Ironically it’s just as difficult in good times as in bad. In bad times, at least ministers and sectors are realistic about what is likely to become of their pet project, while in good times, everyone expects to get something.
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Start your day with the latest business headlines straight to your inbox.Given all that, finance ministers are generally thrilled if they manage to get through the Budget process unscathed.
Finance Minister Nicola Willis should therefore be happy with the reaction to this Budget. She has set a clear direction on fiscal consolidation, has kept investing in core public services, and taken some steps to jump-start economic activity.
That’s not to say everyone will think it is perfect. I for one would like to see a faster pace of fiscal consolidation, and I am very concerned about the lack of investment over seven years now in science, which is crucial for building a strong and prosperous future.
Indeed, this Budget resulted in money being diverted out of scientific research into a pointless reorganisation of the science sector, which is ironic given this Government’s professed direction.
Others will be concerned about different things, but I suspect the broad direction is understood and accepted by the majority of New Zealanders.
The other sad and immutable fact for finance ministers is that if a Budget is accepted, then the public quickly banks it and moves on to ask what’s next. And that is where we find ourselves.
The country’s big problem now is our very slow and sluggish recovery from the long post-Covid recession, and that’s despite strong export receipts from our food sector. We are having an export-led recovery, but so far it is not big enough.
If we look across the economy, there are some large sectors still struggling. Tourism and international education were decimated by Covid and an at-best ambivalent Government. They are coming back but too slowly.
Ministers in both portfolios need to be pushing harder to remove blockages and achieve growth. For example, why is the International Convention Centre in Auckland not open yet when it is now clearly, finally finished?
Are Tourism New Zealand and Education New Zealand doing their national marketing job well enough? Immigration New Zealand’s performance seems to be improving, but is it still a handbrake on growth?
Property and construction is another big sector in the doldrums. You can’t force people to buy and sell properties, and it is clear that activity is sluggish because of weak personal and business balance sheets. But infrastructure building is also too slow.
The Government is putting money in and giving the sector the tools, but government agencies are by all accounts moving too slowly to get shovels into the ground. Ministers need to more aggressively check what their people are actually doing to get things happening.
Governments can’t do everything though, and the big bit missing is private sector investment. That comes down to a lack of confidence, which is hardly surprising.
Ministers do need to land some of their myriad competition reviews to help restore business confidence. But the issue runs much deeper than that.
I’ve talked previously in this column about the Trump overhang, and the impact that is having on investment decisions, which is real and ongoing. But it’s not just that. We are in a time of quite stupendous change and uncertainty, which dates from the late 2010s.
For a while there, capitalism itself got confused. Investment seemed to be about anything other than making a return. Corporate virtue signalling was big, and a lot of shareholder money was spent on things that weren’t core business. Then Covid came along and created a huge economic and social fracture, with a concomitant loss of trust in institutions, science, and governments.
Alongside all this, social media has broken us all into angry sub-tribes. News cycles have shortened dramatically, and many people just don’t know what to think any more. They are also getting impatient. Inflation has bred grumpiness. People want to start feeling again like they are getting ahead.
Now drop artificial intelligence on top of all of that. AI is potentially existential. It portends much more change, and much more fear of change. And that means more uncertainty.
Is it any wonder that investment decisions, both personal and commercial, are slower than normal.
The good news, as my late mother used to say, is this too shall pass. Every big period of flux looks even bigger while you are in it.
The Global Financial Crisis and the Canterbury earthquakes bred huge uncertainty in New Zealand, and now people think they were quite small in the overall scheme of history.
AI is definitely big – and it will probably dwarf some of the other current issues over time. I’ve lost count of the number of companies I’ve talked to in the past two months, grappling with their AI strategy.
But also, what an amazing opportunity. This innovation is bringing huge expansions in the ability of all of us to do things that would have previously taken an army of software engineers, millions of post-it notes, and months of agile working. In many ways our only limits now are our imaginations.
So part of our economic recovery involves a mindset change for all of us. Moving from a fear of overwhelming change to seeing what’s possible.
As a small country, isolated at the bottom of the world, we can either be defensive and hide under our rock, or embrace what’s roaring at us. It’s coming anyway so we might as well make the most of it.
We are a nation of inventors, tinkerers, and close-to-market thinkers. We don’t have big business bureaucracies by world standards. If we can provide the fresh thinking that distance allows and AI requires, we can make the next 30 years our time.
We’ve been a bit fearful as a country for a while now. It’s time to embrace the excitement and possibility of change and new and exciting ways of doing things. It’s time to get our mojo back. My suspicion is that only then we will start to really get this country cranking again.
