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Growth at any price foolish: Rod Oram

The Key Government’s policies are primitive and shameless, says Rod Oram in his Sunday Star-Times column.

Rod Oram portrait

“Business in New Zealand should be alarmed”, says Rod Oram in critiquing the Key government’s growth and environmental policies as “primitive and shameless.”

THE KEY Government’s economic strategy is delivering two deeply damaging outcomes – weak growth and environmental degradation.

Blaming the global financial crisis for slowing growth and rising unemployment, the Government pushes its strategy ever harder, blind to the realities.

The truth is our exports are growing more slowly than our major markets overseas; and the global financial system is stable and offering very low interest rates. So our problems are here, not out there. This is an economy deeply constrained by physical and financial limits. Our households, still among the most indebted in the OECD, are rightly saving more and consuming less. All our major exporters can grow volume only slowly, and value barely at all.

Two charts in the Reserve Bank’s current forecasts tell the story. Potential growth, the rate at which the economy can grow without causing inflation, is bumping along barely above 1 per cent: and business investment is seriously anaemic.

The government believes the constraints are physical. Its solution is to drive hard to produce more of everything at lower cost – education, skills training, resource consents, water, milk, minerals and oil to name a few.

But you can only push efficiency so far. At some point you begin to undermine the very activity you are trying to support; and inevitably you run into physical constraints.

For example, the Government has set a goal of trebling the value of food and beverage exports by 2025. But you won’t find a single thoughtful farmer or industry leader who believes that’s achievable. Perhaps a doubling might be. But that would mean at least a 75 per cent increase in the number of cows, which would do massive damage to the environment.

The Government reckons it knows better. Thanks to its disdain for environmental disciplines, it is weakening them fast so we can farm, build, and extract more and more regardless of the cost. For example, the Government has just admitted, thanks to pressure from the Greens, that it has dropped its once-every-five-years State of the Environment Report

Over the years, the OECD has strongly criticised the reports for being riddled with incomplete and inconsistent data. But they were the best measures we had. They told a dismal picture of declining water quality and other environmental degradation.

The Government’s solution is not to fix the problems or even the reporting but to cover them up. It is replacing the report with ad hoc, piecemeal “report cards”.

Likewise it is massively cutting the number of water quality measurement stations in our rivers and it is planning to introduce cost-benefit analysis into RMA consents for nutrient loading of rivers. Farmers will be able to degrade the rivers if they can show the “economic” benefit.

But that’s a minor deceit compared with the outrageous one the Government is trying on climate change. It says New Zealand would not make a binding commitment to greenhouse gas reductions under the next phase of the Kyoto protocol. Instead, the Government will make a voluntary one under the United Nations’ climate change convention.

The Government argues that Kyoto is dead so it makes more sense for us to align with countries outside the protocol – which happen to be heavy emitters with no governmental commitment to tackling climate change such as the US, Russia, Canada and Japan.

Everything about this new stand by our government is wrong and dangerous. First, NZ has a long history of playing a constructive role in the very hard work of building global legal frameworks on the likes of trade. In fact, the Key Government is promoting Tim Groser, the climate change negotiations minister, as next director-general of the World Trade Organisation. Ditching Kyoto makes a mockery of his already tenuous claim to the job.

Second, the Government argues that it is only refusing to join Kyoto’s second commitment period. It will remain a signatory to the protocol and broadly use the rules to make NZ’s non-binding commitment at the UN. It still expects to have a seat at the Kyoto negotiating table.

But the committed countries doing the heavy lifting in Kyoto, such as the EU members and Australia, won’t let shirkers like us benefit. This will be immensely damaging in practical and reputational terms for us, a country that sells itself on its environmental responsibility.

Third, the Government says it will come up sometime next year with a voluntary emissions reduction target for 2020. We are the only developed country without a concrete one. We are the only one to make its offer conditional on other countries acting. The Key Government has already shown its true agenda on this. In March 2011, it gazetted in parliament an emissions reduction target of 50 per cent from 1990 levels by 2050.

Yet the Government’s own review of the emissions trading scheme last year showed that on policies and ETS rules then in place, our emissions would be higher in 2050, not 50 per cent lower than 1990.

And the Government rolls shamelessly on. Since then, it has gutted the ETS (including formal reviews like last year’s) and is working on doing the same with the RMA, the Local Government Act and oceans regulation to ensure that sound environmental disciplines are no bar to low-value, damaging growth.

Business in New Zealand should be alarmed. The global economy is shifting dramatically to low-carbon, renewable energy, resource efficiency and the cornucopia of technology, products and services those inspire.

Thankfully, our best business leaders are worried, and are responding constructively.

Pure Advantage, the research group created to analyse the issues, has just delivered its latest report. Available at, it identifies substantial green growth opportunities in our existing sectors.

They know business has to lead because government is such a shambles. For example, to invest with confidence they need long-term targets and policies on climate change. At the last two elections, the Key Government promised alignment with Australia’s policies, an effective price on carbon and policy certainty.

But in recent weeks the government has reneged on all three. Is this the folly of an incompetent government? Or the agenda of an unprincipled one?

Increasingly the Key government is showing signs of both fallings.

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