The most notable item in the Government's third term agenda outlined to Parliament yesterday is an intention to hold "job fairs" in Sydney, Melbourne and Brisbane aimed at New Zealand expatriates with skills we could use here. Nothing more neatly expresses the turnaround in New Zealand's fortunes. Until last year, this country was worrying about an annual net migration loss of young people to Australia. Last year, New Zealand recorded a net gain. The mineral boom in Australia had ended and this country was recording strong growth on high dairy prices and an injection of insurance for Christchurch repairs. Dairy prices have since tumbled but unemployment remains lower than in Australia and the Government believes we face some skill shortages.
Job fairs across the Tasman are one response, more vocational training in this country is a better one. The Speech from the Throne mentioned additional money for training engineers, 2000 more places for Maori and Pacific trades trainees and three new graduate schools for information and communications technology. Beyond that, it intends to put more money into business innovation grants and establish four more research centres, one for food science, another for Maori.
There is not much more a government could sensibly do for economic improvement, unless it was to redirect investment away from unproductive housing, which this Government is not about to do. Rather than taxing investment property, it confirmed yesterday it will make it easier for more houses to be built and will provide an incentive for first home buyers to cash in their KiwiSaver funds for the purpose. It will also increase the price that defines "affordable" housing for fast-track consents and purchasers' subsidies. If these measures help stem the decline in home ownership they will probably also feed the demand for investment property.
The Government's immediate priority, quite rightly, is to post a Budget surplus. It believes it can maintain surpluses while spending an additional $1 billion each year and still have room for tax reductions and faster debt reduction "depending on economic and fiscal conditions at the time". The Government should make clear whether a deterioration would make tax cuts more or less likely. Its instinct may be to use them as a stimulant. But in that case, it should give unequivocal priority to debt reduction while the good times last.
New Zealand's ability to weather another international shock as comfortably as it did after 2008 may depend on public debt falling below 20 per cent of GDP, which will not happen on the Government's schedule before 2020.
