With unemployment in low single digits for some time now, it’s not surprising living standards for most New Zealanders have been increasing. According to Infometrics economist Chris Worthington, most New Zealander’s real incomes have increased continuously since 1992, despite high interest rates and the recent surge in fuel and food prices.
What’s not mentioned in the article though, is what’s been sacrificed to achieve this income increase, and whether such ‘live for today’ economics is sustainable.
Take transport for example. During the country’s last boom period, in the 1950s and 60s, investment in transport was enormous- thousands of kilometres of roads were built, along with hundreds of bridges and tunnels. By comparison with the frenetic infrastructure development of the past, transport spending over the last 15 years has been pathetic. No major bridges have been expanded or replaced, attempts to solve Auckland’s traffic bottlenecks have been put in the two hard basket, and not a single stretch of two-lane highway has been converted into a proper motorway. The Otira Viaduct stands out as the only significant infrastructure development of any note in the last 20 years.
There’s also been no investment in a better route for the inter-island ferry, which still takes as long to connect the North and South Islands as it did 40 years ago.
We may have the unemployment level of a Scandinavian country, but we sure don’t have the transport infrastructure.
Between the Reserve Bank and the Labour government with its focus group-based scientific populism, the consumer has been crowned king and the producer relegated to a lowly serf. The high exchange rate has protected motorists from the impact of rising fuel prices, and kept the overgrown retail sector purring like a kitten, while manufacturers, sheep and cattle farmers, horticulturalists and the forestry and fishery sectors have all been wilting under the double whammy of crippling interest rates and the ever rising dollar.
Judging by the fact that it’s our biggest employer, the government seems to worship the retail sector, but doesn’t factor in the obvious point that most of it’s earnings come from money earned elsewhere in the economy.
Meanwhile, the spector of the complex Emissions Trading Bill casts yet more gloom over the horizon for manufacturing and farming.
Spending on research and development has improved slightly in the last few years, from a very low base, but the government still seems lukewarm about giving tax incentives to address the low level of r and d spending by the private sector, which is one of the lowest in the OECD. In line with this neglect of r and d, there has been little research into our conspicuously low productivity rates, which are also at the lower end of the OECD table.
Then of course there’s the country’s pitifully low defence spending. As possibly the only western nation with over a million people which doesn’t have a squadron of fighter planes, we are now totally dependent on the charity of our shunned former Anzac partners Australia and the US. But putting it bluntly, why should they come to the aid of a sanctimonious free loader like us? – certainly we have no means to come to and assist them.
Typically, those vote-winning essentials, health and education, have been reasonably-well catered for, but as far as long-term development goes, the country’s probably no better off than it was in the recessionary early nineties, and back then it didn’t have quite such a large population to plan for.
Posted by mikecourtman 