A few weeks ago on a breakfast TV programme, I was provoked into quoting a recent assessment of the Key/English Government by Kerry McDonald, a former director of the New Zealand Institute of Economic Research, and chief executive or chairman of a number of major companies. He had rated that Government at zero out of ten. I said I agree with that assessment.
“Too harsh” was the response of Duncan Garner after I had left the studio. John Key steered us successfully through the Global Financial Recession and the Christchurch earthquakes.
Broadly true, though our ability to weather the GFC was due in no small part to the strength of the Australian-owned banking system – we didn’t have anything remotely approaching the banking crisis which caused such havoc in the US and several major countries in Europe – and the economic buoyancy of our two biggest export markets, China and Australia. And despite that our recession was still pretty severe, with unemployment taking some eight or nine years to get back towards pre-GFC levels.
But compared with what John Key promised going into the 2008 election, an objective observer would have to say that he dodged, or failed, all the really big issues.
He promised to close the large gap in incomes between New Zealand and Australia, and established the 2025 Taskforce to provide advice on how best to do that. He appointed me to chair that Taskforce, and hand-picked four others to be members of it. And then totally ignored our recommendations. The gap between New Zealand incomes and those in Australia is as big now as it was in 2008.
Yes, aggregate economic growth has been strong because of a very high level of immigration, but income per capita has barely increased because productivity growth has been lamentably slow.
And that has been the underlying reality now for a number of years: the speed with which New Zealand is increasing the output of goods and services relative to the number of people employed has been low even by the not particularly stellar standards of Australia.
While I obviously thought the recommendations of the 2025 Taskforce were ones which would help improve productivity and at least narrow the gap between incomes here and those across the Tasman, I would have had no grounds for complaint if Mr Key had had some other cunning plan to lift living standards in New Zealand. But it was clear that he had none.
He promised to make housing more affordable, and noted that in 2008 the median house price in Auckland was six times the median household income, a level he rightly regarded as putting huge pressure on a very large number of New Zealanders. Today it is nine times, something which, combined with stagnant real incomes, explains much of the current social distress.
With the help of a buoyant export market and Bill English’s careful stewardship, he presided over a fiscal process which did, commendably, get the budget back into balance, but resolutely refused to make the adjustments needed to deal with the deteriorating long-term fiscal outlook, the result of our steadily ageing population.
He promised never to raise the age of eligibility for New Zealand Superannuation for example – despite that being under way in similar pension schemes in Australia, the UK, the US and many other developed countries.
In the 2011 election campaign, National had Labour on its left and ACT on its right both committed to gradually raising the age of eligibility. But John Key persisted with his promise that the age of eligibility would never increase while he was Prime Minister.
Mr English had the courage to announce that the age of eligibility would need to rise, but then said a gradual process would not even begin until 2037!
John Key spoke about the need to increase the export orientation of the economy, and set a target for exports of goods and services of 40% of GDP, up from 30% when he came to office. Today, exports are just 27% of GDP, despite the continued buoyancy of world markets.
In the 2008 election campaign, Mr Key continued a commitment first made by Bill English in 2003 to scrap Maori electorates, and appeared committed to treating all New Zealanders as equal before the law, something which had long been National Party policy.
Ten years on, the Maori electorates are still with us (more than 30 years after the Royal Commission on the Electoral System suggested they should be scrapped if MMP was adopted); the RMA has had a whole raft of additional racially-based commitments added to it; and we’re still wondering what on earth the implications of the Marine and Coastal Area Act will be.
The Key Government did see the creation of the Productivity Commission and a small number of charter schools – both ACT Party initiatives – but there was no attempt to unwind some of the Clark Government’s policies which John Key had denounced so strongly when in Opposition.
John Key was exceptionally gifted as a self-deprecating after dinner speaker. He had enormous political capital. Alas, he almost totally failed to use it to deal with the deep-seated problems we faced in 2008 and still face today.
Copyright © 2024 Don Brash.