NZ Government’s progress overshadowed by global economic, political risks – Bruce Cotterill

Prime Minister Christopher Luxon meets with China's President Xi Jinping at the Apec Summit in Peru. Photo / Pool

THE FACTS

• The Government has reported improvements on issues like school attendance and emergency housing.
• Despite these advancements, the country faces significant economic, structural and geopolitical challenges, including debt and international tensions.
• Prime Minister Christopher Luxon faces a challenge in balancing trade relations with China while maintaining alliances with traditional partners like the US, UK and Australia.

It’s 18 months since the new Government was sworn in.

The mess they inherited has been well documented, so too has their less-than-rapid impact on solving the problems we have. We’re an impatient bunch, and it feels like they’re taking their time.

When we look at many of our problems, we tend to focus on the here and now. The wait times at the hospitals, traffic jams at the roundabout and school exam results to name a few.

While we’ve had to be patient, and it took longer than expected for them to get their feet under the table, they’ve made good progress on many of those inherited difficulties.

I’m not sure if it’s intentional, but over the last couple of weeks, it feels like we’ve been inundated with a flurry of announcements telling us the Government is making progress on those top-of-mind matters.

We’ve had newly minted Deputy Prime Minister, David Seymour, telling us that school attendance, until recently an issue that was of genuine concern, is in recovery with participation having improved to 66%, up from a low a couple of years ago of 52%. To be fair to Seymour, he’s not skiting about it; in fact he’s saying that having 34% not attending is still a major problem. And he’s right. But it’s progress.

Elsewhere, we’ve heard Housing Minister Chris Bishop discussing our progress at getting families out of emergency housing. We can all remember the post-Covid nightmare of families living in motels, despite the previous Government’s supposed focus on housing and kindness. It turns out, according to Bishop, that things are improving and the Government’s policies are generating positive results. Apparently, 1000 families are now out of emergency housing, leaving just over 500 still be to catered for. That’s progress too.

We all remember the destruction of the polytechs under the last Government’s “merge them all under one roof” policy. At the time, I called it “taking a whole lot of small problems and pushing them all together to make one big problem”. Again, through Minister for Universities Shane Reti this time, they’re talking about how the Government is setting things straight, with staff-to-student ratios being realigned to something comparable to what we had before the madness started.

It goes on. We’re pushing people through emergency departments more quickly, too. And there’s more money for mental health, although taxpayers would be forgiven for asking what happened to the $1.9 billion announced as part of the 2019 wellbeing Budget.

It’s important that we make progress in these areas and plenty of others. It’s also important to recognise progress. So I don’t have a problem with the pronouncements or for that matter a bit of backslapping.

But the big challenges for the country are not going away. It’s hard to be convinced that we’re out of recession. The economy’s stuffed, and we have too much debt. We haven’t addressed our oversized cost base, either. And the world’s problems are just getting started. There’s an old saying that when the world sneezes, New Zealand catches a cold. Well, we had better brace ourselves.

Most of us are used to living in a changing environment. Sometimes that change is economic, as was the case in the early 1990s. Then there has been structural change, the type that influenced markets in the 2008–10 period, as big tech firms discovered how to monetise the internet. And of course, we’ve had plenty of geopolitical change over the last 40 years.

But we’ve never had all three at the same time, until now. The economic pressure is a result of the approach governments, including ours, took to keep their economies afloat during the Covid period. In this country, that approach delivered massive borrowing, an escalating government workforce, temporary low interest rates and an inflationary spiral that is now permanently factored into our cost base.

Structural change will gallop for the next five years as Artificial Intelligence changes the way we do almost everything, from coding computers to seeking medical help. That business of medicine is undergoing massive disruption too, with the arrival of incredible new drugs being overshadowed by a level of distrust not previously seen in our medical establishment, delivering unpredictable pressure points.

