours at best.

This election there are two main choices, for the first time, it appears that only four parties will enter Parliament (though the Maori Party may yet win an electorate), so the choice is between a centre-left vision of Labour and the Greens (for the first time without another party) and the centre-right of National and ACT.

Nobody likes to write off Winston Peters, but it is difficult to see how he can recover given that Judith Collins is giving more traditional supporters on the right a reason to vote National. NZ First's main hope is that it can convince more centre-right voters that NZ First keeps Labour from moving too far too the left, but most who think that might prefer simply to vote for a different government. As usual, the Maori Party doesn't expect to get enough party votes to make the 5% threshold (although this should not be so unachievable today given growth in the voting age Maori population), but may manage to win an electorate and bring in another MP on the list.  The New Conservatives are the strongest other party given that there is a constituency for a socially conservative and fiscally conservative party (ACT has effectively abandoned many on the socially conservative side), but it seems unlikely to make 5% without a high profile uplift in support.  On the left, TOP wont make it either, and seems unlikely to maintain momentum after this election (although it serves a useful purpose of drawing votes from Labour and the Greens).  Yet the visions of both main parties are not that different (although their potential governing partners are).

I'll post later about all of the parties and do my usual guide to each electorate

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