Colin James writes:
Several one-off factors will conspire to make this year feel OK, if there is no new international shock. But getting the economy solidly based will take a decade.
This is not an argument about the budget, though it shows up there. It is about how to earn our way. For 40 years we did not, culminating in a bubble economy from 2002 – what Bill English has taken to calling “pinko- economics”. We still don’t.
Getting to equilibrium requires a massive shift from consumption to exports: start with a $5 billion lift in savings just to hold net liabilities at 85 per cent. That requires both a mindset shift and an interlocking set of policies: tax (more to do yet), savings (some initial ideas from the working group), more rigorous asset funding and management (the December investment statement and the SOE selldowns), tighter management and trimming of welfare rolls (the working group reports in two weeks) and maybe a bit more support for innovation.
I think James is right on the time–frame – it probably will take a decade.
AT LEAST that is the Government’s current strategic mix. A major challenge will land soon in the form of the much-delayed report by Chief Scientific Adviser Sir Peter Gluckman’s group of social scientists, fresh off the back of high-level international academic backing for the Dunedin longitudinal study’s findings that much teenage failure and crime stems from fixable bad starts to life.
The Gluckman report will make 10 or 12 major and many detailed recommendations: an expensive programme but ultimately a strategic economic investment.
That report will be fascinating.
Mr Key can’t stretch that far yet. But that he, with Mr English pushing, has taken on the SOE selldown bogey to get a longer- term return suggests he intends his second term to have purpose and he figures that purpose requires strategy, not ad hoc tactics, and longer-sighted policy, not myopic poll-watching. In fact, to look purposeful, strategic and a capable economic manager is shaping as his election campaign theme.
It is too early to tell if Mr Key really has gone strategic. But the past few months look like a turning point. Look again this time next year.
Key steps on the way will be what gets announced today by the PM, the 2011 budget and then finally the election manfesto.