Assuming that both ACT and NZ First return to Parliament this Friday when the official election results are declared, National will have to tread between two very different views of how to grow New Zealand’s economy.
That it needs growing is evident in a New Zealand Initiative report published yesterday on the organisation’s visit to Ireland earlier in the year.
The group that went included a diverse range of business leaders.
But in the report, one set of figures stands out.
In 1990, according to the World Bank, New Zealand had a GDP per head of $14836, just slightly ahead of Ireland with $13744.
By 2022, Ireland had jumped to $US126,905 while New Zealand made it to $US51,967.
It’s little wonder Ireland is called a “Celtic Tiger”; a reference to its similar performance to that of the Southeast Asian “Tiger” economies like Singapore, which grew from $US 11,861 GDP per head in 1990 to $US82,808 last year.
But though the delegation included bottom-line focussed executives from companies like Toyota, the Bank of New Zealand, Fonterra, Mainfreight, Foodstuffs or Precinct Properties, a surprising conclusion was that intangibles mattered.
The executive director of the Initiative, Oliver Hartwich, told POLITIK that in all three of the countries (Switzerland, Denmark, Ireland) visited by Initiative delegations since 2017, one thing stood out.
“There was one common factor that all three countries had, though they were very different in many ways because they had different success factors and different policies,” said Hartwich.
“But the thing that really hit the delegations in all three countries was that it didn’t matter who you talk to, whether it was a trade unionist or politician or business leader or an academic or whoever, they all had a certain national narrative that was the same regardless of who you talked to.”
What the delegation found in Ireland was a consensus on the benefits of excellent education, low corporate taxation and welcoming foreign investment.
There is some consensus here among the parties that will form the next government, particularly on education, where all three parties want to see a focus on core literacy and numeracy and an encouragement of excellence in schools.
But they disagree on tax and foreign investment.
Ireland has lowered its corporate tax rate to 12.5 per cent, but National would maintain the corporate tax rate here at 28 per cent. In comparison, New Zealand First would reduce that to 25 per cent for small and medium-sized businesses, and ACT would not change it at present because of the current fiscal situation.
There is an even bigger difference in foreign investment, which New Zealand First generally opposes.
Its vision of stimulating growth sees government investment play a major role in establihsing new industries, particularly in provincial New Zealand through a revamped prvoncial growth fund.
NZ First would invest in domestic manufacturing companies and industries co-investing with private sector investors.
ACT, on the other hand, would lower barriers to overseas investment from OECD countries.
Hartwich said one of the most notable differences between Ireland and New Zealand was over education.
Ireland has a programme which delivers intensive assistance and money to schools in deprived areas.
Since 2006, Ireland’s main tool for this has been a programme called DEIS, standing for Delivering Equality of Opportunity In Schools.
The Irish word “deis” also means “opportunity”.
DEIS aims to reduce inequality in schools in struggling communities.
It currently serves 240,000 students across 1,200 schools, with a budget of €180 million for 2023.
DEIS’s core focus is educational fairness. I
It strives to make every child feel valued and supported in reaching their full potential. It focuses on five main goals:
- Ensuring an accurate assessment framework.
- Enhanced learning experience and outcomes.
- Teacher and leadership skill-building.
- Encouraging collaboration between agencies.
- Establishing research information evaluation and feedback.
“We had four speakers in the from the (Irish) Education Department, and they spoke very plain English,” Hartwich said.
“There was none of this kind of or more sociological talk that you would get from our education ministry.
“It was really straightforward; we want kids to read, we want kids to write, and we are really measuring well.”
Foreign investment is the engine that drives Ireland’s growth.
There are now close to 1,800 multinational companies employing over 300,000 people directly.
Exporting multinational companies spend over €30 billion within the economy on payroll and materials and services procured from Irish companies.
The Initiative report notes that since 2012, Ireland has increased its foreign investment from 170 per cent of GDP to 266 per cent today.
Over the same period, New Zealand’s figure fell from 40.6 to 39.0 per cent.
Hartwich said that the difference was the Industrial Development Authority (IDA), which is the agency responsible for attracting and retaining inward foreign direct investment.
The IDA acts as a sort of concierge for foreign investment, easing the way through everything from planning restrictions to helping overseas executives settle in.
“An organisation like IDA does not even exist in New Zealand,” the report said.
“There is not even a remote equivalent.
“Many international investors in New Zealand face the Overseas Investment Office (OIO), of course.
“But rather than helping these investors set foot in New Zealand, the OIO’s task is to ensure compliance with the restrictive requirements of the Overseas Investment Act.
“Where Ireland rolls out the red carpet to international investors, the only thing red these investors see in New Zealand is a stop sign.”
Hartwich believes there is not just a consensus within Ireland on how to go forward but a consensus that welcomes the role of business in the country.
He believes it has its roots in the country’s tragic history.
“There must have been a moment in the 70s or 80s when Ireland almost collectively decided we don’t want to be poor any longer,” he said.
“Until then, Ireland was the poorhouse of Europe for centuries.
“It was the country that lost massive amounts of people from migration.
“And if you were young and ambitious, you wouldn’t stay apart from all the violence that was happening in the Republic of Northern Ireland especially.
“So at some stage, everybody seems to have switched where they said, actually, we want to break out of this; we can do better.”
“And part of that was the education.
“Everybody in Ireland says they’ve got this passion for education.
“They always had a passion for education, and previously, it was probably something that qualified you to leave.
“But now the quest is used to build up one country.
“The other thing was to aggressively make that call to go for really low tax rates, and initially, that had a massive impact. “
Hartwich said that even the political left in Ireland now defends low taxes.
“The other thing that was very interesting and no one had any problems with was foreign direct investment.
“I quote one Minister, we met Simon Coveney who said he could not travel around Ireland, not even to the smallest village, without being asked. Minister, what can you do?
“Can you please get us some international investors who would like to have something here?
“That wouldn’t happen here.
“And so it was probably just an experiment that worked, and then over time turned people around towards support for more business-friendly policies.”
The Initiative are likely to find a more welcoming reception in the Beehive once Christopher Luxon and his government are installed there.
But beyond their policies on education and, possibly, to a limited extent, foreign investment, the next National government will be a cautious one.
Hartwick might need to keep finding small countries to take delegation to so he can bring back more arguments to try and persuade the politicians that they will have to move the status quo if they want to move the GDP per head statistics.