Vincent Heeringa on Labour’s economic policies

Vincent Heeringa has published an article called The First 3,000 days:

Labour swept to power in 1999 promising to transform New Zealand into a world-class, knowledge-led economy. Instead, they reverted to ‘Old Labour’ habits of taxing, regulating and centralising.

Anyone remember their goal of the top half of the OECD?

Today, it’s Labour’s turn to look flat-footed. Its stuttering, knee-jerk reaction to John Key reveals a Cabinet empty of fresh talent and ideas.

Does he mean their policy of borrow and smear?

In ’99, Labour swept in with an agenda to transform the New Zealand economy. … Most importantly, it declared that ‘economic transformation’ would lead us to a knowledge-based, world-class economy. Optimistically, Labour promised to get us into the top half of the OECD by 2011.

Oh yes that’s right – all the buzzwords and goals.

Labour knew what had to be done to get New Zealand’s economy off the road to nowhere, but has done far too little, much too late. Despite a good start and despite being armed with full knowledge of what transformed the similar economies of Ireland and Finland, Labour surrendered the task through a lack of willpower and ideas. When it was time to step up, Labour reverted to type.

So long as there was enough economic growth to fund their spending promises, they saw no reason to transform the economy.

The greatest failure, in my view, is that Labour’s rhetoric about transformation has proven to be just that. Fancy talk. The Growth and Innovation Framework was dropped around 2004. Of the three major task forces established in design, ICT and biotech, only design continues. The science and research that was to emerge from such a framework has simply not occurred. In fact, the science system may be in a worse state than when Labour took power.

Once the high profile conferences finished, so did the strategy it seems.

But while the Australians have deployed public–private partnerships in infrastructure and state services, this government reverted to the old Labour policies of taxing, regulating and centralising. It now owns ACC, Air New Zealand, KiwiBank, KiwiRail and four power companies. The government has turned the idea of private ownership of strategic assets (even as partners with the state) into an anathema and hobbled crown entities with high dividends and restrictions on how they can raise capital.

No other left-wing Government in the OECD has such a hatred and aversion to the private sector. NZ Labour are miles apart from Australian Labor and UK Labour.

And whereas the Blair government re-energised its public services and brought in much-needed entrepreneurship and investment by working with the private sector, Clark’s Labour has simply added more bureaucrats. Total government spending has increased from 36.1 percent of GDP in 2000 to 41.4 percent last year.

It gets worse than that. The recent PREFU shows total government spending increasing to 45% of GDP next year. The tax increases in Labour’s planned mini-budget to cover this will be massive.

Heeringa then looks at individual indicators:

  • Standard of Living: slipped from 20th to 22nd in OECD
  • Productivity: annual labour productivity growth of 1.1% half of the 1990s and below OECD 1.8% average
  • Savings: praises KiwiSaver but says why did they wait until 2007
  • Innovation: NZ ranks just 25th in our ability to use innovation to develop new and unique products
  • Tax: No tax cuts until 2008 – and a unnecessary tax increase in 2000
  • Infrastructure: Not enough power due to planning restrictions, are extending copper network when fibre is needed.

So low marks all around. And Heeringa is no “hard right” commentator. If anything, a but Labour-friendly.

Hat Tip: Homepaddock

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