PUBLIC SERVICE BLOAT
Crime is now the number two issue this election according to voters. ACT was onto the issue before it was popular, because it heard from those affected at close quarters. The Party’s policies from last year would remove the target of 30 per cent less prisoners, set up a fund for victims, and remove state funding of pre-sentencing reports. This year’s Alternative Budget allowed serious money for increased youth and adult imprisonment.
However the number one issue is now the cost of living. People up and down the country are not just having trouble making ends meet, they are furious. They’ve done the right thing, they’re careful, but there is too much month left at the end of the money.
Part of the problem is the sheer recklessness of Grant Robertson, which we’ll talk about, but also the long term problem with productivity. People can’t afford the things they need because production in New Zealand doesn’t equal the first world consumption people would like to enjoy here.
That last point is borne out in the Current Account Deficit. At 8.1 per cent of GDP, last quarter had the second equal worst CAD since records began in 1988. The other two worst quarters were the two quarters immediately before the last quarter.
Some of that deficit is Government borrowing. $10 billion last year, $7 billion this year, $7.5 billion forecast for next year. COVID is over but the New Zealand Government’s books don’t look like it. Yet, the economy has gone into recession despite the massive injection of borrowed Government cash. Robertson really is running out of options.
As David Seymour put to Grant Robertson in Select Committee last week, the amount of money spent by the Government is up 25 per cent. That’s per person, adjusted for inflation (which has been considerable). What measurable improvements has Grant demanded from the public service for this 25 per cent increase in spending?
Astonishingly he could not give a single example. “Well,” he could have said, “the streets are safer.” Or maybe something about reduced hospital waiting lists or better roads or more kids learning more stuff at school, or greater access to medicines and mental health.
That the Government is spending 25 per cent more and can’t say what it’s delivering should have been the biggest media story of the week. For familiar reasons it wasn’t, that’s why we have Free Press.
The same week the New Zealand Initiative released another excellent Bryce Wilkinson report Public Service Bloat. Among other things it points out that "The number of public servants… was 28% higher than in June 2017. The economy-wide employment increase was 12%. This 28% rise even understates the increase in the employment of people in public service activities. Central government spending on consultants was $1.25 billion in 2022. To put that in perspective, core Crown spending on personnel in 2021-22 was just under $10 billion."
It goes on to make the same points made above, in greater detail. It compares the social outcomes in New Zealand with those in similar countries. Taxpayers are not getting the outcomes for the spending, which is why Grant Robertson couldn’t answer David Seymour’s question.
Another interesting piece of data last week came from former Reserve Bank economist and current blogging curmudgeon Michael Reddell. His basic point is that New Zealand is exhibiting the downside of an island nation. Busy with itself and not engaging competitively with the world. He says:
"Non-tradables real per capita output has still been running well above trend, consistent with an overheated economy (high inflation, large current account deficit), as we'd seen on a smaller scale in the mid 00s. But the proxy for the real per capita output of the tradables sector hasn't yet recovered much at all, and is only about 10 per cent higher than it was 32 years ago… …It is an increasingly inward-focused economy, where policy (such as it is) is only tending to reinforce such developments. It doesn't have the feel of the foundations for a prosperous and highly productive economy for New Zealanders - this generations, or our children and grandchildren."
In other words, too much money wasted by Government, spent on houses, and tied up in compliance activity that doesn’t actually produce any goods or services to sell. No country can consume more than it produces. Not sustainably, anyway.
That’s why ACT’s agenda of shrinking Government tax, borrowing, spending, and regulating is essential for future generations. The alternative is the continuing inward focus that grew under Helen Clark, steadied under John Key, then took off again under Jacinda Ardern.
ACT is campaigning for a New Zealand where it’s safe to go to the shop, and you can afford what you need when you get there. That will require real change, just trimming the sails won’t be enough.