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Insights 25: 16 July 2021
NZ Herald: A bouquet to MBIE on Fair Pay Agreements says Roger Partridge
Newsroom: Oliver Hartwich comments on the politics of the Euro 2020 football tournament.
The Dominion Post: Eric Crampton on setting New Zealand's ETS price cap

No copyright on good policy thinking
Dr Oliver Hartwich | Executive Director |
When opposition parties produce policy documents, they can be overly simplistic and populist. They can be unrealistic because they do not have to be implemented straight away. They can be glorified marketing documents.

ACT’s new housing policy is none of these. Honest Conversations: Housing and Infrastructure is a breath of fresh air. It is straightforward, realistic and shows the party has understood the economic challenges facing our cities.

The document starts with a summary of New Zealand’s housing crisis. Last year alone, the median house price rose by 30 percent. Worst hit are first-time buyers who are now struggling even to save for a sufficient deposit.

To tackle the crisis, ACT proposes many policies that would be familiar to Insights readers. Just as the Initiative has been arguing, ACT wants to privately fund infrastructure. To do that, ACT suggests combining Crown Infrastructure Partners and the Infrastructure Commission into one body.

Also in line with the Initiative’s thinking is ACT’s proposal to share GST revenue from new housing development between central and local government. Such an incentivisation of local government has been core to our housing thinking. It is also something that I have been promoting since my first housing research project in the UK in 2005.

Further to these measures, ACT wants to see land-use rules simplified so that more land can be used for development. Again, this is something the Initiative has been saying for a long time.

And not just us, by the way. Former housing minister Phil Twyford also pushed for these changes, and some of them have already made it into the Labour Government’s National Policy Statement on Urban Development.

Further ACT proposals include streamlining regulations for building materials, making it easier for international investors to invest in build-to-let projects, and introducing a competitive consenting process.

Look through our past columns, and you will find these ideas reflected there, too. Just as you would find support for ACT’s calls for a meaningful reform of the Resource Management Act and the introduction of road-user charging.

It is always encouraging to see opposition parties come up with good policy thinking. It is even more gratifying for us as a think tank to see many of our ideas entering the political debate.

What matters less to us is who eventually implements these proposals. So, in the interest of solving New Zealand’s housing crisis, let’s hope that the current government steals most of ACT’s ideas. There is no copyright on good policy thinking.

Another cheer for MBIE
Dr Bryce Wilkinson | Senior Fellow |
In my book, governments that do not publish a competent cost-benefit assessment justifying their spending and regulatory proposals do not take community wellbeing seriously.(Only if the wellbeing benefits plausibly exceed the costs is the policy likely to benefit the public.)

The absence of such an assessment is now common. It suggests that a measure is being imposed on the public for partisan or elitist, paternalistic reasons.

Taxpayers pay public servants to give competent advice in the public interest. MBIE gained a big first cheer back in 2018 when it assessed that the government’s cavalier ban of offshore gas and petrol exploration would cost the community a great deal for no clear environmental benefit.

MBIE almost certainly sent that advice against the wishes of ministers. That is a courageous thing for a department and its officials to do.

Now MBIE has done it again. Last week MBIE proactively released its assessment of the likely costs and benefits of the government’s flagship Fair Pay Agreements policy. This unfair policy will see many workers and employers forced into collective agreements against their will. The only clear beneficiaries are the trade unions and employment lawyers. The biggest losers are likely to be the least employable – the ones who struggle to get paid employment currently.

To its considerable credit MBIE’s sixty-five page assessment was both reasoned and critical. In this age of what appears to be a bullied, cowed and thinly-skilled public service this is a rare thing.

In a nutshell, MBIE did not find that the benefits from the government’s proposals were likely to exceed the costs.

The government’s ostensible justifications for its proposals are mere arm-waving assertions about an ‘imbalance of power’ and a mythical ‘race to the bottom’ under competitive wage setting. Final year IT students in NZ are reportedly being lured across the Tasman by salary offers of NZ$215,000. In New Zealand restaurant owners and horticulturalists struggling with labour shortages. How can these events be due to employers having too much power?

Outside government, supply and demand forces wages to track productivity. The best protection workers have against an employer who tries to exploit them is competition from other employers.

By hiking the minimum wage and these proposals the government seems to be hell bent on removing this form of protection for the least productive workers.

A less Orwellian name for the legislation would be the Unfair Pay Agreements Act.

Bomb the city to save it
Dr Eric Crampton | Chief Economist |
Japan’s post Second World War economic growth was astonishing. Despite widespread devastation, Japan produced an economic miracle.

Economist Mancur Olson provides the most compelling explanation.

I wonder whether his lessons might apply to continued difficulties in Wellington.

Olson argued that political institutions become ossified over time. Entrenched interests block improvements. Wiping out existing political hierarchies and veto players enabled sustained growth.

Ideally, that kind of change is possible without the bombers. But one does wonder.

Wellington’s draft spatial plan debates a month ago were bad enough.

Some councillors did their best to prevent owners of old wooden tents in Mount Victoria from redeveloping their properties into modern townhouses and apartments.

While Council reduced the extent of heritage protection, substantial bans still prevent building new housing in places where people want to live – despite a massive housing shortage.

But it gets worse.

Wellington enjoys a heritage rail ticketing system, complete with paper tickets to be punched by conductors. While the bus system has electronic payment, getting that system onto the trains has been slow.

This week, Kāpiti Coast District Councillor Gwynn Compton found one reason why. Gwynn requested correspondence between Heritage New Zealand, Greater Wellington Regional Council, and KiwiRail regarding the rollout of any integrated ticketing system.

The response ran to three volumes and 128 pages. Heritage Impact Assessments needed to be prepared for necessary infrastructure. Comment on the Heritage Impact Assessments needed to be assessed. The size, colour, and location of six temporary posts checking electronic fare cards needed to be considered. Bold colours that might let commuters tell where to find things were considered too intrusive.

If you think that the Wellington rail station is a museum piece, fair enough. But it does also try to be a working commuter rail station. Britomart in Auckland somehow managed to integrate electronic ticketing into its heritage facilities.

But everything heritage in Wellington is simply too hard.

And that brings us back to my bomber-based solution. Every two years, Wairarapa has an airshow. When we are lucky, an American B-52 flyover delights the crowds.

It flies over Wellington on the way, on a well-advertised flight path providing plenty of notice.

Next time it could have payload.

Clearing Mount Victoria, the Gordon Wilson Flats, the unfixable-at-any-reasonable-cost library, and a few other spots could kickstart an economic and housing miracle for the Capital.

I wish there were an easier way.

On The Record

Initiative Podcast:
  • Matt Burgess explains what happens when the ETS reaches its price cap - A $50 carbon price – and then what?
  • Matt Burgess and Oliver Hartwich discuss the politicisation of the Euro 2020 football tournament
  • Oliver Hartwich interviews Mark Honeybone, the founder and owner of Property Ventures, on the pulse of the property market
All Things Considered
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