Who decides what's crazy in the public debate on economic issues? Where does orthodoxy lie?

If you follow local business news closely, you'll know there are three major sources of economic analysis in this country.

There are the government agencies: Treasury and the Reserve Bank.

There are the bank economists: Westpac, ANZ, ASB, BNZ and KiwiBank, plus a few investment banks and auditors, that run research units with independence from corporate head office.


And then there are the independent think tanks.

The three biggest of those are the NZ Institute of Economic Research (NZIER), Business and Economic Research Ltd (BERL) and the NZ Initiative.

Producing regular reports, working with Cabinet Ministers and ministry officials, and with their senior economists regularly in the media, they are some of the country's most influential voices on public policy.

Broadly, the three organisations offer a left, right and centrist political spread. At least in the traditional sense.

On the left, BERL was a critic of many market reforms of the 1980s and 90s and advocates the most interventionist approach of the three.

The market economy is riddled with failures, argues BERL chief executive Ganesh Nana. Picture / Mark Mitchell
The market economy is riddled with failures, argues BERL chief executive Ganesh Nana. Picture / Mark Mitchell

"From a philosophical perspective, BERL undoubtedly comes from the perspective that the market economy is riddled with failures," says chief executive Ganesh Nana. "And if we don't respond to them, that will be to the detriment for New Zealand."

The NZIER, on the other hand, seeks to position itself in a neutral political position.

"We try to be centre of centre," says chief executive Laurence Kubiak. "That's a challenging place to be because we tend to annoy both sides. We're not right enough for the right and not left enough for the left."

We're not right enough for the right and not left enough for the left."


That leaves the NZ Initiative occupying the right of the spectrum - though chief executive Oliver Hartwich says he is not a fan of what he sees as outdated political labels.

The NZ Initiative was formed from the merger of the Business Roundtable and David Skilling's NZ Institute in 2012, and comes from the most free-market perspective.

It is funded by membership fees, as opposed to the other two think tanks, which pay the bills by undertaking commissioned research.

Those NZ Initiative members are typically from the big end of town – large corporates and a few wealthy individuals.

Membership is public and the list includes Fonterra, the major banks and Air New Zealand, among many others.

Belonging isn't cheap: $45,000 a year, although there are discounts for smaller organisations.

The NZ Initiative is not a lobby group, Hartwich says, and does not advocate for policy on behalf of its members.

"I always say to them, if that's what you want then you're probably at the wrong address ... we have Business NZ and the Bankers' Association and all sorts of other business lobby groups," Hartwich says.

"The difference as I see it is that lobby groups work on the stuff of the day, that is currently going through Parliament … select committee and so on, and they want to see bang for their buck.

"We take a longer perspective. And we work on the issues we think are right for the country, like education reform, improving housing affordability ... we say to members: you will probably benefit from this if we get this right, but that's not the target."

So what is the motivation to join?

The NZ Initiative is not there to lobby on its members' behalf, says chief executive Oliver Hartwich.
The NZ Initiative is not there to lobby on its members' behalf, says chief executive Oliver Hartwich.

"It's philanthropic," says Hartwich. "Don't join us if you want a lobby group. Join us if you want to do something for the good of the country."

The NZ Initiative's legacy as an organisation representing big business has been hard to shake.

But in the past few years it has been comfortable taking some surprising and unorthodox policy positions.

"This whole left-right thing is so 1980s," Hartwich says. "It's so cold war. Leave it behind. Focus on problems and solutions."

This whole left-right thing is so 1980s. It's so cold war. Leave it behind. Focus on problems and solutions.


He cites the NZ Initiative's work on welfare last year. Former Green MP and left-wing activist Sue Bradford wrote an introduction to the Welfare, Work and Wellbeing report and took part in a panel discussion at its launch.

The NZ Initiative has also worked closely with Labour's Phil Twyford – when he was in Opposition - and had an influence in formulating housing policy which will open up zoning for residential development on the city fringe.

"Again, it's one of those things where we want the same things as the left," says Hartwich. "We all want affordable housing."

Another area of research where Hartwich believes the NZ Initiative is getting traction is around local government and the idea of decentralising the tax base to put more control in the hands of the regions.

Last year the NZ Initiative took a group to Switzerland, to look at the model there. That was met with scepticism from many, including the National Government, but Hartwich is unfazed. Shifting the boundaries of public discussion is part of the goal.

"Part of the strategy is to first sound crazy and then after a few years sound reasonable," he says.

BERL and NZIER are much older organisations – both of them formed in the 1950s.

At BERL, Nana says he thinks they can claim to be the oldest think tank in the country. The organisation dates back to 1957, compared to a 1958 start date for NZIER.

However NZIER is the biggest. In fact, Kubiak notes that they probably have New Zealand's largest economic research unit outside of government. The organisation has a team of more than 30 staff.

Most of its business is doing bespoke microeconomic work for businesses that want answers to specific problems.

