Peter Lyons: Govt gets 'must do better' grade for economics

Prime Minister Jacinda Ardern and Finance Minister Grant Robertson during their joint post-Cabinet press conference at Parliament. Photo / Mark Mitchell

COMMENT:

This Government has earned a "C" rating in terms of economic management. It hasn't done too much harm, but hasn't really achieved much either.

The continuous dire business confidence surveys are a bit unfair.

I suspect the Ardern administration was catapulted into power with few clear achievable policy objectives.

KiwiBuild was a classic example of this — an aspirational goal totally lacking the necessary resourcing.

The Government set up numerous task forces and working groups to develop policy along the way. These groups have since reported back and the results have been watered down.

The capital gains tax was abandoned. The Tomorrow's Schools' reforms were severely tempered. The KiwiBuild target is long abandoned.

This Government is little different from the last one. John Key's administration was centralist and so is Ardern's. Both leaders were, and are, very adept at political management.

Both have handled major national tragedies with great calm and dignity. We have been well served as a nation in this capacity. But there have been few major economic initiatives.

Key's biggest economic policy was a determination to achieve Budget surpluses whatever the cost to the scope and quality of government services.

The only other policy of note was the partial privatisation of some government assets. Hardly transformative.

Centralist economic politics have been dominated by political management, rather than actual leadership.

We are wedded to the belief that Governments cannot contribute to economic prosperity. Yet history shows Governments play a major role, particularly in infrastructure projects, that shape the long-term economic landscape.

The private sector can be very efficient in the delivery of certain goods and services but it is notoriously myopic.

In the 1870s Premier Julius Vogel borrowed heavily to finance infrastructure projects in New Zealand.

He launched "the Great Public Works scheme" borrowing to invest in core infrastructure such as railways, roads and telegraph. At the time he was criticised for his borrowing.

Yet his infrastructure investments proved hugely beneficial for the country's long-term future. He helped to ensure our national prosperity in the early 20th century.

Peter Lyons. Photo / Supplied

We are at a similar crossroads now. The private sector does not have the scope, vision or finances to ensure long-term innovative infrastructure spending.

Smart government initiatives are the only option. But there is a political timidity which has become structural in recent decades.

The Government has announced proposed huge investments in infrastructure but the details are very sketchy. There is huge risk of political backlash and it needs to get it right.

It needs to work closely with smart business leaders. It needs to ensure the resources are available, rather than just throwing money at it. Only a Government can provide a 20-to-50-year vision for infrastructure.

A core flaw of free enterprise and the pursuit of profit is short-term thinking. We desperately need another Julius Vogel.

This next election should be largely defined by alternative infrastructure proposals. We need a long-term vision.

• Peter Lyons teaches economics at St Peter's college in Epsom and has written several economics texts.