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Insights 32: 31 August 2018
Read: Oliver Hartwich's first fortnightly 'Spotlight on Europe' column for Newsroom Pro
Blog: Jack Goldingham Newsom argues in his last blog NZ needs more debate (and coffee)
Vacancy: We are seeking an economist to join our research team

Still the lucky country
Dr Oliver Hartwich | Executive Director |
“Australia is a lucky country run mainly by second rate people who share its luck.” This is how the late Donald Horne once described the West Island in The Lucky Country (1964).

Half a century later, Horne’s double characterisation of the country and its political leadership applies more than ever. If proof was needed, it was provided by the overthrow of a sitting Prime Minister Malcolm Turnbull by his own party last week. It was the fourth political assassination in just eight years.

Despite such political instability, the Australian economy is doing well. Australia continues to increase its record as the country with the longest uninterrupted economic growth. The economy has been expanding for 27 years, this year at an expected rate of 3.1 percent.

A booming developed country with the government of a banana republic: Donald Horne sends his regards.

Even for Australians it has become difficult to follow the confusion of their federal politics. There is now a Twitter channel (@WhoIsPM) that announces the name of the prime minister every half hour. Because you never know.

So if even Australians have become so confused by their politics, how could it be explained to outsiders?

Well, it might go like this: Australian politics is what you get when you encourage an amateur cast to perform House of Cards in Canberra. It is the transformation of representative democracy into a soap opera, a Machiavellian psychodrama with Shakespearean ambitions.

Little of the turbulence of the past decade had much to do with policy. Much more can be explained by personalities. In Australia, the comparative forms of enemy are arch-enemy and party colleague.

On the Labor side, it started with Kevin Rudd whom even his party colleague Kristina Keneally once called a “psychopathic narcissist”. That is among the nicest things said about him. Rudd was dumped by his party, only for him to get his brief revenge on Julia Gillard three years later.

On the Liberal side, arch-enemies Tony Abbott and Malcolm Turnbull have been knifing each other every few years since 2009. That is how Scott Morrison got his job.

Australia has demonstrated that reality can easily keep up with the fiction of House of Cards. Frank Underwood’s Washington seems almost civilised against the snake pit that is Canberra.

But actually Australia has only confirmed Donald Horne’s dictum. Only a lucky country can afford such a second-rate leadership.

Assessing government’s fitness for purpose in New Zealand
Dr Bryce Wilkinson | Senior Fellow |
New Zealanders have come to rely a great deal on government. The proportion of national income taken by taxes more than quadrupled in the 20th century and the number of Parliamentary Acts increased 50-fold.

How good a job is it doing? Could it achieve more with the same resources, or do as well with fewer?

I am assessing this issue in a report the New Zealand Initiative will release in mid-September.

To examine the issue should not be controversial. Government performance matters. Unnecessary waste in government harms New Zealanders. It does so regardless of one’s ideology. No one would prefer worse outcomes to better ones.

Some preach complacency about this issue, seeking to defend the status quo.

To be fair, they can point to the high self-assessed wellbeing of most New Zealanders. They can also point to New Zealand's top tier world rankings in many important respects. For example, we enjoy greater economic freedom than almost anyone else. Our laws and regulations can't be all bad.

Some also assert that New Zealand is a low tax country. And so it is – relative to many European countries.

Such observations invite the complacent and dismissive conclusion – “nothing to see here, move on.”

Yet averages can conceal deep problems. Self-assessed well-being is low for a significant proportion of New Zealanders.

Our news media daily record public dissatisfaction with government. Housing affordability and quality are ongoing concerns. So are crime rates, child abuse and neglect, inequality, poverty, hardship and low wages.

Likewise, there are weak aspects within our high overall international rankings. Our report focuses on aspects in the “could and should be doing better” category. One example is a humiliating ranking for the quality of our judicial processes. We should not be too proud to learn from others. In this case it looks like Australia.

There is further reason for rejecting complacency. One cannot establish that one is slim by comparing oneself to the most obese.

The claim that New Zealand is a low tax country does exactly that. European countries are the high tax outliers on the world stage. New Zealand is close to being one too.

On the evidence, government could and should be doing better in some important areas. We do not see this finding as controversial. But we look forward to debating the issues regardless. 

The market is a harsh mistress – for competitors
Dr Eric Crampton | Chief Economist |
It was the year 2019 and Kiwis had had enough. It was time for legislation to finally protect the interests of those of us stuck in the car leasing market.

It wasn’t always this bad. The market used to be able to keep up with demand for cars. Mostly. Sure, the cars available overseas were better and cheaper. Some overseas families even had more than one of them! Normal people couldn’t really get those cars here because of import controls.

The 1980s reforms hadn’t touched the car market. Petone still made lots of cars.

But the reforms had touched it indirectly. People saw the cars available overseas, either while travelling or on television, and wondered why the new ones here were of such poor quality and high cost by comparison – and why so many people were stuck driving old and run-down ones. Higher incomes built greater expectations.

The government tightened car regulations to try to close the gap, but that always wound up either making cars worse in other ways, or increasing prices for those who could least afford it, or both.

It was annoying, but we put up with it.

Fat-cat families with more than one car had started leasing their second cars to those who couldn’t afford one in the late 80s. Car ownership rates started their long decline. And we started seeing stories on how cars in Houston didn’t cost multiples of the median income.

The leasing market was never that nice. If the owner’s kid came back from OE a bit early, you might have to scramble to find another car in a hurry. You were usually stuck doing far more of your own maintenance than expected. And the lease price could jump at the owner’s discretion – take it or leave it.

The immigration boom made everything worse. Some brought their cars with them – lording their well-built Honda Civics over everyone else. But the rest simply added to the pressures on the car market. The local production plants just couldn’t keep up. People even wanted to ban immigration to restore automotive affordability.

Finally, in 2019, the government decided to really fix things and protect renters.

It opened the market to imports.

Scarcity is power. Fixing the rules that artificially constrain supply enables the best regulator of all: the competitor down the road.

Renting a house as easily as leasing a car doesn’t have to be science fiction.
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