Saturday, October 21, 2017

ON THE CHANGE OF GOVERNMENT - AN AUSTRALIAN VIEW

“This is the way the world ends. Not with a bang but a whimper,” wrote the poet TS Elliot.

So it must have seemed for the centre-right in New Zealand late on Thursday afternoon when the capricious Winston Peters snuffed out Bill English’s chance of staying in office and ended three terms of reforming government.

English will be celebrated as much for his eight years as finance minister under John Key as his 10 months as prime minister. Key and English were described more than once as the quiet achievers. The governments they led as the bore-cons introduced reforms in tax and welfare while balancing the budget without fanfare or fuss.

Seldom has the demise of a New Zealand government caused such political shockwaves on this side of the Tasman. In a period of near-universal political volatility, it raises the dispiriting possibility that simply governing well may no longer be enough.

The Key and English legacy compares starkly with Australia’s record over the same period. In 2008, when the National Party came to power, New Zealand was 24th on the World Economic Forum’s Global Competitiveness Index, six places behind Australia. Since then the positions have been ­reversed. Today New Zealand is in 13th place on the index, eight positions ahead of Australia.
Its economy has grown by an average of 3.2 per cent since 2013 measured by GDP, partly driven by population growth and rebuilding after the Christchurch earthquake. Australia has ambled along at an average of 2.3 per cent.

New Zealanders are still poorer than Australians on average but they are catching up fast. Nine years ago GDP per capita in New Zealand was 30 per cent lower than in Australia, now the gap has narrowed to 19 per cent.

The relative change in economic fortunes has changed the migration flow across the Tasman. Inward ­migration from ­Australia exceeded outward ­migration last year for the first time in a quarter of a century.

If we assume that governments have the power to control the economy — which incidentally 33 per cent of Australians no longer believe, according to the most recent Australian Electoral Study — then Key and English governed exceedingly well by ­almost any measure.  They did so through an ­approach that was often radically different to that of Australia under the Rudd and Gillard governments. While treasurer Wayne Swan was doling out cash and spending billions on poorly conceived make-work projects to help Australia survive the 2008-09 ­financial crisis, English gave personal and business tax cuts.  New Zealand went into ­recession while Australia did not. But the New Zealand economy bounced back strongly and deficits were more easily contained. Everything Swan claimed would not work in Australia worked magnificently in New Zealand, setting the country up for a decade of investment and growth.

Today the New Zealand budget is in surplus while Australia is still running deficits. Ten years ago the New Zealand government’s gross debt stood at 25 per cent of GDP while Australia’s sat on 20 per cent. Today the positions are reversed. Australia’s net public debt is at 47 per cent; New Zealand’s hit a peak of 41 per cent in 2012 and has steadily declined to 38.2 per cent.

The achievements of Key and English are by no means limited to the economy, however.
English’s most important legacy may well prove to be a revolution in thinking about govern­ment and how it can best serve its citizens. The centre-right’s scepticism about government leads it to underestimate the extent to which the economy can be improved through the business of government, English told an audience in Melbourne two years ago when he delivered the John Howard Lecture
“If you compare it to the private sector, a business needs to understand its customers because they drive its revenue. In government, we need to understand our customers because they drive our costs,” he said.   Long-term welfare recipients topped the list of the government’s most expensive customers.
“Their lives are complex and often challenging. Their inter­actions with government agencies are usually chaotic and crisis-­driven, and therefore expensive and often ineffective.”

From this thinking flowed a new approach to welfare that has since been adopted by the Abbott and Turnbull governments to great effect.   In its second of two terms the ­National government first halted the long-term trend of rising welfare dependency and then ­reversed it. The number of New Zealanders claiming sole parent benefit has fallen by a quarter as 20,000 single parents found work. Long-term welfare dependency has fallen substantially. In 2012 78,000 New Zealanders had been collecting benefits for 12 months or longer. By June this year the number had fallen to 55,000.
The reductions have been achieved by focusing attention on the groups likely to place the heaviest demands on the welfare system over their lifetimes, using both carrot and stick to entice them back into the workforce.

The idea of calculating the ­future costs of welfare — the so-called actuarial approach — was pioneered by English. The success has exceeded expectations. The New Zealand Treasury estimates that the future cost of welfare payments has been cut by $NZ12 billion since its Better Public Service targets were introduced in 2012.

English saw no tension ­between good fiscal management and good social policy.

“The ideal outcome for a government is fewer customers, not more. Fewer dysfunctional families. Fewer parents who spend decades on welfare. Fewer people who commit crimes,” he told his 2015 Melbourne audience. “Sometimes I wonder if the post-war welfare state was set up to service misery, not to reduce it.”

English’s approach was founded firmly on the principles of Australian liberalism. Governments needed to recognise that people can do more for themselves, and usually want to.

The philosophy of the left, by contrast, was “of helplessness in the face of overwhelming forces that cannot be changed”.

The result of last month’s election could hardly have been predicted when Key stepped down as prime minister last December and English was unanimously elected to succeed him. The government’s strategy of taking the public with them on reforms, ­explaining the logic well in advance in language people could follow, adjusting ­expectations and then implementing the promised changes, was remarkably successful until the end.

