Around $700m of the Provincial Growth Fund has been spent on dozens of large and small things in Northland, more than any other region. The Auditor-General has been quite scathing in his polite way about how that money and all the other PGF funding has been distributed.
The two sums are quite similar in size. One has resulted in a project which will have a direct tangible benefit as a multiplier of economic growth in the Northland region lasting decades into the future; the other has largely disappeared already.
There are a few worthwhile projects in Northland’s PGF funding, like the Hundertwasser Art Gallery, which will be a boost to the region’s tourism industry. That, though, was being funded by government before the PGF came along. Some other justified projects were also previously being funded by other mechanisms. $200 million of it was a windfall to KiwiRail in a nostalgic bid to maintain a railway line which is never going to contribute significantly to the Northland freight task, and struggles to support daily freight trains. Much of it simply subsidised existing activity.
The bottom line is that nobody is arguing the PGF funding is having the long-term positive economic benefit to the region that the new road will. The Government is too scared even to properly evaluate the results of the PGF spending.
The stories of these two very different pots of money are symptomatic of what is wrong with the way much of the money this Government has borrowed has been used over its six years in office. Last year it spent 60 per cent more than was being spent in 2017, and yet there seems to be little tangible long-term economic benefits from it.
The previous Government’s more parsimonious spending resulted in 300km of new four-lane highway being funded and constructed, along with ultrafast broadband to 85 per cent of the country — both with the direct goal of growing the economy. Yesterday’s road opening was actually the last hurrah of that previous infrastructure programme, delayed by the ill-advised shutdown of the construction industry during Covid. Very little new construction has started since 2017, and virtually none of it pitched at growing the economy.
Whether we are now in a technical recession or a real recession, and whether it is going to get worse over the rest of this year, as Treasury and the Reserve Bank both predict, or whether we will just bump along the bottom, it is clear that our current economic performance is poor. Our balance of payments position is the worst it’s been since the dying days of the last Labour Government, and inflation remains stubbornly high. Government debt is big and growing.
The only way we are going to solve this problem is by growing our way out of it, and that means giving our small and medium-sized businesses the confidence to invest and expand, and sell more stuff to the world.
Back when I was Minister of Economic Development, we developed a Business Growth Agenda centred on the six inputs companies need in order to be successful from a New Zealand base. These were access to export markets, capital, skilled workers, innovative ideas, the natural resources they need, and the necessary infrastructure to get their products to market. We figured that if obtaining these things at a reasonable cost was becoming easier, companies could keep growing. If it was getting harder, they would struggle.
If we do a quick sense check now on how we are doing in these half-dozen crucial inputs, we can easily see why our economy is stalling. We are going backwards in at least four of them. As already noted, infrastructure provision is almost non-existent. The access to skilled people dried up during Covid while the border was closed and isn’t much better now. The Government’s inflationary hikes in the minimum wage flowed through to all other sectors and decreased the competitiveness of Kiwi businesses.
We all know the cost of capital, in the form of interest rates, has risen dramatically and in many cases it is more scarce too, and when it comes to the availability of resources, the Government is half-way through making the Resource Management Act far more complicated and restrictive, while also placing all sorts of other restrictions on the use of private land.
The Prime Minister can talk all he likes about focusing on bread and butter issues, but he’s missed his chance for a real re-set of the Government’s agenda this year to get our economy growing again. Finance Minister Robertson seems content to simply defend his track record which, to be fair, takes quite a lot of time these days.
Meanwhile, the Government’s “road to Warkworth” conversion to the economic benefits of better highways is far too late. The whole country has paid dearly for the six years and countless billions lost while ministers educate themselves about what an economy needs to grow. In Northland alone, we could be most of the way to building the next stage of the highway to Wellsford if we hadn’t squandered so much money and time.
We need a proper re-set, and I suspect that means hiring new personnel. If we keep expecting these leopards to change their spots, we will keep slipping backwards.
- Steven Joyce is a former National Minister of Finance. He is the director at Joyce Advisory
