ANDREA BLACK

POLICY DIRECTOR & ECONOMIST

New Zealand Council of Trade Unions – Te Kauae Kaimahi

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One of the things that’s coming through really strongly in commentary around COVID-19 response is that recovery doesn’t just mean getting back to what was before.

Oh no, I hope not.

How do we avoid making it even worse than before, and maybe even be able to build back better?

In the Minister of Finance’s pre-Budget speech this year, he talked about the fact that while we had a strong economy in terms of low debt, low unemployment, and Government surplus, we also see too many children are growing up without the basics, housing is too expensive, many of our waterways are not swimmable and our emissions are rising. I read that and I went, “Yes, yes!” That’s exactly the world we’ve been living in. While the economy might have been doing well, not everybody has been doing well.

We’d really like to see the government more involved in creative ways of providing work. For example, we know there are issues with literacy in some of our very young people. One idea that I’ve been toying with: could we just increase the numbers of teacher aides to help children learn to read? I’m sure there are people who are currently without paid work who can sit with a five year old and help them read a book.

How has COVID-19 offered us an opportunity for a change of mindset?

The fact that we can’t import labour the way we used to, I think is driving a change in mindset; which is all the things that we’ve always want- ed for some time, which is the training in investment, in people. This is a pivot moment for us to start focusing not so much on job rich economy, but a high wage economy that delivers for the people who are in it.

We keep hearing that New Zealand has fallen behind when it comes to productivity. What do you think could be something that could actually work to make us more productive?

Take the two problems of low productivity and the high cost of housing. There are companies and factories in New Zealand that are supplying modular housing and looking at pre-fabricated housing that’s imported from overseas. The Government could be further investing in these companies and giving them long-term contracts to create and supply pre-fabricated houses—which is a version of what Kiwibuild was intended to be. Done well, that’s a mechanism to raise productivity, through guaranteeing capital that will stimulate innovation and smarter ways of working, rather than continuing with industries that remain profitable through the use of lots of very low wage labour. There would still be factory jobs but it would be much more high tech.

Is there a tension for you as an economist that works for the CTU, in thinking about developing high productivity workplaces that would presumably involve fewer workers?

I’m glad you asked me that question. If we hadn’t been importing vast swathes of labour over the last 20 years, quite possibly. But, not really, because productivity and innovation has the ability to get rid of the dangerous, dirty, boring jobs. It doesn’t concern me, so long as there are also the transition programme to bring industries and the people in them along with retraining and upskilling. For so long people have talked about the fact that New Zealand has to import skilled workers—no, how about we train our own people!

For so long people have talked about the fact that New Zealand has to import skilled workers—no, how about we train our own people!

Much has been said about politicians who have had “political capital” and didn’t use it to make real change. If you were one of those politicians, what would you spend your political capital on?

Fair pay agreements to bring up wages. There’s a received wisdom that says: we have low wages because we have low productivity. Our view is: we have low productivity because we have low wages. Because wages are so low there’s no natural incentive for employers to invest in capital or higher skilled labour, or innovate generally.

New Zealand’s COVID-19 response has raised government debt to historic levels that we will be paying off for generations. What trade-offs do you think we will have to start making to handle what’s just happened?

The conversation around debt drives me insane because debt isn’t necessarily bad. If I borrow a million dollars and buy a million dollar house, that’s quite different to me borrowing a million dollars and spending it on meth. In prioritising low debt through the Public Finance Act we have also prioritised high levels of social deprivation and low levels of public benefit.

The second thing I’d say is, our debt levels aren’t that high. If we adjust our debt for the money that we have in the Super Fund, we get to something like 37% of debt to GDP. Even in the current world of borrowing $12 billion for the wage subsidy, it all depends on what you’re spending the money on. If you’re investing and improving the housing stock, if you’re investing and training people, if you’re investing in infrastructure, all those things have a much higher return than the cost of debt.

In terms of the world we were in pre-COVID to use the personal debt metaphor, it’s like we had a mortgage-free house but we weren’t feeding our children.

What’s one policy from a previous government, that you would like to have seen implemented?

