Friday, 24 March 2017

Take advice? Moi?

Most years - they skipped 2016 - the OECD comes out with one of its Going For Growth reports. They're a big thing for the OECD: its Director General says that "Going for Growth is the OECD’s flagship publication on structural policies. Its purpose is to help policymakers set reform agendas for the wellbeing of their citizens and to achieve strong, sustainable, balanced and inclusive growth".

Don't know why they bother, frankly, if New Zealand's reactions are typical. We give the reports close to zero coverage in the media, and our governments sleepwalk on, taking too little heed of the OECD's advice. From time to time we do some patchwork or catch-up improvements, but rarely if ever deal to the issues properly. All of the recommendations in the 2013 version, for example, were still there in the 2015 one (if you want to see previous years, they're here).

And that's a real shame, because if you're in New Zealand's position, where we seem to be doing quite a lot of good things but getting little payoff by way of faster productivity growth, you'd think that we would be lapping up informed ideas on how to get more traction.

So, what are they saying we should do?

The OECD's got two approaches. One is a "what everyone should do" piece, which you can read here, and the other is a country-specific piece, which for New Zealand is here.

At the "everyone" level, the OECD has a long shopping list, some of which don't apply a lot to us, because - while we've still things left undone - we did a pretty good reform job in the Eighties and Nineties. But some do, and I was especially interested in their recommendations on infrastructure. As I've mentioned before, we're currently chronically unable to roll out enough infrastructure in good time: the OECD says that

The most direct contribution of policy to growth of the whole-economy capital stock comes from public investment and recent empirical work suggests a large positive effect on productivity. Solving infrastructure bottlenecks, such as those in transport, can also contribute to stronger labour utilisation, through enhanced labour mobility, and to better environment protection, through lower carbon emissions. Considering the post-crisis fall of government investment as a share of GDP...and the current macroeconomic context, enhancing core public capital, and in particular the capacity and regulation of infrastructure, is a priority for both member and non-member countries.

Everything we do (and we're not alone in this) is a dollar short and at least a decade late, and I have a strong suspicion that it's one of the bigger reasons for our relatively poor productivity performance by international standards (have a look here). With financing costs at historically low levels, we ought to be getting on with it in any event, but it would be nice to think that the OECD's advice will give a further rark up to the government's Budget plans on the infrastructure spend.

For New Zealand, the shopping list is:

  • Reduce barriers to FDI [foreign direct investment] and trade and to competition in network sectors
  • Improve housing policies [a new one added since the 2015 report, and no surprise given what's happened to house prices]
  • Reduce educational underachievement among specific groups
  • Improve health sector efficiency and outcomes among specific groups
  • Raise effectiveness of R&D support

There are detailed policy recommendations under each of the headings. On housing, for example, the report says by way of preface that "Reducing the scope for vested interests to thwart land rezoning and development that is in the public interest would result in greater agglomeration economies and housing affordability, which would disproportionately benefit lower-income households", and it says we should

Implement the Productivity Commission’s recommendations on improving urban planning, including: adopting different regulatory approaches for the natural and built environments; making clearer government’s priorities concerning land use regulation and infrastructure provision; making the planning system more responsive in providing key infrastructure; adopting a more restrained approach to land regulation; strengthening local and central government emphasis on rigorous analysis of policy options and planning proposals; implementing pricing to reduce urban road congestion; and diversifying urban infrastructure funding sources.

That's a pretty good summary of the choke points - each of us might emphasise one rather than another, but they're all there - and of what to do to relieve them, and the same goes for their other detailed recommendations.

But our track record on responding quickly and fully is, sadly, poor. Oscar Wilde said he could resist anything except temptation: New Zealand governments can take anything except advice.

Postscript (March 24): Michael Reddell has also written about this latest Going for Growth report in his post, 'What does the OECD really have to offer us?'. As his title suggests, he's less enthused about the OECD's ideas. And that's okay: opinions make markets.

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