It was an approach formed in response to the crash-or-crash-through approach of the 1990-99 National Party government. Its reforms were extensive, at times chaotic, frequently unexpected and thirsty on political capital. The failure to build a broad constituency sowed the seeds of the government’s ­demise.  Many of its policies were reversed by the Labour government that followed.

Key and English’s incremental radicalism — reform by stealth — was touted as a new model for centre-right governments elsewhere. Some of the reforms were unpopular with the electorate, like the sale of 49 per cent of three government-owned electricity companies. Yet the inclusion of the policy in the National Party’s 2011 election platform provoked no ­obvious backlash. The secret to ­reform, English later said, was to be predictable, transparent, consistent and upfront with voters.
The same approach enabled tax reforms unimaginable in the present Australian political climate. In 2010 the government cut all income tax rates and the company tax rate, funding it by an ­increase in GST and property taxes. The changes were largely uncontroversial, judged by voters to be balanced and fair.

English, the centre-right poster boy of the English-speaking world, looked crestfallen at ­Pe­ters’s decision to form a coalition with a Labour Party that looked down and out this time last year, as well he might. He had fought an energetic campaign against his youthful opponent, using his charm and the government’s outstanding record to great effect.

For 11 years he and Key had written a counter-narrative to that prevalent in Australia that reform was all but impossible in the era of Facebook and Twitter. While Australia appeared stuck in a policy drought, New Zealand was breaking new ground, discovering new ways to measure government programs by their results and finetuning them accordingly. Feel-good policy, sentimentalism and identity politics were anathema to them.

English and Key proved that centre-right parties were not condemned to be nasty parties, ­focused on numbers rather than people, as they doggedly cleared up their predecessors’ fiscal mess. Devoid of ideology, fiercely pragmatic, self-aware and inspired, the pair stands as inspiration to the rest of the developed world in these anxious and volatile times.

Nick Cater is executive director of the Menzies Research Centre.

11 comments:

Adolf Fiinkensein said...

It surprises me that so many commentators think English wanted to get into bed with Peters whereas I believe he set Peters up to have no option but to go with Labour and the Greens - a far more pragmatic result for the National Party..

The Veteran said...

Adolf ... I've known WRP for near on thirty years. He is a complex character but one thing for sure ... he's a very proud man. If it were JK rather than BE he was talking to there could have been a deal. There was just too much bad blood beteen Peters and BE who was one of the key players in having him expelled from the National Party. You add into that the leaking of Peters' NZ Superannuation over-payment and the general left leaning of NZ First policy and National was negotiating from behind the eight ball.

But it was close and my gut feeling is that Winston is uncomfortable in being part of a coalition of losers. The failure by National to dangle enough baubles was the deciding factor. In the end BE decided enough was enough and the price was too high. Good for National ... sad for NZL.

Noel said...

Shouldn't that be Liberal Asutralian view?
Don't believe the Centre donates to the Labour party in addition to the Liberals.

The Veteran said...

Noel ... it's a think tank albeit a centre-right think tank. It is a non-profit body with a distinguished alumni. It does not donate to the Liberals. That is not its mission.

Noel said...

Someone should correct Wiki
https://en.wikipedia.org/wiki/Menzies_Research_Centre

Anonymous said...

A very good obituary Veteran..... In the interests of balance you might have mentioned the result of this Stella performance is the worst homelessness crisis in the OECD...twice that of "failing" Australia and four times that of the USA. When 1% of your population is homeless in a first world country in the 21st century because too many vested interests allowed the property market to become a playpen for overseas money. Houses are meant to be homes not portfolios.

Lord Egbut

Anonymous said...

And of course, you've got this . . .

https://en.wikipedia.org/wiki/Economy_of_New_Zealand#/media/File:NZ_Govt_debt_1990-2011.svg

A NZF/Nat coalition was always going to be difficult. Winnie hates English and the opportunity to fuck him up was too good to pass up. On the other side, English's born-to-rule arrogance and hubris spiked any chance of a deal too. English will be shanked by the Collins faction now for failing to secure the treasury benches. The last thing they wanted to be is in opposition, especially now as the media will move heaven and earth to serve and protect Ardern.

English, once a loser at 21%, still a loser at 45%. This guy could lose for his country. Time to go Bill and take that incompetent bung-eyed fool friend of yours as well.

The Veteran said...

Egbut ... do you honestly believe your statement that right now there there are 45,200 'homeless people in New Zealand?

You are aware of course the official definition of 'homeless' includes those living in boarding houses, caravan parks, shared accommodation (i.e. student flats), womens refuges etc, etc.

The Veteran said...

Noel ... thank you. Clearly I stand corrected (but no recent donations) but do you have a view on the article itself?

Anonymous said...

Veteran....yes I am aware of that. Same as in Australia, UK and USA. So same stats per capita which is shameful.


The ABS statistical definition states that when a person does not have suitable accommodation alternatives they are considered homeless if their current living arrangement: is in a dwelling that is inadequate; or. has no tenure, or if their initial tenure is short and not extendable.

Not be confused with rough sleepers who very difficult to count but there is thought to be around 700 in Auckland alone but will stand corrected if anyone can supply a link.

Lord Egbut

Judge Holden said...

Really Vet? Can you point to the official definition of homelessness as someone living in a student flat as you claim? Otherwise do you think it’s fine that large numbers of people are living in caravan parks and refuges? Or is that simply their choice under the grand economic vision of Steven Joyce and Bill English?