"We answer the wicked questions for both the public and private sector," says chief executive Kubiak. "We can do due diligence on investment proposals, demand forecasting, all the scenarios, economic impacts ...

"The other part is membership services, in the macroeconomic forecasting space. We have a public good programme which we fund internally and subsidise from other projects."

So as well as producing quarterly economic reports for members - and the media - NZIER will take on topics it sees as important and under-explored.

In 2016 it made a splash with a report looking at the commercial potential of legalising marijuana. Last year it looked at the economic value of immigration, among other topics.

The NZIER also runs a Monetary Policy Shadow Board which meets before the Reserve Bank and offers an independent take on interest rate decisions.

"That's independence - we protect that quite jealously," Kubiak says. "There are people out there who think we're a tiny corner of the Reserve Bank, or Treasury and publicly funded.

"We're not, we're a commercial consultancy, we're independent and people appreciate that independent, dispassionate view - except on those occasions when they don't."

All three groups like to think they have some influence on those in government and senior administrative roles, but the extent of that influence is difficult to gauge.

"We're aware they [Ministers] get them; I'm not sure whether they pay any attention," Nana says of BERL's reports. "Hopefully we have some influence on the policy debate."

With the new Government - and to some extent mainstream economic thinking - switching back to a more interventionist model, it seems likely BERL may find more favour for some its ideas.

"Optimistic is not the right word," Nana says. "Because we've never had any direct influence into Government irrespective of any colour. Others might think we have that influence."

But with officials, Nana says, the relationship is clear. "They are willing to listen and exchange views."

He says he is positive about the new Government "in that there is a very much more welcome appetite for that sort of discussion ... in context that the economic indicators we have been getting just don't seem to fit with the realities of the wider New Zealand population, whether regional or Maori."

Meanwhile, BERL has to stay focused on its commissioned reports to ensure its survival.

"That's always a challenge and a battle. We have to pay the bills daily and we have to do that so we're not beholden to the whims of the Government of the day ... or the market."

The Burning Issues

We asked the think tanks for the key issues they'll look at this year, and beyond.


• Beyond GDP as a measure of prosperity? Growth, as measured by GDP, unfortunately continues to be the be-all and end-all of much economic commentary. But we know GDP is a poor proxy for broadly-defined prosperity. BERL remains committed to developing much broader perspectives on prosperity and an improved understanding of how, or whether, the business and economic activity of our clients is contributing to overall wellbeing.

• What changes are in store for the NZ economy? Or, just how much of an appetite for "change" does this self-styled "Government of change" have? The terms of reference for the Tax Working Group and the monetary policy review both appear somewhat narrow, and suggest "change" may be more superficial than substantive. Similarly, adherence to self-imposed Budget Responsibility Rules would seem to have a limiting impact on implementation of change. We will be monitoring these closely, as they are set to have a lasting impact on the future structure and economic framework for the nation.

• Charting the progress of Māori economic endeavour. While Treaty settlements may take headline attention, long-standing landholding trusts and incorporations remain the mainstay of Māori economic activity. While proposed legislative changes around Te Ture Whenua Act may now be off the table, challenges remain around the potential of these landholding entities to access development capital and capability. Potential interaction with the new Government Provincial Development Fund is set to be a new element in this story.

The NZ Initiative

• For the Initiative, the big issues continue to be New Zealand's infrastructure, in particular the housing crisis and its flow-on effects and our transport system. Linked to this is localism: the intelligent devolution of funding and control to meet regional needs.

• Education is an enduring concern, as evidenced by the recently announced NCEA review. Does our assessment and curriculum framework work to provide the best school to work transition, the best skills for a 21st century economy and equitable educational outcomes for all New Zealanders?

• Increasing the size of our economic cake must remain a constant policy goal, and here the Initiative continues its work across matters such as foreign direct investment, regulatory governance, the role of the state in the economy, water management, retirement savings and the sufficiency of regulation.


• Climate Change. What's it going to take to get to zero carbon? What's the transition path, what are the costs and benefits, who wins and who loses? We also need to think hard about the tradeoff between mitigating the effects of climate change and adapting to them.

• Housing. The Kiwibuild targets won't be achieved by fiat; we need to co-ordinate the entire supply chain and deal with the blockages in the markets for land, labour, raw materials, finance and infrastructure provision.

• Migration and wellbeing. How does migration affect the wellbeing of the host population? Is it always positive? We're also taking a hard look at how migration forms human capital and affects wellbeing, so we've got a basis for identifying the social gains of migration policies and any bottlenecks. Getting this right really matters — skills shortages are worsening, and policy direction suggests cuts to immigration.

• Productivity. A perennial issue that will not go away. Too many New Zealanders think productivity is working harder. To raise living standards, we need to get paid more for the work we do (or work less for the same pay).

• Social investment and child poverty. Social investment might change its name, but it won't go away. There are New Zealanders for whom improved economic performance has not been reflected in improved living standards and life chances, despite years of active policy interventions and considerable social spending. Getting this right should also improve our productivity in the long term.