O’Reilly on resources
January 18th, 2012 at 2:00 pm by David FarrarPhil O’Reilly writes in the Herald:
As we start 2012, we have an opportunity to earn new wealth and control how it is earned and spent.
New Zealand has come out of the global economic crisis with strengthened markets for our traditional soft commodities, dairy and other foodstuffs, and with more market opportunities for sophisticated manufactured goods.
As before, our prospects depend on how well we do business and exploit those opportunities. But there are also new opportunities emerging. Because of new global economic needs and technologies, our hard commodities – minerals and petroleum – offer outstanding rewards.
And if you are going to whine about people moving to Australia, and the need for more jobs in NZ, then don’t adopt an economic policy of leave it all in the ground.
Our democratic system allows all New Zealanders to have a say over the development of our resources, most of which are owned by the Crown (that is, all of us), and we have a process by which we can tell the Crown what we want.
The process is the review of the Crown Minerals Act being undertaken on behalf of the Crown by the Ministry of Economic Development. …
We should take this opportunity seriously. We should respond not just to the questions in the review but also put forward our views on the big economic questions:
* Which resources, how much and when, should we access?
* Which offer most opportunity to grow high-tech industries with high-skill, high-paid jobs?
* What level of royalties and taxes should be paid by enterprises wishing to access our resources?
* How much transparency should we demand from those enterprises?
* How can we best use the income earned?
* How can we have world-best safety standards?
* How can we ensure the environment is left the same or better afterwards?
These are not vague, feel-good questions – they require information and specific answers. To answer, we can look at other mining countries.
The Greens answer seems to be to say no to any additional mining or drilling. I hope Labour considers a more sophisticated approach.
We shouldn’t look to third-world countries with poor environments and poor law enforcement – countries with the “resource curse”, where over-reliance on natural resources blocks the development of other industries.
We should look at first-world countries where resources play a part in balanced economic growth, creating industries and employment – such as Norway, Australia and Canada.
None of these countries has a perfect record, of course. For example, we would want to avoid poor practice in how local communities are treated. We would want to ensure all New Zealanders reap the benefit.
Norway shows us how much people can benefit from responsible resource use. Norway’s oil revenues play a major part in supporting high-quality health, education and welfare services and infrastructure.
Similarly, our own resources could do an enormous amount to pay for more generous public healthcare, better care for the aged, more teachers, better social services, improved roads, rail infrastructure and so on.
Absolutely. Closing the gap with Australia and ensuring NZers maintain a decent standard of living has no silver bullet to it. It’s doing lots of small to medium things such as improving ports profitability, and growing the minerals sector.
Related posts:
- Two good political resources
- Joyce on foreign investment
- Joyce on Economic Development
- “You can’t” carries a cost
January 18th, 2012 at 2:29 pm
youd thnk labour would back mining. all that extra revenue to redistribute
Vote:January 18th, 2012 at 2:35 pm
‘Closing the gap with Australia’. Wow, is that still the aim?
Vote:January 18th, 2012 at 2:36 pm
If that was the aim mikenmild, we’d only have to wait for their new carbon taxes to take effect on their economy.
Vote:January 18th, 2012 at 2:37 pm
Wasn’t it National that pulled the plug on mining because it upset a few people. Until John Key goes and we get a real National government I don’think we have a chance. Thrid world here we come.
Vote:January 18th, 2012 at 2:53 pm
Easy answers to those questions:
Q: How much?
A: All of it.
Q: When?
A: As soon as possible.
A dollar earnt today is worth more than one earnt tomorrow and we do have to worry about changing technology making these resources worthless.
Vote:January 18th, 2012 at 3:07 pm
> It’s doing lots of small to medium things such as improving ports profitability…
…or siginificantly cut workers’ wages and conditions irrespective of sustained producitivity gains. I’m not sure how that will help reduce the pay gap with Australia. Maybe you’d like to explain.
