Report rates NZ reforms a bare pass

By NZPA

Monday 16th December 2002

New Zealand's economic reforms have been given a bare pass mark by an Australian academic, who says New Zealanders' standard of living will slip further behind those in other developed countries without a change of attitude.

After reforms in the late 1980s and early 1990s, the economy expanded at a "respectable" average annual rate of 3.3 percent in the decade until 2002, Wolfgang Kasper says in a report card on the reforms.

Australia, by comparison, receives a "credit" score for more complete and consistent reforms yielding an average annual 4.1 per cent growth rate in the same period, he says in his analysis, commissioned by the Business Roundtable.

"The economy's continuing momentum in the face of an international slowdown owes much to actions taken by governments 10 to 15 years ago," he says.

"Nevertheless, its performance has not matched that of countries such as Ireland and Australia, which also implemented programmes of economic liberalisation."

Professor Kasper is emeritus professor of economics at the University of New South Wales and a senior fellow at the Centre for Independent Studies in Sydney.

Economic growth had been undermined by unstable and inconsistent policies, a failure to persist with efforts to increase economic freedom, a weak "constitutional attitude" and social welfare policies incompatible with fast growth, he said.

As the Government eyes average annual growth of 4 percent for the next 20 years to return New Zealand to the top half of the developed country wealth ladder, many observers doubt its policies will deliver such a long-term improvement in growth.

Prof Kasper said New Zealanders had a choice: They could aim for fast growth requiring continuing structural changes, personal motivation and effort, and a willingness to test new ideas. Or they could accept slow growth with protective government intervention and redistribution of wealth.

He dismissed the idea New Zealand was unduly handicapped by its size and location. He quoted research suggesting up to 85 percent of the difference in income between rich and poor countries was linked to differences in economic and political freedom.

Earlier reforms boosted New Zealand's ranking in economic freedom, but moves to reregulate the economy had since reduced the ranking, he said.

Prof Kasper cited changes to the electoral system, deregulation and reregulation of the labour market and accident insurance, changes to the Reserve Bank's policy targets agreement and a stop-start record on privatisation for creating uncertainty and deterring investment.

Business Roundtable executive director Roger Kerr said the report confirmed the benefits of improved policies took a long time to materialise. Equally, the costs of backward moves showed up with a considerable lag.

"Beyond the next few years, the economy's growth outlook is little better than 2 percent a year and is unlikely to improve unless the lessons of Wolfgang Kasper's report are heeded," he said.

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