New Zealand, part II…

"There are a few other factors that might contribute to NZ not being as successful as we should be:

1. Monetary policy. We do have low inflation but the Reserve Bank’s official cash rate is 6.5%, not exactly Greenspanesque. Borrowing money is expensive.

2. Labour markets are only free in the sense that union membership is not compulsory. Instead, pay and conditions are extremely heavily regulated and our Employment Court is weighted heavily against employers. Employers may appear to be acting voluntarily, but actually they are being coerced in all kinds of subtle ways. Our minimum wage is $9 per hour and this also makes entire areas of economic activity unviable.

3.  Welfare benefits are much too generous and little or not effort is made to ensure that the unemployed attempt to find work. Refusing to take a job that is offered is rarely penalized. Every year fruit growers watch some of their product die because they can’t get enough pickers, even though there are people just down the road collecting welfare benefits.

4. There is a serious underinvestment in infrastructure, since the consent procedures allow green and Maori groups to bring about enormous costs and delays in gaining approval. We have had power shortages on several occasions, while at the same time no new dams have been approved and burning coal (or even digging up our massive
stockpiles of it) is out of the question. We even had an extension to a state highway held up because a taniwha (a mythical river-dwelling creature) was angered and had to be appeased (i.e. paid) before contruction could continue.

5. Some of the privatization efforts have since been rolled back. In the last 5 years, the Labour government has nationalized our airline, the railways and accident compensation insurance and established a massive state superannuation fund. They are well on the way to nationalizing kindergartens and have just started on primary healthcare. Where they don’t own businesses they still regulate heavily, e.g. telecommunications.

6. Taxes are not as low as it might appear. The top rate of personal tax is 39% but there is also a 12.5% universal sales tax, property taxes and many others. Recent figures show that over the last four years, average household income has increased by $7700 while average household taxation has increased by $5200. Once you take into account price increases, our purchasing power has dropped. Since education and hospitals are fully state-funded with no voucher scheme, if you want private provision of those you have to pay twice.

7. There is a widespread and irrational dislike of foreign investment. We have always been a country that had land, labour and far too little capital. That is unlikely to change because the public, fuelled by politicians and the media, go on the attack any time an overseas business or individual tries to invest here. At the moment Shania Twain is trying to spend $14 million to buy a farm in a remote area of the South Island. You wouldn’t believe the outrage: it’s front page news and questions have been asked in Parliament.

You might wish to start reading Rodney Hide’ s blog here:  Rodney is the leader of ACT, which is New Zealand’s (maybe the world’s) only classic liberal political party. He was an economics professor before being elected to Parliament."


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