Vote:January 18th, 2012 at 3:12 pm
Minerals in the ground are money in the bank. It is a matter liquidating it now or waiting and borrowing the money instead. I don’t care either way
Vote:January 18th, 2012 at 3:16 pm
If National doesn’t make some drastic changes, there will be no catching up and closing the gap. It will just deteriorate into an ongoing wankfest while NZ gets more and more poor.
Vote:January 18th, 2012 at 3:23 pm
Trolling on another thread Ross, fucking boring.
Any chance you make a comment that was a tiny bit interesting or insightful
Vote:January 18th, 2012 at 3:32 pm
I think natural resources are a red herring. Singapore has higher income than New Zealand and does not use natural resource extraction to achieve that. Nigeria has vast natural resources and lower incomes. The “Resource Curse” is important and the risk is that New Zealand actually makes itself poorer by creating a source of massive lobbying for control and protest in the pursuit of these resources. Division of labour is the true source of prosperity, perhaps focusing on eliminating the many things that interfere with that in this country would be more productive.
Vote:January 18th, 2012 at 3:40 pm
ben
Singapore is in the middle of a whole bunch of shipping lanes, bit of a diffirent situation to NZ
Vote:January 18th, 2012 at 4:01 pm
…or siginificantly cut workers’ wages and conditions irrespective of sustained producitivity gains. I’m not sure how that will help reduce the pay gap with Australia. Maybe you’d like to explain.
Only after you explain why the rest of NZ should subsidize the Stevedores wages through higher shipping costs attached the imported goods – you know, the goods just about every single kiwi procures through their existence…..
Vote:January 18th, 2012 at 4:24 pm
As someone who voted Green in the last election (albeit mainly for their progressive social policies) I’d like to provide a bit of a left-wing perspective. Only a loud minority of us are against any kind of mineral extraction. I think you’ll find the concern of the average New Zealander is that these resources will be gifted by the crown (who currently owns them) to foreign companies in return for perhaps a few thousand jobs and minimal royalties. This is a very real risk as long as we have a government that believes governments cannot and should not run or own businesses.
We won’t improve NZ’s position in the world by increasing our current account deficit, just as we won’t by adopting a strict “leave it in the ground” policy. You’re looking at a Green voter who is not against mining schedule 4 conservation land IF the majority of the profits stay in taxpayer hands. As Phil O’Reilly says, we need to look to Norway to maximise the value generated by our precious environment. I just don’t think New Zealanders trust a National Government not to give it away.
Vote:January 18th, 2012 at 5:54 pm
“And if you are going to whine about people moving to Australia, and the need for more jobs in NZ, then don’t adopt an economic policy of leave it all in the ground.”
No, David. It’s not about “leaving it in the ground”.
It’s about raising wages (as Key pledged in 2008); education ; and job opportunities. There’s no point in mining if you’re going to pay miners sweet stuff all in wages.
And don’t tell me the wealth will “trickle down” – that horse bolted a long time ago, and is filed alongside the Easter Bunny, Father Christmas, and Don Brash.
Vote:January 18th, 2012 at 5:55 pm
Pauleastbay (1,832) Says:
January 18th, 2012 at 3:23 pm
“Trolling on another thread Ross, fucking boring.
Any chance you make a comment that was a tiny bit interesting or insightful”
One could say the same about your comments pauleastbay.
Vote:January 18th, 2012 at 6:31 pm
Yes, because the Australian economy is so balanced right now….
Mining is hurting everyone who isn’t in mining and creating a “two economies” situation, those who are in are doing great, those who aren’t are getting fucked by high exchange rates.
Vote:January 18th, 2012 at 7:13 pm
Great to finally have this debate.
Vote:NZ is the only developed nation in the world that is primarily dependent on agriculture. This is unsubstanable and accounts for our slide down the prosperity tables since UK joined the Common Market in the early 70s.
NZ has an opportunity to become a economic power house and ACTUALLY close the gap with Australia if we remove the bureaucratic obstacles to developing the Coking coal of Westland, the Lignite of Southland and the Iron Sands off the West coast of the North Island. This along with oil exploitation would fund a standard of living that we wish for but can’t afford.
