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| Dr Bryce Wilkinson | Senior Fellow | bryce.wilkinson@nzinitiative.org.nz | ||||||||||||
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Open debate about the best path forward matters, especially when so many New Zealanders are doing it tough. But the letter’s central argument is puzzling. The last government left an economic mess. Deficit spending was entrenched. Net public debt reached 40% of GDP. Meanwhile, serious problems persisted in health, education and welfare, despite spending increases between 2018 and 2024. Inflation was too high. Real GDP per capita fell for four of five quarters before the 2023 election. Labour productivity was also falling. That mess came from the policies the letter now proposes: sustained deficit spending, believing growth would follow. It has not. The current government faces competing pressures. Some say Budgets 2024 and 2025 should have cut harder. Others argue that would have been too polarising; lower prolonged pain is the right call. The 20 economists represent a third position: continue to spend, borrow and hope economic growth will emerge, regardless of spending quality. These camps disagree on the path forward. But they share common ground: productivity growth would help deal with our economic challenges. The question is how to get there. The open letter assumes prolonged deficit spending is the best answer. Yet it does not give us an analysis of how this would make a positive difference. Nor does the letter address restoring a prudent public debt level before the next natural disaster or global crisis. It is currently much higher than the 15-25% of GDP finance minister Michael Cullen deemed prudent in 1999. Debt policy must also address the Treasury’s dire public debt projections. The letter calls for a broadly accepted economic plan. But such a plan needs measures to boost productivity growth, which the letter ignores. Deficit spending is not a growth strategy when spending quality is poor. The New Zealand Infrastructure Commission reports that infrastructure spending levels were reasonable, the problem is quality. Better spending would be a start. Other measures might include lower tax rates, less red tape and greater respect for property rights – though any new policies need to be accompanied by rigorous evaluation and cost-benefit analysis. The point is that productivity gains require more than spending and hoping. The letter’s authors might object to alternative approaches. But can they explain why their own would work? |
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| Dr James Kierstead | Research Fellow | james.kierstead@nzinitiative.org.nz | ||||||||||||
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But as well as being a lot of fun to play and to watch, it turns out that the game has other uses. This Monday, Australian Prime Minister Anthony Albanese and his Papua New Guinean counterpart James Marape co-signed a major new defence treaty, just a day after the two leaders attended the National Rugby League grand final in Sydney. The treaty is underpinned partly by the A$600 million that Mr Albanese pledged to help develop rugby league in PNG last year, including through a new NRL franchise in the country. The Pukpuk Treaty is Australia’s first new formal alliance since the signing of the Australia, New Zealand, United States (ANZUS) treaty in 1951. It is the first formal alliance that PNG has entered into in its history. The treaty commits both parties to ‘act to meet the common danger’ if either is attacked. It also grants Australian forces access to PNG’s territory in the event of a major threat. Access to PNG was crucial to Australian forces’ ultimately successful campaign against the Japanese Empire during World War II. Now, the two countries are anxious about a different threat. Both countries trade extensively with China, and there is no reason why this should not continue. Mr Marape was at pains to stress that the Pukpuk Treaty ‘is not a treaty that sets up enemies’ but one that ‘consolidates friendships.’ Nevertheless, the treaty forbids Australia and PNG from ‘entering into any agreements that would compromise’ the bilateral partnership – something China had expressly tried to prevent. It thus constitutes something of a line in the sand. Regrettably, this is long overdue. China’s autocratic government has been seeking to expand its presence in the Pacific for years. In 2022, it signed a security agreement with the Solomon Islands. Australia is now looking to negotiate a defence pact with Fiji. If New Zealand values a free Pacific, it could do worse than follow Australia’s lead and strengthen some of its own relationships in the region. And how better to get started than through the region’s favourite sport? The opening match of the 2026 Super Rugby season will take place in Fiji. Perhaps Christopher Luxon should be there alongside Fijian PM Sitiveni Rabuka. And maybe they could discuss regional security the next day. |
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| Roger Partridge | Chair and Senior Fellow | roger.partridge@nzinitiative.org.nz | ||||||||||||
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Sunday’s welfare announcement will ensure another strong quarter. The Government’s proposal is straightforward: restrict Jobseeker payments for 18- and 19-year-olds to those from low-income families. It will also offer a $1,000 bonus for staying in work for a full year. The stated goal: spare young people from what modelling suggests will be an average of 18 years on welfare over their lifetimes if they enter the system before 25. Within hours, the outrage sector demonstrated its capacity. Radio NZ led the chorus of disapproval. A modest policy became “cruelty,” parental support became “unconscionable” and the $65,000 threshold – set at benefit levels – was deemed impossibly low. Meanwhile, the $1,000 bonus was condemned as discriminatory – accurately, since it favours young people who complete a year of work over those who don’t. A youth worker declared young people were being “punished for an economic crisis they didn’t create.” Green MP Ricardo Menéndez March warned that the policy would push “young people deeper into poverty” – unless, of course, it pushes them into employment. The Prime Minister complicated matters by introducing data. Dargaville’s kūmara industry reports being “desperate” for workers. Primary industries are “crying out for young people.” Treasury forecasts unemployment below five percent. Critics maintained that no jobs exist. The outrage economy thrives on such contradictions – each side has its facts, and neither requires the other’s. Media outlets operate on outrage-per-click quotas. Radio NZ’s performance this week will exceed expectations. Lost in the noise were the lives at stake. Nine in ten young beneficiaries come from households already dependent on welfare. The 18-year projection isn’t destiny, though settings that support dependency don’t help. But nuance doesn’t generate clicks. The system provides young people with advocates who speak for them – while inadvertently ensuring they’ll need advocates indefinitely. Sunday’s reforms acknowledge that 18 years on welfare isn’t compassion – it’s abandonment. The changes are modest: the threshold means many at-risk teenagers will still receive the benefit, ensuring the cycle continues. Modest or not, the sector’s response was unrelenting. Once, governments were expected to manage the economy. Now they are encouraged to manage outrage. But if compassion means helping young people build purposeful lives rather than providing them permanent spokespeople, we might invest less in outrage – and rather more in outcomes. |
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