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Dr Oliver Hartwich

We Don’t Know How Unlucky We Are In NZ

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In the lead-up to the election, Time magazine admired our “calmer democracy.” The World Health Organisation once again praised our Covid-19 management. And in its latest issue, The Economist revealed that our Prime Minister is now the global leader with the highest approval ratings.

If the world had a choice, its people would either migrate to New Zealand or at least swap their political leaders for Jacinda Ardern. Kiwis went from “world-famous in New Zealand” to simply “world-famous,” and we love it.

But reports of New Zealand’s stellar performance are greatly exaggerated.

What Kiwis need is an honest conversation with themselves. Frankly, if there is one thing New Zealanders are pathologically unable to do, it is an honest national conversation. Not even close.

Our small population size has fostered a social conformity that makes it hard to speak one’s mind. With two-degrees-of-separation, you cannot afford to burn bridges. And given our latent inferiority complex, we don’t publicly admit to our problems.

The international media’s positive obsession with New Zealand plays into all these issues. Most of us no longer dare question if it is grounded in reality and anyone who does is called unpatriotic and petty.

So, at the risk of being torn to pieces, let me do it anyway.

But, in a typical New Zealand way, let me begin with a positive: I love this country so much that I recently applied to become a citizen. I did not have to. Being a permanent resident grants me every right to live and work here indefinitely.

Having spent eight years in New Zealand, my commitment to the country is exactly why I am so critical of it now. And, just so we understand each other, I do not want New Zealand to be any other country. I only want it to be the best it can be. Right now, it is not.

New Zealand could be where families can easily afford their homes. Overlaid on a map of Europe, it fits between Denmark and Southern France and is almost the geographical size of Italy but with less than a tenth of its population. If there is anything New Zealand has in abundance, it is space.

Despite this, our housing market is the most expensive in the developed world. For each house, we typically pay about two-thirds to three-quarters of the price, not for the bricks and mortar but for land.

As a result, house prices are rising so fast that an abode in a good Wellington or Auckland suburb now “earns” more yearly income than any teacher, nurse or policeman. To add insult to injury, we say the housing market is “doing well” even as it becomes more unaffordable. If that were happening anywhere else, we would call that inflation.

Commentators keep excusing the core failure to build enough houses. They say it is just the Kiwi psyche, or that property is our traditional retirement nest egg. Actually, it is just a policy failure. Encumbered by byzantine planning laws, aggravated by a lack of fiscal incentives for councils and hindered by building regulations, New Zealand has simply stopped building enough to keep up with demand.

The social consequences of this policy disaster are visible everywhere: from households drowning in debt to young adults delaying starting a family and unable to chase better opportunities. On top of all that, the average poor quality of housing makes a complete mockery of the high prices.

Another policy disaster is the 30-year erosion of New Zealand’s once world-leading education system, reformed and dismantled under various governments.

In no other country has the pendulum swung so far from traditional school knowledge towards more esoteric “21st century skills.” Today, while nearly every school leaver gets a certificate, many of them – about two fifths – are functionally illiterate and innumerate.

The dumbing down of our school system is a scandal. And while those responsible probably had the best intentions, the bigger scandal is that they now try to explain away this poor performance.

It frankly baffles me that when someone points out our poor education results, they are routinely criticised of elitism, Eurocentrism or other such nonsense. The truth is that teaching a broad, knowledge-rich and stimulating education would help precisely those children without elite or privileged backgrounds.

The education system’s pursuit of noble and progressive goals has tragically sacrificed the future of Kiwi children. In doing so, it is not just cementing but widening ethnic and class divides.

Housing and education are just the most obvious policy failures, and both main parties must accept responsibility. But the hidden policy disasters require more of an economically-trained mind to see.

New Zealand’s negative international investment position is key here. This means we collectively owe the world a lot more than the world owes us. We also do not produce goods very efficiently and must work much longer hours to make up for it.

Many other failings in this “rock star economy” have been hidden for some time. Actually, for the past quarter century all we ever did was welcome migrants, increase house prices, borrow against them and stay longer at the office.

Even before Covid-19, the wheels were coming off this strange business model. Unfortunately, the Prime Minister’s stellar PR reinvigorated New Zealand’s belief in its own spin – and now the world has fallen for it, too.

Following this path of least resistance will not make our housing market more affordable, make schools teach proper qualifications or help boost productivity.

Our policy sclerosis threatens to turn New Zealand into a highly indebted, unproductive and uneducated backwater. It will become a country bereft of good schools where Kiwis struggle with a soft dollar that buys ever-more-expensive-but-poorly-built housing. The overall standard of living is bound to slip.

No international commentator will write about that because it does not fit their narrative and, in truth, international media organisations know vanishingly little about New Zealand.

But we do – and we must demand better from our political class.

It feels nice to be admired by the world. Yet I would rather live in a country that has honest conversations with itself. Conversations about turning around decades of underperformance to once again deliver superb living standards to all Kiwis.

First published HERE.