The New Zealand economy has performed well in recent years, but bottlenecks in housing and urban infrastructure, inequalities in living standards and rising environmental pressures all pose challenges for sustaining robust growth and high levels of well-being over the long term, according to the OECD’s latest Economic Survey of New Zealand.
The Survey says that New Zealand can expect its strong, broad-based expansion to continue in the near term, with economic growth projected at 3.4% in 2015 and 3% in 2016. The budget deficit has been almost eliminated, general government debt is falling as a share of GDP, and monetary policy remains accommodative, pushing inflation back up to the midpoint of the official 1-3% target range.
However, the OECD points out a number of barriers to sustaining strong growth. House prices in Auckland, New Zealand’s economic hub, are high, reducing its attractiveness as a business location and posing financial stability risks. Strong population growth and constrained housing supply have resulted in rapid house price increases, eroding affordability. To address this, New Zealand should reduce the economic costs of environmental and planning regulations and the scope for vested interests to limit development that would otherwise be in the wider public interest.
The burden of housing costs has risen substantially for low-income households. Moves to bring the social housing stock more in line with demographic and geographic demand, as well as to reallocate it to those most in need, will help the hardest hit households. The government’s commitment to expanding the social housing stock is welcome, although the Survey recommends providing additional resources, to achieve a more significant increase.
They also look at local government:
One of the most problematic factors cited for doing business in New Zealand remains an inadequate supply of infrastructure. The Survey recommends that New Zealand facilitate greater urban infrastructure provision by diversifying revenue streams available to local governments. Better management of the demand for and use of urban infrastructure, including congestion charging to reduce urban traffic, should be considered.
I’m in favour of congestion charging.