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By Friday, 14 June 2024

Why mining is NZ’s last chance to avoid Third World status - Matthew Hooton

THREE KEY FACTS:

  • New Zealand’s gross debt is set to increase by $212 billion between 2008 and 2028.
  • Fifty years ago, Norway decided to assure the sustainability of its welfare state and low taxes by drilling for oil.
  • Now, the Norwegian government’s share in state-owned oil giant Equinor is worth around five times the commercial entities and shares owned by the New Zealand Government.

Matthew Hooton has over 30 years of experience in political and corporate communications and strategy for clients in Australasia, Asia, Europe and North America, including the National and Act Parties and themayor of Auckland.

OPINION

God help us, but NZ First’s Shane Jones and Act’s Simon Court may be our last hope.

It’s irrefutable New Zealand has put itself on a path to bankruptcy since 2008.

After a prudent 20 years from 1988 to 2008 of New Zealand paying back our gross debt – the amount we need to service – Sir Bill English let it balloon by $56b over his eight Budgets, an average of $7b a year.

Against GDP, it jumped from 23 to 32 per cent.

An offshore gas platform operated by Statoil, now Equinor, in the North Sea, 140km from Bergen, Norway. Photo / Kristian Helgesen
An offshore gas platform operated by Statoil, now Equinor, in the North Sea, 140km from Bergen, Norway. Photo / Kristian Helgesen

Grant Robertson, of course, was worse. After paying off $4b in 2018/19, he borrowed $90b over his next five Budgets. Across his six Budgets, he borrowed an average of $14b a year, taking gross debt to 44 per cent of GDP.

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Nicola Willis plans to trump him. Despite her modest spending cuts, she plans to borrow another $69b over her first four Budgets, a cool $17b a year – and that assumes heroic GDP forecasts and implausible limits on new spending.

Even if absolutely everything goes to plan, Willis will take gross debt above 48 per cent of GDP by 2028.

For an alternative view: The fast-track bill puts Aotearoa up for sale - Dr Russel Norman

Since 2008, these three fiscal wizards will have increased gross debt by $212b. As a percentage of GDP, it’ll be up three-fold. There is no credible projection that doesn’t have it continuing to grow indefinitely after 2030.

To be fair, as much blame lies with voters. Whenever the political right waves a $20-a-week tax cut before median voters, they take it. Yet whenever the left promises another handout or more cash for health and education, they take that too.

Sir John Key and Christopher Luxon’s National has promised and delivered both at the same time.

Prime Minister Christopher Luxon. Photo / Mark Mitchell
Prime Minister Christopher Luxon. Photo / Mark Mitchell

I was among the first but certainly not the last to describe this as voters wanting Singaporean levels of taxation but Scandinavian levels of handouts. It can’t add up, and hasn’t for the last 16 years.

New Zealand voters aren’t any keener on measures to boost productivity.

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If there really is a direct link between tertiary education and productivity, we remain below the OECD average, with just 40 per cent of Kiwis aged 25-34 having a tertiary qualification.

For advanced education, we’re among the worst in the developed world, with just 6 per cent having a post-graduate qualification, less than half the OECD average of 16 per cent.

If ordinary Kiwis don’t want to learn more, then vested interests in the business community and unions also adamantly oppose the sort of microeconomic reform to boost productivity sometimes suggested by the political right.

When Act was last in Government with National, Rodney Hide forced Key and English to agree to Don Brash – wearing his economist rather than Ōrewa-speech hat – to lead a working group on closing the income gap with Australia by 2025. That would require us achieving faster productivity growth than across the Tasman.

Economist Michael Reddell did much of the economics for the group, called the 2025 Taskforce. I helped with the media relations for its first report, which outlined 35 recommendations and was ready just a year after the 2008 election.

When Key and English received confidential courtesy copies of the report ahead of its release, the Beehive immediately leaked the recommendations they thought would be most unpopular, and trashed the whole exercise to TV political editors.

That was the end of that. Key’s Government was quite happy just winning elections by borrowing rather than boosting the economy and New Zealanders’ living standards.

The debt data indicates the Dame Jacinda Ardern and Luxon Governments are the same.

Here’s where Jones and Court fit in.

NZ First’s Shane Jones. Photo / Mark Mitchell
NZ First’s Shane Jones. Photo / Mark Mitchell

Fifty years ago, Norway decided to assure the sustainability of its generous welfare state and low taxes by drilling for oil.

It established a 100 per cent state-owned oil company, Statoil, with the Government also owning 50 per cent of every production licence.

Profits went into Norway’s equivalent of our Super Fund.

With external capital, Statoil, now called Equinor, is worth around $140b, employing 23,000 people in 30 countries.

The Norwegian Government’s 70 per cent share is worth $100b, five times the commercial entities and shares owned by the New Zealand Government. Yet Norway and New Zealand’s populations are almost the same.

Despite that, Equinor has become Europe’s biggest energy provider, wealthy and powerful enough to be leading that continent’s transition to renewable energy.

Norway’s pension fund is even more impressive, now with $2.7 trillion under management. Our Super Fund is worth less than 3 per cent of that. Even throwing in every last KiwiSaver account, New Zealand has saved just 6 per cent as much for our retirements as Norway, despite near-identical populations.

Given climate change, some New Zealanders are squeamish about drilling for oil.

Yet Norway achieved economic security producing just 2 per cent of the world’s annual oil. With the US, Russia, Saudi Arabia, Canada, Iraq and China and the four other top-10 producers continuing to increase production, Norway’s contribution to global warming is minuscule and falling.

In any case, New Zealand’s main target isn’t oil but natural gas. To the extent natural gas replaces New Zealand burning coal – imports of which soared under the Ardern-Hipkins regime – extracting and using gas lowers global warming.

If New Zealanders are squeamish even about gas, what possible environmental argument is there against us searching for and extracting whatever undiscovered deposits of copper, chromium, molybdenum, lithium, graphite, titanium, bauxite, iron, nickel and cobalt may lie beneath our land and sea? All are critical to support global moves to renewable energy.

For that matter, what possible climate arguments are there against looking for and mining any uranium or remaining gold deposits? What if we found diamonds?

Act might prefer the private sector profiting most from expanding mining but NZ First’s very name demands the Norwegian model. National would go either way, depending on the polls.

But if New Zealanders won’t vote for serious spending cuts or tax increases, study harder or accept Brash-style microeconomic reform, then there’s really nothing left except finding and extracting the wealth beneath us, putting the money into the Super Fund, and then tidying up after ourselves, by rehabilitating and reclaiming the land and seabed.

And, in case anyone thinks there’s another alternative, it’s not just a succession of debt-addicted Finance Ministers who need to get real. Tourism, film subsidies, gaming and whatever else Greenpeace and the Grey Lynn liberal establishment suggests instead can’t possibly compete with the value lying under our sea and land.

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