Israeli security forces inspect houses destroyed in an Iranian missile strike in the Rishon LeZion area on Saturday. Photo / The Washington Post

The geopolitical landscape is changing daily. The Ukraine conflict was followed by Israel’s attacks on Gaza. Meanwhile ,India and Pakistan are going at it and Israel has turned their focus to Iran in the last couple of weeks. Illegal immigration is being stomped on in the US, while Europe seems conflicted about how to deal with the same issue.

Economic. Structural. Geopolitical. All at once.

At the risk of overstating it, I don’t think we have any idea what’s coming. To give credit where it’s due, it’s fantastic that we are making progress on the things we value., things that until recently fell into the “basket-case” category. Health services, education, housing and the like. These things are important and desirable. We need that progress to continue.

But with a bigger picture emerging and our economic affairs not yet in order, I’m worried we might be making mistakes on the international stage that further affect our ability to recover amid a world in conflict.

I refer to government comments about where our affiliations may lie. As an economy in tatters, we desperately need our trading partners. The Prime Minister is fond of saying we have to grow the economy in order to be able to afford the services we want. He’s right.

But we also need our protectors. Our allies.

If we accept that our largest trading partner, China, is on one side of a likely global conflict, and our traditional military allies, including the US, are on the other, then we have to be very careful about ensuring that we don’t ostracise ourselves from either.

The Government’s recent comments about Israel have undoubtedly provoked the US. In a statement last week, US Secretary of State Marco Rubio stated that “the United States condemns the sanctions imposed by the governments of the United Kingdom, Canada, Norway, New Zealand, and Australia on two sitting members of the Israeli cabinet. These sanctions do not advance US-led efforts to achieve a ceasefire, bring all hostages home, and end the war.” That feels like a punch on the nose.

Late last year our Prime Minister made public comments about Israeli Prime Minister Benjamin Netanyahu that attracted international attention, suggesting Netanyahu“doesn’t appear to be listening to other world leaders as they call for de-escalation in the Middle East”. The comment didn’t go unnoticed.

It’s difficult not to react to Israel’s treatment of the Palestinians. Many of Prime Minister Luxon’s electorate will feel the same way. But diplomacy is a finely balanced art. There are things we can think about. And there are things we can say.

It’s to our advantage that Prime Minister Luxon is again in Beijing. He’s pressing the flesh, knocking on doors and making sales – building our economy in the world’s second-biggest marketplace.

But unlike the US, China is not a natural bedfellow for us. Our cultures are very different. Our attitudes to human rights are at opposite ends of the spectrum. Our attitudes to women, to equality and to individual freedoms vary greatly. To our credit, our trade teams have, over many years, successfully navigated these differences to a point where they are our largest trading partner, one we can ill afford to lose.

That trade relationship would suggest a level of substantial trust between the two countries. But the appearance of three Chinese naval warships in the Tasman Sea, between Australia and New Zealand, in February caused genuine alarm and political concern.

Therefore, New Zealand has a very challenging diplomatic tightrope to walk. As China increases its influence in the Pacific, the ability to rely on our traditional allies is important. The US, UK and Australia have historically filled that role. We’ve played our part alongside them, too. But if we’re honest, we need them more than they need us. The thought of that relationship breaking down is unimaginable.

Yet we need to hold on to the revenue lines we have so expertly built. The Government is doubling down on efforts to develop a free trade agreement with India. It makes sense. They’re bigger than China and more similar to us in terms of language and legal systems. It’s a good strategy to de-risk our trading revenues. But doing so will take time, and it will likely never replace the revenue delivered by the Chinese economic juggernaut.

I sometimes wonder if New Zealand’s correct place is as a neutral country. A Switzerland, if you like. But we’re a long way away. We’re geographically isolated. We can’t afford a massive military presence. That makes us vulnerable to the madness that exists elsewhere.

With the world at war, whose side would we want to be on? There’s a cost either way.

I hope we don’t have to make that decision.

But in a world less predictable than ever, we might.

Bruce Cotterill is a professional director, speaker and adviser to business leaders. He is the author of the book, The Best Leaders Don’t Shout, and host of the podcast, Leaders Getting Coffee. www.brucecotterill.com