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Insights 35: 15 September 2017
Dr Randall Bess: New Zealand's inshore fisheries - a game of chicken
Public Meetings: Future of Recreational Fishing
The Outside of the Asylum

It's good to be flexible
Dr Eric Crampton | Chief Economist |
Elections are not quite the advance auctions of stolen goods that H.L. Mencken warned about. When the electorate is very lucky, elected governments break the worst promises they had to make to win election – or at least bend them.

Labour’s industrial relations policy is a great example of a policy promise best left unfulfilled. Campaigning on the policy might attract a few votes. But delivering on it could be rather damaging, both for the overall economy and for the workers Labour might intend to help.

Labour proposes industry-level Fair Pay Agreements within their first year in office.

Quite what that means is not clear. But it looks like national-level bargaining between employers, unions, and the Employment Relations Authority would set wages, hours, and conditions for broad industry-level groups. And the agreements would apply for all firms in each industry, whether or not their workers had decided to join a union. 

So manufacturing companies across the country might have to negotiate with E tū to set standardised pay, hours, and employment conditions across the whole sector. Restaurants across the country, from fine dining to McDonald’s, would have to do the same.

Where think tanks might sit for collective industrial bargaining is anybody’s guess.

But flexible labour markets where employers and workers come to the arrangements that best suit local circumstances simply work better. Right now, jobs are being created as fast as new workers join the work force. Both the employment rate and the labour force participation rate for the past year are higher than they have been in any year going back to 1987.

When labour markets are more free and flexible, unemployment is lower, and recessions are less severe – at least in empirical work on the Fraser Institute’s Economic Freedom Index.

Last year, New Zealand’s labour markets ranked as seventh most free in the world, despite a poor showing around our rules on hiring and firing. Australia’s labour markets, where wages and working conditions are set by the kind of complicated system that Labour suggests, rank eighteenth.

Politicians are often criticised for not keeping election promises. We hope that Labour reconsiders this one. Mencken also warned that democracy is the theory that voters know what they want, and deserve to get it good and hard. But a bit more mercy than that might be in order. Voters know not always what they do.

In the mood for policy change
Dr Oliver Hartwich | Executive Director |
Approval ratings of more than three quarters are almost unheard of in politics. Most politicians would be satisfied with far less.

So you can imagine our excitement when we saw the results of the New Zealand Herald’s ‘Mood of the Boardroom’ survey. It polled leading business people on a range of issues – including two that are close to our hearts at the Initiative.

And it revealed overwhelming support for the Initiative’s ideas.

As Insights readers know, we have been making the case for radical devolution since we started five years ago. Initially, there was much scepticism about giving fiscal incentives to local government. Not much anymore, it appears.

The survey revealed that 76 percent of New Zealand’s top business leaders now support sharing GST revenue with local government.

Business leaders understand that local government needs to be incentivised for economic development. They know that New Zealand can only move forward if it aligns central and local government with the goal of economic growth.

A few years ago, such a response from the business community would have been unthinkable. But the Initiative’s fresh thinking made the case for fiscal devolution. The ‘incentives approach’ to local government is now widely understood.

Taking a delegation of our members to Switzerland, the country that does decentralisation best, definitely helped to promote this idea within the business community.

Our visit to Switzerland also had another effect. Our members learnt about the Swiss dual education system, which combines vocational training with further school education. It is an approach that delivers excellent education for blue and white collar workers alike.

The Herald asked our business leaders if New Zealand should do the same. The response was emphatic: 94 percent of the business community agree that New Zealand should copy the Swiss model.

On both devolution and dual education, the business community thus firmly stands behind the Initiative’s policy ideas.

Now we want to see political action.

On dual education, a broad cross-party consensus is emerging. The appeal of the Swiss system is great, and individual businesses are already considering what they can contribute.

On localism and devolution, we note that Labour, ACT, the Greens and New Zealand First are all open to these ideas.

To sum up the Mood of the Boardroom, there is an appetite for change in the business community. Not necessarily in a party-political sense but certainly in policy terms.

What a difference a sea makes
Amy Thomasson | Research Assistant |
New Zealand, you’ve done it again. You’ve one-upped Australia, and not even on purpose this time.

While you’ve been experiencing a relatively respectable and sane election campaign, the Australian Parliament has been plagued by so many political upsets I can barely keep up. To be honest, I’ve been avoiding telling people that I’m from Australia just to save myself the looks of incredulity and suspicion.

Of course, the major parties have trotted out their fair share of ill-considered policies. ‘Jacindamania’ has swept the nation, and perhaps retreated. But no matter how hard Winston Peters tries to derail the election by announcing a policy that somehow connects prostate health checks to tax refunds, New Zealand cannot rival the silliness of Australian politics.

At least neither Bill nor Jacinda saw fit to rock up to the leaders debate wearing a burqa, which is how Australia’s resident parliamentary pot-stirrer (to put it lightly), Pauline Hanson, chose to dress herself for the Senate recently.

While the stunt baffled most of Australia, myself included, Senator Hanson insisted that donning a burqa in the Federal Parliament was the best way to facilitate a high-level commentary on national security. The more you know.

Then you have the postal survey on same-sex marriage. Sure, same-sex marriage was legalised in New Zealand in part thanks to the luck of the biscuit tin ballot. But at least you had the good sense to allow a conscience vote, which isn’t even being entertained by the Turnbull Government across the Tasman.

Ultimately, a party room deadlock on the issue has forced the Government to innovate in all the wrong ways. The High Court last week dismissed two challenges to the legality of the postal survey, so it is definitely going ahead. But there’s still no denying that this is a totally unprecedented approach to legislating that should not be repeated.

Speaking of the High Court, it turns out eight of Australia’s parliamentarians may have flouted section 44 (1) of the Constitution, which excludes dual citizens from holding office in federal Parliament, when they stood as candidates.

What was originally a crisis facing one Greens Party MP has now gripped the Parliament, endangering the Turnbull Government’s one seat majority.

All this just goes to show what a difference the Tasman makes. There are plenty of reasons to be optimistic about the election, one of them being sticking it to Australia with some sensible politics.
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