But before I get to that, I should start with a political disclaimer.
As much as it may surprise some, I do not want this column to sound party-political. Over my career, I have seen plenty of nonsensical policies from both the left and the right. And now and then, I have equally witnessed good policies from both left- and right-wing parties.
Neither side of politics has a monopoly on good or bad ideas.
That said, the policies introduced under the previous Government, especially those from its second term, were generally awful. Not because they came from a Labour-led Government but because they were poorly designed and executed.
The previous Government’s policies often lacked clear problem definitions. They usually did not even have a rudimentary analysis of costs and benefits. Their implementation was delayed, botched and chaotic.
The current state of New Zealand can be attributed to the poor policy-making of the past two terms.
For economists, it was doubly frustrating. If you are trained to look at public policy problems from an economic perspective, you could spot with the naked eye where the previous Government was going wrong. But even more frustrating was knowing that even bad policies, once introduced, are often hard to repeal.
Even the most nonsensical policies always have a few people benefiting from them. The textbook example are United States sugar tariffs and import restrictions. Fewer than 5000 farms benefit from this policy, but some 330 million Americans pay for it through higher prices. Yet, a repeal is elusive because the few people affected would make too much noise.
So, as economists, we are used to fighting against bad policies being implemented. And we are used to bad policies being kept on the books, even when governments change.
This brings me back to the new New Zealand Government and why it is such a breath of fresh air.
The previous Government bequeathed a comprehensive set of bad policies. They were not bad because they did not mean well (they did). They were bad because they could never work.
The path of least resistance for any new Government would have been to keep those bad policies on the statute books and move on. That is how politics usually works. Not so for this new Government.
Instead, in its coalition agreements and 100-day plan, the new Government aims to rectify most of the significant policy mistakes of recent years — from the small to the big ones. And it has signalled that it will do so even when public opinion (or sometimes published opinion) will likely be against it.
Take the smokefree legislation, for example. Few people would be against policies to reduce smoking. Still, the previous Government’s smoke-free policies were nonsensical in many ways, so are part of the new Government’s policy bonfire, even though it will hardly earn them brownie points with the commentariat.
The same goes for the ridiculously expensive pumped-hydro scheme at Lake Onslow.
And the equally grotesquely expensive Auckland light-rail project.
And the unjustified income insurance proposal.
And even the ban of pseudoephedrine-based cold medicines, which was introduced under the Key Government and was then kept by Labour.
We could continue the list with big-ticket items like the new planning laws that replaced the old Resource Management Act.
Introduced in haste to seize the opportunity of Labour’s outright majority the legislation was so complicated and lacking in sound policy principles that it was a regulatory disaster.
It will be gone over the coming 100 days — and a good thing, too.
The same is true for the Reserve Bank’s dual mandate. Who could be against a central bank aiming for low unemployment? Apart from economists, that is, who know that a central bank cannot do much about it. Even so, that goal is out, and we will hopefully see a return to sensible monetary policy (with or without a new RBNZ governor).
By simply cleaning up the plethora of policy mistakes made by its predecessor, the new Government will create a better country without doing anything new. Maybe that does not sound that great. But it is more than economists are used to.
Yet it is not sufficient to be without vices; virtues are equally important.
Fortunately, this new Government does have some virtues. Or, at least, it professes to have them.
After the disastrous experience of the past Government, it is encouraging to read in the coalition agreements that the new Government commits itself to better principles of policymaking.
It will be music to the ears of economists to read in the National/New Zealand First agreement a commitment to “making decisions based on sound public policy principles, including problem definition, rigorous cost-benefit analysis and economic efficiency”.
And to read that “the Government will set clear public service targets and regularly report on progress towards these objectives”.
Indeed, “decisions will be based on data and evidence, with programmes regularly assessed to see if they are delivering results”.
Even non-religious economists can only say ‘Hallelujah!’ in response to all of that.
Economists are a fairly sceptical bunch. We are used to the madness around us, and we are prone to being disappointed even by our friends in politics.
But with this coalition’s founding documents, we may be on the winning side this time.
Perhaps. Just this once. Please.
· Dr Oliver Hartwich is the executive director of The New Zealand Initiative.