I got to hang out with Michael Cullen for 18 months on the Tax Work- ing Group, and he said that in the 80s during his last term as Minister of Social Welfare he was looking into how he could bring disability into ACC. That would have made a huge difference for people now who are potentially languishing on the Supported Living Payment—it would have treated them with a lot more respect. That could have been the beginnings of rethinking welfare or rethinking our entire approach to how we treat people who perhaps haven’t had the start in life that many of us have.

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DEREK GILL

PRINCIPAL ECONOMIST AND HEAD OF PUBLIC GOOD

NZIER (New Zealand Institute of Economic Research)

What’s top of mind for you for New Zealand as we look to “build back better” in this moment of time?

We may be returning to a world where people movement is extremely costly. International tourism as we’ve known it will have to fundamentally change—it was going to have to change with climate change anyway—in a way that’s going to bring forward changes New Zealand was going to have to make.

Before COVID-19 we were clearly at the stage where international tourism was at overload. There is an optimal amount of tourism and we were clearly overshooting on low value visitors and servicing their needs with a lot of low paid jobs. COVID has given us a chance to reset our tourism strategy, and if we’re smart we won’t be prioritising cruise ships with people who walk off the ship and spend $10 in Wellington during the day and go back on board to eat their free dinner.

This is kind of a pivot moment where economically and politically it seems like anything is possible; what do you think we need to hold onto and what are good opportunities for change?

One of the things you’ve really got to keep an eye on, is effectiveness—spending money is easy, spending it well is the hard thing. I see a lot of clamouring for government assistance to do things that are just pet projects that weren’t on the agenda before, and shouldn’t be on the agenda now. The hard thing is to find a shovel ready project that’s actually worth doing.

We’ve got to keep an eye on the longer term commitments inherent in the things we’re spending on now. I’ve spent a lot of my career as a senior bureaucrat, and policy people find it really difficult to turn things off. Announcing things and cutting the ribbon is easy, turning them off when they aren’t proving worthwhile is really hard for government. The private sector finds that much easier.

New Zealand’s COVID-19 response has raised government debt to historic levels that we will be paying off for generations. What trade-offs do you think we will have to start making to handle what’s just happened?

Debt is a transfer of responsibilities from the current generation to future generations. It’s a question of how that’s then reduced. As a small open economy we have to be much more cautious about debt than a large open economy like the US. We’re the second most disaster-prone country in the world—we have to be really worried about public debt. This is a burden that the post-boomer generations are going to have to grapple in the foreseeable future—our government spending choices are going to be much more constrained, and my kids are going to face a lifetime of higher taxes than they would have otherwise. Despite all the rhetoric, people don’t like paying taxes. They like other people paying taxes.

If you were one of those politicians who had “political capital” to spend what change would you be tempted to spend it on?

Given the fiscal situation, I’d have to say New Zealand superannuation reform. It’s an issue that no recent government has wanted to touch, yet in opposition both major parties have accepted what anyone in Wellington will tell you needs to happen—which is that we simply have to raise the age of superannuation at least in line with the aging population, because the maths is just inevitable.

In 1990, the boomer generation were politically involved in raising the age of NZ Super from 60 to 65. With hindsight we should have just added a couple of lines of text to the legislation to say: “And thereafter, to be indexed to average life expectancy and adjusted at this frequency.” If that was set as the norm from that point, half of our Super affordability problem would go away.

People have dug into what explains New Zealand’s low productivity, and the answer isn’t entirely satisfactory in my view

We keep hearing that New Zealand has fallen behind when it comes to productivity. What do you think could be something that could actually work to make us more productive?

Ironically, COVID is a massive opportunity. People have dug into what explains New Zealand’s low productivity, and the answer isn’t entirely satisfactory in my view. A lot of work has been done, but one of the things that comes through the data really clearly, is a lot of productivity gains come out of recessions shaking out low performing firms—40 or 50 percent of our overall productivity gains comes in those shakeouts. So those low value tourism jobs that we’ve got, those low value private training establishments that we’re running, it’s a chance to get people out of those jobs and into more productive roles.

What’s one policy from a previous government, that you would like to have seen implemented?

Bill English’s big idea of a “Social Investment” approach to policy. It suggests that sometimes it’s worth investing a buck early on in a person’s lifecycle based on quality evidence, in order to improve their life chances.

