Steven Joyce: GDP figures show the true cost of Fortress NZ

OPINION:

This week’s economic growth figures for the 2020 calendar year should be sobering for all of us. Despite world-leading levels of fiscal and monetary stimulus in response to the pandemic, our economy shrank nearly 3 per cent in the 12months, and GDP per person, the measure most linked to individual living standards, fell by nearly 5 per cent. These are record rates of decline.

Quarterly figures are, as always, being cherry-picked to suit political narratives, but even looking on a quarterly basis the trend is not currently our friend. We shrank by 1 per cent in the last quarter of last year while our neighbour Australia grew 3 per cent, and our negative growth is likely to continue for much of the first half of this year. We are continuing to go backwards.

Economic growth can be a bit nebulous for many people, but it translates directly, if sometimes with a time lag, into real things like jobs, wages, and tax revenue to support government spending.

So what to do? We can’t change 2020 and we always understood there was an economic price to pay for our health response to the pandemic.

What matters now is the amount of urgency we show in coming out of it. Things like the speed of vaccination rollout relative to other countries, the opening of safe travel bubbles with important partners like Australia, and the management and expansion of MIQ (managed isolation and quarantine) facilities.

This week’s news should at least provide any final impetus required to get the much postponed transtasman bubble over the line, which will be a big step forward for tourism, family reunification andbusiness relationships. It has taken a full court press by business, the Australian PM,Kiwis in Australia and a range of others to drag the Government to it, but it seems we are almost there.

Meanwhile, being largely closed off from the world for a year has graphically demonstrated how important it is that we are well-connected, and just how important the flow of people across our borders really is.

We’ve learned that without foreigners coming in, our regional towns that live at least partly off tourism wither away. We’ve learned that fruit rots on the ground in regions like Bay of Plenty, Hawke’s Bay and Marlborough without seasonal workers.

Our education system is not as well resourced as it is when we teach some international students alongside our own, and while Zoom and ultra-fast broadband are fantastic, there are limits to how much of their business exporters can do through a video camera.

We’ve learned how much construction projects and ports are often dependent on specialist workers such as tunnellers and crane drivers, for which the pool of available domestic workers is small or non-existent.

All these experiences tell us that as soon as we can open up, our migration settings should return mostly to the way they were, because they are of great benefit to our small, isolated country.

There are those who have loved the little New Zealand approach and want it to continue. Many subscribe to the “lump of labour” fallacy, which statesthere is a set amount of work to be done in any geographic location, and that letting some foreigners in to do some of the work displaces local people from those jobs.

It was first labelled a fallacy back in 1891, when an economist was able to show that the amount of work is not fixed and the availability of more people mostly creates much more work. The world has been proving it again and again ever since.

Let’s take a few topical local examples. One reason the Hawke’s Bay apple industry has grown so fast over the past 20years and turned the Bay back into a prosperous place has been the availability of RSE workers from the Pacific Islands to come in and pick much of the harvest.

This has been a win-win situation for all involved. The RSE workers earn good wages compared with what they can earn at home, growers get their fruit picked and earn a living at world apple prices, and locals work full-time in often much better-paid jobs along the distribution chain which supports the industry and its growth.

Our technology sector has also been a great success story over the past decade. We are proud of companies like Xero, Rocket Lab, Vend, and Fisher and Paykel Healthcare, but visit any of them and you will find a United Nations of skilled workers beavering away alongside local engineers and software designers.

If those international workers had not been allowed to come in, many of these tech companies would either be a lot smaller or forced to shift their work offshore. Along with the jobs for the locals.

A slightly different take is in the importance of foreigners to our tourist towns.

Queenstown has many more attractions, restaurants and hotels because it caters to large numbers of international visitors, and international workers help staff all the facilities.

Many people would like the same Queenstown but with many fewer tourists. Unfortunately, that Queenstown cannot exist.

This is all relevant because there is a disturbing “small New Zealand” lump of labour rhetoric becoming evident in government circles among ministers and bureaucrats whenever the post-Covid recovery and topics like skilled migration, tourism or international education are discussed. Ministers shuffle their feet and talk about quality not quantity ad nauseam, without saying what they really mean.

It would be hugely ironic if the main economic lesson we took from the pandemic was that it was time to return to 1970s-style fortress New Zealand border policies that would rapidly send us broke — much as they nearly did then. Surely the amount of money we have borrowed, printed and foregone in the past year demonstrates graphically what such an approach costs us.

A slow, tentative return to the world stage will deliver a smaller economy and fewer opportunities for Kiwis. We need to open up again as soon as we safely can.

– Steven Joyce is a former National MP and Minister of Finance.

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