National was elected on the promise of fixing the economy. Not talking about it; but to deliver the goods. Not to do a public relations and marketing job, since we tired of the spin doctors & comms teams under the previous Labour government. National was elected to deliver tangible improvements in our daily lives. How is Finance Minister Willis doing? She has not yet proved herself. She has little over one more year to do so. How come?
First, the Kiwi economy is stagnant. It is presently experiencing one of the lowest GDP growth rates in the world, ranking near the bottom of the 190 countries that are tracked by the International Monetary Fund. Foreign tourism is still not back to pre-Covid levels.
Second, although inflation is lower, it has been coming down in most nations. Willis' tweak of the Reserve Bank Act had nothing to do with the drop here. Our Reserve Bank used to have the same dual mandate as the US Federal Reserve, where inflation has also greatly fallen.
Third, Willis is missing in action when it comes to breaking local monopoly powers, which are the main cause of our high cost of living. The big banks are running riot. The supermarket duopoly is as strong as ever. The building industry has not been disrupted by any significant shake up in the competition landscape, let alone the likes of domestic aviation.
Forth, we held out hope there would be a drastic reduction in red tape and regulation. However the new Department of Regulation has done next to nothing yet, other than hire managers. Similarly, Willis' new Social Investment Agency has also done little more than change its brand name. It used to be called the Social Well-being Agency, but she replaced the word “Well-being” with her preferred word, "Investment". It sounded more conservative.
Fifth, on taxation, National has no room to move. It has only tweaked the system, adjusting tax brackets to account for inflation. Willis has sent no clear message to the markets that hers is a government of low taxes. Quite the opposite, she has kept top tax rates the same, as well as corporate taxes. The only way to avoid higher taxes in the future is to help Kiwis save more, so we don't need to rely on the State for so much assistance. Australian retirement savings per person are ten times our levels. Willis has shown no interest in changing that situation. She has no plan to bring the 20% of Kiwis who do not have Kiwi Saver accounts into the system.
Sixth, on healthcare, Willis pretends that hiring Lester Levy is a reform. Parachuting in a cost cutting manager does not constitute a health-care policy. The solution is changing incentives. This country will inevitably move toward a more French / Taiwanese style model of health-care delivery. We will eventually all become free to choose where to go, whether public or private, regardless of our income. The bills will be paid by the government. Prices will be negotiated with the industry. Quality competition will take place between suppliers. National should have led this change, but the Health Minister lacks the imagination to do so.
Seventh, the fiscal deficit will worsen under Willis, unless the economy starts to rapidly pick up. The trimming of civil servants, whilst necessary, is not on a scale that will greatly shift the dial. Ms Willis has done zero to address the ageing population trend, which is starting to blow out the deficits. I once handed National MPs a fully costed plan showing how to avert that problem many years ago, written with a former NZ Finance Minister. They ignored it.
Eighth, on housing, once the propaganda is stripped away, National's reforms offer less of an increase in supply than was going to happen under the bi-partisan accord that the Party signed up to with Labour years ago. Under that agreement, up to three homes of three stories could be built on most urban sites, without need for resource consent. National's new plans do less. They offer fewer agglomeration benefits, since the emphasis is more on building out into green fields, rather than up. Building out will be more expensive, requiring more infrastructure.
Ninth, National's trumpeted Fast-Track Approvals is nothing more than a rejig of the Fast-Track Approvals process Labour enacted when in office, although with a lessening of environmental checks, something the Party has been reluctant to admit.
Tenth, although the PM has been jumping around the world talking to the Commonwealth and attending APEC conferences, the tide is turning against free trade and globalization. Big deals on that front are unlikely. Instead, since the US intends to target China with tariffs, and that country is, in turn, our largest trading partner, some of the fall-out will affect us.
More generally, Willis has already signaled what she represents. Namely a Sir Bill English-type, a steady-as- she-goes, status-quo, old-style, conservative Nat. Maybe it worked for him. It won’t for her. It won’t for the nation. It’s a new world. New thinking is required.