Come on Greens, imagine it. More money to spend on conservation, National Parks, saving Kiwis and insulating Homes.
Come on Labour, more money for Social Welfare!!
And for the rest of us Tax Cuts to spend our hard earned cash where we wish (which further stimulates the economy.
Development of our mineral resources is a no brainer, that would help provide the venture capital needed to crank up the new smart industries we all would love to happen but we can’t afford to get off the ground.
January 18th, 2012 at 10:29 pm
According to Phil
I question this statement. Norway set up a Sovereign Wealth Fund specifically to avoid that trap. That fund is now renamed as specifically a pension provision fund (they have a baby boomer problem just like us) and my understanding is that it is Noway’s high redistribution ethos that suppports the provision of the services Phil mentioned.
So Phil, if you are going to make a broad assertion, how about a figure or two to prove that your use of the word “major” is justified.
Two final observations: all my life (6 decades now) I’ve heard of the big gusher just around the corner. Well, it’s a bloody long corner! And we promote ourselves as 100% Pure, yet a recent survey of environmental policies and practices only placed us 11th in the OECD and the more drilling and mining we do, the worse it will get for our credibility.
Let’s be careful what we wish for.
Vote:January 18th, 2012 at 10:35 pm
The reason for that is that Norway has a state owned oil company producing and distributing oil since the early 1970s. In 2001 Statoil was privatised, but the govt still retains a 67% stake.
Vote:The obvious question is should NZ do the same, or just rely on royalty payments from overseas oil companies?
January 18th, 2012 at 11:06 pm
@campit,
Thank you for agreeing that we should exploit the resources our country and EEZ has to offer! It would seem the only questions are how to exploit those resources? and what ownership split vs royalties to take?
Those questions will surely come down to what vehicles are best able to more effectively extract, present and export those resources most efficiently. The most effective and efficient option might have some degree of government ownership. Or it might focus more heavily on royalties.
Either way, it is very welcoming that you agree we should exploit the resources we have at our disposal.
Vote:January 19th, 2012 at 12:18 am
He was saying there is no point to doing so unless we own the companies exploiting the resources.
Vote:January 19th, 2012 at 8:59 am
It should also be pointed out that Norway has a 78% tax rate on oil companies, so the government retains almost 93% of Stateoil’s profits. I appreciate some sort of overseas involvement would probably be required, as we may not have the local expertise to most efficiently extract these resources. I personally don’t see the difference between high royalties combined with strong regulation and government ownership, however it is vital we take one of these two options.
What also must be non-negotiable is that any company extracting oil needs to be infinitely liable should a Gulf of Mexico type incident occur. Anything less amounts to a NZ government subsidy on dangerous extraction practice. If companies won’t accept these terms it says a lot about how safe they think the procedure is. Because of this I’m leaning towards royalties/regulation rather than government ownership.
Vote:January 19th, 2012 at 12:02 pm
samtheman you voted Green? what were you thinking? now you have 14 MP’s with no influence in parliamnet, what a waste. All teh Greens have achieved in 15 years is a few insulated houses, and you thought they could do mor ethan that this time? Wasted vote
Vote:January 19th, 2012 at 1:08 pm
ben
Singapore has people who work (hard).
Vote:There are no handouts there – no bludgers, and very very tough rules.
The initial development from Malaysia into Simgapore was hard for the mainly Chinese origin Malays so they put their own ethics and rules into place.
Step out of the accepted line and God help you.
That’s the difference.
January 19th, 2012 at 2:13 pm
@rg
By that logic any vote for a party not in government is wasted. My vote helped stop more National/ACT MPs from getting in so it wasn’t wasted. What’s a poor left-wing bastard meant to do when the other option is Labour, who forced all their good candidates to the bottom of their list? If a Labour government had been formed it would have included the Greens, unlike previous Labour governments, so I don’t feel my vote was wasted.
Vote: