A lesson for our Govt: Inviting the next Sergey Brin to build the next Google

When it comes to something like the budget, everyone has an opinion. Unless one is deeply familiar with the nuts and bolts of the budgeting process, it is not easy to understand what the trade-offs were and why the calls that were made were made.

It is also the case that for us average punters, the numbers are pretty much meaningless. A billion here; a billion there, what does it all mean? We don’t know if this is an increase or a decrease from the current baseline; what fraction of crown revenue does this represent and what does the increase in spending in one area mean for spending in another?

It is also the case that the budgeting process for a small open economy in the middle of the South Pacific is not easy since we are seldom the masters of our own destiny. A lot will depend on what happens to our trade with China or the US, which in turn depends on how those economies rebound from the pandemic.

So, we pontificate on the basis of our own perspective; so we talk up those things that we like and disdain those that we do not.

But having said that and a with a due mea culpa for my own pontificating, here are few thoughts that come to mind.

A budget needs to be understood as an aspirational document that sets out our priorities and goals.

And in that case surely there is something wrong with a budget that starts out with the explicit purpose of correcting three decade old wrongs. This does not mean that those old inequities should not be addressed, but my fear is that the authors of the current budget are not only worrying about three decade old wrongs but trying to address them with three decade old thinking.

Three decades ago, there was no Iphone or Ipad; “googling” had not become a verb; China was still a relatively poor country; the massive off-shoring of jobs was still to come; Amazon was still a river in South America and social media did not exist.

Let me give an example. The New Zealand government talks a lot about climate change. General Motors has just announced that by 2035 (on in fourteen years’ time) they will only produce electric vehicles. It is likely that most other car makers will follow suit.

Let us suppose that in short order all Kiwis start driving electric cars. Can our current electric grid support this? If not, then is this not something that should be a priority?

The Finance Minister has made a big deal of saying that crown debt which was supposed to exceed 50% in about three years’ time will be held down to a lower proportion. Why?

Japan’s debt is more than 200 percent of its GDP. There are other countries like Greece with debt  standing at more than 100% of GDP.

If it was fine to effectively quadruple debt in 3-4 years from its pre-pandemic level, then why the sudden pusillanimity?

Having run up that debt, why not invest in large infrastructure projects and industries with large value added?

Currently two of our biggest export industries, tourism and higher education, are on their knees.

What is the thinking here? That one fine day we will open up our borders and things will go right back to where they were?

This is highly unlikely to happen. For one thing many airlines have re-routed their existing flights so that if and when we open up there will be far fewer options and consequently higher prices.

The government seems to believe that New Zealand will become this Covid-free haven where everyone, tourists, workers and students will want to come.

This seems far-fetched. By the end of 2021, most countries in the world will be Covid-free. If I am skilled worker or student located overseas and I am looking to emigrate, will New Zealand be a priority for me?

I would be thinking: am I better off emigrating to a small country with a small market in the middle of the South Pacific? What if I get stuck there without a job when the next pandemic hits? Or am I better off looking at some of the bigger countries and markets in North America or Western Europe, which offer greater mobility and job prospects?

Already there is evidence that international students are going away from Australia to the UK. The same is most likely true, and probably to a greater extent, for New Zealand.

In per capita GDP terms, New Zealand is already one of the poorer of the OECD countries with a per capita GDP that is close to the OECD average and comparable to South Korea and the Czech Republic.

Can New Zealand sustain a first world lifestyle on the basis of primary products exports and without skilled migrants?

Yes, the Chinese economy is growing rapidly. But unless China manages to establish democracy it will never achieve the economic vibrancy of the US or Western Europe. Why? Simply because currently the best minds of the world migrate to those latter countries with new ideas and new optimism. The vast bulk of Silicon Valley start-ups were started by migrants to the US. None of these people will consider heading to China. Japan, once an enterprising pioneer, has been in decline for a long time now.

With increasing global connectivity, a stable, non-corrupt and crime-free society, why should New Zealand not be able to attract some of this talent particularly in the service sector? But governments cannot figure out who the next Sergey Brin will be; what they can could do is the make it easy for talented people to come to the country and leave them alone to build the next Google.

It is not clear that the current government understands these challenges or how to deal with them.

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