His Government has made some progress. Inflation and interest rates have come down.
But it has proved painful and divisive and some truly awful numbers will be unveiled when Treasury posts the Half Year Economic and Fiscal Update on December 17.
“Of course you’ve got to keep the pressure on that space, but now it all moves to growth,” says Luxon.
“It needs to move to growth and jobs in dealing with the 30-year productivity disease that we’ve got.
“We’ve started those conversations already, but we’ve got to really flesh that out over the course of the next year.”
Last Sunday, New Zealand’s new national infrastructure agency began operations. The agency will unlock access to more capital for infrastructure and will strengthen the Government’s private finance and commercial capability.
It has been created from a repurposed Crown Infrastructure Partners (CIP) to act as the Crown’s “shopfront” to receive unsolicited proposals and to facilitate private sector investment in infrastructure, partner with agencies, and in some cases, local government on projects involving private finance, and administer Central Government infrastructure funds.
Work is also under way on a 30-year National Infrastructure Plan.
Luxon has held meetings with major investors during missions to Southeast Asia and Japan this year. often accompanied by Morrison’s Paul Newfield who oversees a sizeable fund.
“I’ve been sitting down with the investors,” he relates. “But the problem that we’ve got is we need access to those superannuation and pension funds for our public infrastructure development.
“When I’ve sat down with those investors, they’re very open to New Zealand, and now they’ve got a Government that is very open to partnering with them – in PPPs for example.”
The Prime Minister is excited about the upcoming summit, forecasting it will be a catalyst for connectivity between the large offshore funds and New Zealand.
Projects are being fast-tracked to deliver a new generation of Roads of National and Regional Significance (RoNS and RoRS) for New Zealand to support economic growth and get people and freight to where they want to go, quickly and safely.
Twenty-two renewable electricity projects will help electrify the New Zealand economy, boost energy security and help New Zealand address its climate change goals.
New Zealand has abundant renewable energy resources but the planning system puts barrier after barrier in the way of taking advantage of them.
Collectively the projects will contribute an additional 3 gigawatts of generation capacity, if all consented. By comparison, Auckland’s historic peak demand is about 2 gigawatts.
Cabinet Ministers like Transport Minister Simeon Brown, will take part in the summit. “Simeon should be able to stand up and offer up a package of roads, for example, as an asset class,” adds Luxon.
The Prime Minister has studied what makes other small advanced economies successful.
He doesn’t buy the slogan that New Zealand punches above its weight. “It’s nice that people think positively about our country and our people. But that has to be converted into investment and into exports.”
Sir Peter Gluckman’s review of the science sector is well overdue. Says Luxon: “I personally feel we’ve been too siloed in the institutes, universities and the businesses, and as we’ve seen examples like Ireland and Israel. We need to get the right ecosystem for us.”
He cites space and advanced aviation as areas that should be growing organically. Advanced agriscience and software are also exciting.
“I do think we have to focus on areas where we think we can build out real capacity, capability and expertise and will be No 1 or 2 in the world at.”
Plant & Food Research is also an opportunity, he says. “There is incredible technology sitting there, incredible innovation and amazing science. And the challenge now is they want to commercialise it.
“We want them to commercialise it and not have New Zealand science be commercialised in Australia or the US.”
Taxing stuff
Unlike Ireland, which has offered a 12% corporate tax rate for international investors, there are no plans to follow suit here. “We haven’t had a specific tax conversation. Obviously, it’s pretty challenging at the moment as we just deal with the fiscal cleanup job that we’ve kind of got to get into shape,” says Luxon.
“But, there is a big appetite in the Government to welcome investment, and the mindset needs to change from not this privilege to invest in New Zealand to actually welcome and thank them for coming.”
Asset sales are not on the agenda either: “My commitment has been no asset sales. Understand we’ve got to get a lot of the fundamentals right.
“We’ve got two years to the next election. We have to do the fiscal repair job and get inflation under control and get the investment thing right.
The March summit will provide a readout on how international investors view us.
What small advanced economies do well
Vision and goal-setting: These countries often set out very clear visions and goals for their economic development, whether it’s becoming a global hub for certain industries or achieving specific productivity targets.
Targeted Sector Development: Rather than trying to do a little bit of everything, successful small economies have often focused on developing world-class capabilities in specific high-potential sectors. The Prime Minister sees opportunities in areas like space, advanced aviation, and agri-science.
Commercialisation: Ensuring local innovation and R&D get effectively commercialized, rather than being taken overseas, is a key lesson.
Welcoming investment: Countries like Singapore have cultivated a very proactive, welcoming attitude towards foreign investment. The Prime Minister wants to shift New Zealand’s mindset from being reluctant to embracing and facilitating international capital.
New Zealand Infrastructure Investment Summit
The New Zealand Infrastructure Investment Summit is slated to be held in Auckland on March 12/13.
It will showcase upcoming infrastructure opportunities in New Zealand, including investment and development opportunities, and provide an overview of NZ’s infrastructure vision.
It will highlight the Government’s Infrastructure vision, enabling policy and legislative work programme, the approach to partnering with private sector organisations to deliver the infrastructure New Zealand requires over the coming years and importantly, to showcase specific infrastructure investment/deal opportunities in several public infrastructure areas.
The project is being led by Treasury Deputy Secretary Financial and Commercial Leilani Frew. Others involved include: NZTE Australian Investment Director Andrew McGowan and NZ Story Director of Major Events Jonathan Alver.