I’ve worked in Child Youth & Family, and I know what we spend on the kids that we fail. If you go through the youth justice system, the chance you’re going to end up in an adult criminal justice system is around 80 percent. So if you can divert some people out of that it’s obviously a massive benefit to them personally and also the government is not going to be paying $60,000 a year for them to be in prison.

Social Investment was a great challenge to bureaucracy to think beyond their immediate portfolios in a lifecycle way and it’s a shame that the new government hasn’t built on it.

TERINA COWAN

DEPUTY CHIEF EXECUTIVE, DIRECTOR OF POLICY

Ministry for Pacific Peoples

How has COVID-19 changed the way that you do policy work?

It sounds really cliché, but as we’ve responded to the unique challenges of COVID-19, it’s forced us to work together in ways we haven’t had to before. We’ve been running what we call “Zono”—a mix of Zoom and the word fono, which means to come together and meet.

I think the way that our community have adapted to technology to engage with each other and directly with government is something that we need to hold onto.

For example, we’ve been hosting Zono with the nine different Pacific communities that our Ministry serves, in their own languages, bringing in government ministries like Education, Social Development, and Health onto those calls—all of us working together and giving the same consistent message across the different languages of each community. I think there’s a real power in that. This is policy getting practical, making sure that not only are these services avail- able where they are needed, but that people actually know about them and access them. That’s public service, and it’s how we should be doing policy moving forward.

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What opportunities do you think this year has opened up?

COVID-19 has showed us what happens when we are more inclusive in our thinking, when we create opportunities where everyone has a voice, and everyone has a role. The challenge for us now is how we get more Pacific voices into the room as researchers, advisors, and policy makers that can represent their communities in a way that’s meaningful and respectful, and ensure that when the final paper’s written it has a flavour of everything in there.

If you were one of those politicians who had “political capital” to spend, what change would you be tempted to spend it on?

At the moment we’re doing a piece of work called the All of Government Pacific Wellbeing Strategy. While jobs are important, if things at home aren’t good, or a person isn’t strong in their identity, they’re not going to do well in their job, they’re not going to do well in their education, and if they’re not physically healthy they’re not going to do well economically. While “wellbeing” may seem like a buzzword, it’s actually about recognising the very real connections between all parts of our lives.

While Treasury have done a fantastic job on the Living Standards Framework and articulating ideas around wellbeing, it doesn’t quite fit what Pacific people view as wellbeing. So I would really drive this piece of work saying, “Let’s look more practically at how policy is applied, and make sure that it meets the needs of all people.”

We keep hearing that New Zealand has fallen behind when it comes to productivity. What do you think could be something that could actually work to make us more productive?

Pacific people make up only 2% of the people in the tech sector in New Zealand. Last year we brought together young Pacific people who are working for tech companies like Google and Microsoft all over the world and held a high-tech fono to ask how we can change that statistic. We had also been planning a fono around language, culture and identity with the traditional elders of our different Pacific communities, but the budget was a bit tight, so we thought, “let’s just combine them and see what happens!”

So we had this merging of ideas and experiences and I think that what came out of that fono really strongly is that we’re not playing to the strength of our cultural values and our cultural norms, we’re trying to be something that we’re not. We have an incredible ability to bring people together—we value collectivism, leadership that builds consensus, we are so strong in collaboration. Long before these terms became mainstream business buzzwords, these have been at the core of our Pacific ways of working and being, and it’s interesting to see that they are now becoming essential in the business world.

This is kind of a pivot moment where it feels like a lot of stuff is up in the air, what do you think we need to hold onto?

It’s easy to think about the economy as this “thing” that’s out there, and invisible but what we don’t talk about is the economy of a family—the success of the economy is actually grounded in families and communities. If you think about a home, you’ve got income coming in; if that family is strong, they have a safe home, they feel strong in their culture, language, identity, whatever that is, and they’re together, they can overcome anything. Resilience is built into that. If every family in New Zealand is thriving, then we’ve got a thriving economy.

jeremy

Jeremy Vargo

As part of his role as Communications Manager for Maxim Institute, Jeremy has had the privilege of editing Flint & Steel magazine for the last 4 years. He has previously worked some classically soul crushing roles in the retail, commodities trading, and manufacturing industries, but managed to emerge relatively unscathed. Outside of work, he has a number of interests, but the recent birth of baby Ivy has put all that on hold for a while, which is actually rather wonderful.