The Prime Minister’s State of the Nation speech yesterday was the kind of speech he should have given a year ago.
Finally, we found out why he is involved in politics.
Last year, all we heard from him was a catalogue of complaints about Labour.
But now, he is redefining National with its own ideas and as the party of growth and that will mean a fundamental shift in how the Government addresses the economy..
“Embracing growth is about saying yes instead of no,” he declared.
It was a different type of Luxon speech; he was more animated, and the speech itself even opened very slight chinks into him as a person.
“My ancestors came to this country in search of a better life,” he said.
“They came as bankers and miners, stonemasons and farmers, hotel keepers and fishermen, and they came in search of opportunity and ambition.
“And above all, they came in search of a place to call home.
“And like so many new New Zealanders, they found that here.”
For all that, he got only moderate applause at the end, perhaps, a realisation among the 500 plus businesspeople there – including any number of big names — that the devil in the plans he announced yesterday will be in the delivery.
That is particularly true of one of his two big initiatives, on foreign investment, which is currently hamstrung by an impasse within the coalition on how much to liberalise the foreign investment rules.
That is supposed to follow the establishment of Invest New Zealand, a new agency to attract and manage foreign investment.
However, because ACT and New Zealand First are at odds on how to rewrite the overseas investment legislation, it could end up being only half a reform and considerably less than what Luxon promised yesterday.
His other big reform involves substantial bureaucratic restructurings, which will take months, if not a year or two, to have any immediate impact.
That reform of the science sector has been driven by John Key’s Chief Science Advisor, Sir Peter Gluckman. The first stage of the reforms centres on restructuring the Crown Research Institutes. The previous Labour Government had also looked at this but was not proposing to do anything until 2026.
Gluckman’s science reforms will obviously take time to implement and may face a few bumps in the road, particularly laying off 500 staff from the Callaghan Institute, which is to be closed.
The PSA have already signalled that will not be accomplished without a fight.
Otherwise, outgoing Science and Technology Minister Judith Collines unveiled proposals that would:
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- Transform the current seven Crown Research Institutes into three Public Research Organisations (PROs) focusing on bio-economy, earth sciences, and health and forensic sciences;
- establish an advanced technology PRO to deliver research, capability and commercial outreach around technologies such as artificial intelligence, quantum [advanced computing] and synthetic biology;
- establish a Prime Minister’s Science, Innovation and Technology Advisory Council to provide strategic direction and oversight of the system, advise on priorities and identify the biggest opportunities to leverage science, innovation and technology for economic growth;
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This is only Stage One of the reform of the science sector. Gluckman told POLITIK that the next stage would look at the Universities.
But he is proposing that there would be a central pool of funding for research with a specific percentage set aside for so-called “blue skies” research.
Gluckman’s report draws heavily on ideas from the Small Advanced Economies Group, which he was one of the founders of when he was the Prime Minister’s Chief Science Advisor under Sir John Key.
“We’ve relied on that grouping in our work,” he told POLITIK yesterday.
“So there’s been a lot of discussions with Ireland; for example, in fact, the former chief science advisor of Ireland is on the review team.
We’ve had a lot to do with Israel, who have been very helpful.
“Singapore, very helpful; Denmark, very helpful and I hope to be in Finland talking to the Finish in a few weeks’ time.
“So this whole advanced economy group has proven to be a key group in looking for ideas that are responded to not just in the announcement today, but the theme of work the Cabinets released today and the work that we’re instructed to continue with.”
The Prime Minister confirmed that the Small Advanced Economies group, particularly Ireland, had been influential in the science decisions.
But their influence goes beyond the science reforms.
The proposal to set up a foreign investment agency, Invest New Zealand, is modelled on Ireland’s IDA agency, which promotes and assists foreign investment in Ireland.
The Prime Minister is a fan.
“I think I would look at other 5 million people, countries, other small advanced economies and say, and you ask the question, why are they fundamentally wealthier than New Zealand because it doesn’t make sense that they could or should be.
“You have to come back to the core elements in the core foundations of why they’ve been able to drive greater levels of economic productivity.”
However, the Irish model is significantly different from what he proposed yesterday.
Essentially, all the Government is proposing is to have an agency go out and seek investment and then offer a “concierge” service to help the foreign investors navigate through the various New Zealand bureaucracies they will encounter.
Ireland couples its foreign investment offer with much lower company tax rates and a much more liberal foreign investment approval regime.
That has been tightened up this year to require investors to seek approval for investment in critical infrastructure, technology and media, but otherwise, they are free to invest.
That is not the case here, where the investors who come in through the Invest New Zealand service must show that their investment will benefit New Zealand through a series of tests.Last October, ACT leader and Associate Finance Minister David Seymour proposed reforming the overseas investment legislation.
“The new starting point is that investment can proceed unless there is an identified risk to New Zealand’s interests,” he said.
“This process will be guided by a government policy statement.
“These changes are designed to overcome New Zealand’s position as the most restrictive out of the developed countries we compare ourselves to.”
He promised the new legislation would be in place by the end of this year.
But POLITIK understands that there is no agreement within the coalition about how to proceed, that New Zealand First opposes Seymour’s desire for a blanket liberalisation and would only support targeted liberalisations.
When asked about the situation last night, NZ First Leader, Winston Peters, had only a terse response.
“These things are all under consideration,” is all he would say.
Asked specifically if the coalition partners were in sync on reforming the legislation, Luxon would only say, “We are a coalition government; we have good conversations inside, but I can tell you all of us are very much in sync about growing New Zealand and attracting more investment.“
That didn’t answer the question but raised another one, which is why, given the importance he is attaching to attracting foreign investment, the Prime Minister has not stepped in and brokered a settlement between Seymour and Peters.
The reality is that neither the science reforms nor the half-done foreign investment proposal will give any immediate boost to the economy.
Luxon indirectly conceded that when he nominated two existing sectors of the economy as those which could increase growth this year.
“I think we can power up our tourism, and I think we can turn on international students really, really quickly,” he said.
He also spoke enthusiastically about the potential of the mining sector.
“Mining needs to play a much bigger role in New Zealand’s economy,” he said.
He said that there were big economic opportunities in regions like Taranaki and the West Coast.
“And absolutely importantly, the minerals sector will be critical, critical for our climate transition.
“EVs solar panels and datacentres aren’t made out of thin air; they use critical minerals.
“I want to see mining employ more Kiwis and power more profit for the economy. And I’m adamant we take further steps to make that a reality as well.”
Unlike the foreign investment situation, the Government has already passed legislation enabling mining with the Fast Track Approvals Act.
Already, there are reports of increased mining activity.
What that shows is that to get the economics right, you first have to get the politics right.
That means that though yesterday’s speech was the kind of aspirational rhetoric we have waited for over a year to hear from the Prime Minister— that rhetoric will now have to be matched by some butt-kicking politics to deliver what is being promised.
