Tuesday, 1 October 2019

Are we serious?

Every couple of years the OECD updates its Going For Growth reports, which are meant to be its best policy advice to governments on how to raise living standards. Or at least that's how it used to be: the focus up to 2017 was exclusively on productivity and incomes, but in 2017 it widened to include social inclusiveness and, in this latest iteration, brought in environmental sustainability as well. Worthy causes, to be sure, and there are of course interlinkages with productivity and incomes, but I'd have preferred if they'd kept Going For Growth as a productivity instruction manual. Especially for its New Zealand readership, given that our low productivity performance is something we self-evidently could use a bit of focused help with.

Not, I suspect, that Going For Growth has much of a New Zealand readership. Neither the 2017 version ('Take advice? Moi?') nor this latest one appears to have got much mainstream or social media attention. So if you're not one of the select policy tragics who've had a look, here are the OECD's five priorities for New Zealand (if this whets your appetite here's the full country report):
  1. Reduce barriers to FDI [foreign direct investment] and trade and to competition in network sectors. Non-transparent screening, barriers to trade facilitation and competition in network sectors deter investment and hinder the competitiveness of downstream firms [in this bit they mean the 'barriers' to extend to 'barriers to competition']
  2. Improve housing policies. Restrictive land-use policies reduce housing supply responsiveness to demand, accentuating price increases when demand rises
  3. Reduce child poverty. Child poverty is higher than in the top performing countries. It has adverse effects on children’s health and development.
  4. Reduce educational underachievement among specific groups. Students from Māori, Pasifika and vulnerable socio-economic backgrounds have much poorer education outcomes than others
  5. Raise effectiveness of R&D support. Relatively low public funding of business R&D contributes to below average R&D intensity
Four of these were on the 2017 priority list, too (number 3 is a new one reflecting the new focus on social inclusiveness), and the implementation record since 2017 has been distinctly patchy. There was no action taken at all on number 1, for example. Number 2 continues to be a national scandal, and I see in today's DomPost that it's not just Auckland, either: "Wellington City has consented fewer buildings this year, its waiting list for social housing has spiked sharply, and its rental crisis is on par with Auckland's". The only achievement the OECD records on number 4 is the Sir Humphrey Appleby "appointment of a taskforce". Number 5 is the one recommendation where there has been anything like a respectable response: the current government has, for example, run with the recommendation to "make the tax credit refundable so that firms that are not yet profitable can benefit".

It's hard to see why we haven't followed up what looks like a reasonably uncontroversial list of targets and tactics (although the anti-trade nutters may jib at #1). They're almost certainly not enough to make huge inroads into our productivity problems, but they'd be a good start, and a couple of them (#3 and #4 in particular) would be worth doing in their own right, even if they didn't have spillover productivity effects on the talents of our workforce.

There is one possible explanation, albeit a depressing one. In the economics trade we call it "revealed preference": you can figure out what people value from what they actually do.  It could well be that successive central and local governments haven't put the priority they claimed on higher living standards. When it's come to having the national incomes to pay for modern healthcare, or rationing the expensive drugs, they've preferred rationing. When it's come to a choice between wealthy homeowners having an unobstructed view of a volcano, and poor families with young children sleeping in cars, they've been with the homeowners.

It would be nice of the OECD's 2021 scorecard showed a better rise to our livings standards challenge. But I won't be holding my breath.

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