Rebuilding Better: Time for a new Ministry and a state-owned investment bank

Kiwibuild properties under construction at Papakura. Photo / NZME

OPINION:

If you bought a home in the last year, you may be baulking at the soaring cost of your mortgage repayments, keeping the lights on, and putting food on the table - particularly considering the latest historic, largest-ever, interest rate hike of 75 basis points.

The problems we face are not a consequence of small decisions here and there. They are a consequence of the economic model we have built up in Aotearoa over the past 40 years. But that model is a choice – one that we can change if we wish to.

We need to consider what kind of economy we want and need. Our economy is a tool to deliver the kind of life we want, not an end in itself. The NZCTU has, since September, been consulting on our Alternative Economic Strategy for New Zealand, Building a Better Future, talking with people up and down the country about what a good economy looks like, particularly for working people.

Our economic model has created both a shortage of housing and too much poor-quality housing. Households who rent are nearly twice as likely to live in cold, damp, and mouldy housing as homeowners. In 2021, a child aged under six was hospitalised every hour with illnesses such as respiratory tract infections and meningitis, likely caused by inadequate housing.

Nine years of selling off state housing, a refusal to tax capital gains, and an underregulated rental market bought us to today’s housing crisis. As Bernard Hickey once said, “New Zealand’s economy is a housing market with an economy tacked on.”

Those born in the 1980s and 90s entered a world of work during the Asian Financial Crisis or Global Financial Crisis. From 2012 to 2016, youth unemployment averaged 21 per cent to 24 per cent. That same group is often paying 12 per cent of their income in Student Loan Repayments for the privilege of entry into our low-wage job market.

Alongside a housing crisis, they are trying to form families and relations through a global pandemic, a climate crisis, and now a cost-of-living crisis — if you’re part of that group, you might question the success of our rockstar economy.

If we look at the outcomes that the economy has brought for Māori, Pasifika, women, or the disabled, you might also conclude that our approach to the economy has not been working.

The Pasifika pay gap will take 120 years to close at current rates. Disabled children are twice as likely to live in material poverty. Sixty-four per cent of families in poverty in New Zealand are in employment. We encourage home ownership as an investment in “good” debt.

We discourage “bad debt” such as government debt or investing in families through welfare. But this idea of good versus bad is what has brought us a public infrastructure gap of $210 billion, crumbling public services, and a health service that’s over-capacity.

Since 2015 it has meant the top 20 per cent of households by wealth have seen their wealth rise 100 times faster than the lowest 20 per cent. Delivering the housing and investments needed to tackle these problems will be an enormous challenge - one that is beyond the scale and capacity of our existing private sector.

That is why the CTU is proposing a Ministry of Green Works. It would rebuild our capability to deliver and give hope again that we can get ahead of our housing demand.

Additionally, it would upgrade existing housing to meet Healthy Homes Standards, reducing costs to occupiers, lowering emissions, and saving health services money through reduced illness. It’s real social investment in action.

Craig Renney. Photo / Mark Mitchell

It’s real social investment in action. Why is this different to Kiwibuild? That sought to deliver through the private sector, with the government paying for construction. The Ministry of Green Works would bring specialised, on-the-ground, expertise, and capacity in-house.

It would bring the different parts of government (procurement, planning, transport, infrastructure) together under a common goal. It would actually do – rather than just plan. The original Ministry of Works was axed in 1988.

In its heyday, it was responsible for the design and construction of most of the country’s core infrastructure including electricity, hospitals, schools, rail, and state highways. It helped the government to build 10,000 units of housing a year after World War II. We still rely upon many of the products of the Ministry of Works in our everyday lives. Its operations were also a major source of employment and training.

To help finance its works, we are calling for the creation of the New Zealand Investment Bank, modelled on the Scottish National Investment Bank. The NZNIB would invest to support projects seeking to improve our economy and society.

It could be funded in part by a levy on the biggest banks. Those banks would also benefit from the return on the infrastructure investments made from funding received via that levy.

It could also be funded through a new State-owned Kiwisaver provider – using Kiwisaver funds to deliver real nation-building. It’s the kind of new thinking based on previous experience we need, and we are calling for all Kiwis to think about the kind of economy that they want to emerge from the Covid disruptions.

According to the World Bank, New Zealand is the best country in the world to be a business. We also want to make this the best country in the world to be a worker. It’s the only way that we will make New Zealand the best country in the world for our children.

• Craig Renney is the NZ Council of Trade Unions’ economist and Diana Russell is its policy analyst and programme organiser.