Danyl McLauchlan: Betting the house - can the government lure foreign investment?
Nicola Willis is looking overseas for investments, while Chris Hipkins and Winston Peters rule each other out. Photos / Getty Images
Imagine a feisty little stream, sparkling among the ferns and bickering down the valley. No two moments in its flow are identical but the water always returns to the same turbulent-yet-familiar pattern: there are always little eddies and whirlpools at the same points in the bends. Then one day there’s a flood, the geography of the stream changes and different patterns emerge.
The stream is our politics – perhaps it should be murky rather than sparkling – and the flood was Covid: it delivered our first truly left-wing government since the Labour-Alliance coalition in 1999. Now we have our first truly right-wing government since the mid-1990s.
The flagship policies of its second Budget make this economic shift from the centre explicit: “reprioritising” billions of dollars from pay equity to tax cuts for business via Investment Boost, allowing businesses to accelerate the depreciation of their assets by taking a larger deduction in the year of purchase. It’s a direct transfer from labour to capital, justified in the name of economic growth.
But we don’t see much growth in the Treasury forecasts. Our per-capita GDP recession began in December 2022, and the economic and fiscal update released in the Budget sees us returning to pre-recession income levels in September of 2027. Five lost years.
The government is more optimistic. It believes that Investment Boost will interact with other pro-growth policies: RMA reform, the fast-track programme, the public-private partnerships around infrastructure and InvestNZ, the new government agency dedicated to pestering investors around the world into sinking some of their money down here.
Investment dream
It’s long been a pipe dream of New Zealand politicians – especially on the right – to follow the path of Ireland, Singapore, Poland even, and transform into a richer, higher-wage economy via foreign direct investment. But in all those years of talking about it, and establishing an economic development ministry then turning it into MBIE, the super-ministry, we forgot to do the actual work that made those model nations so successful. Instead, we gave Shane Jones a billion dollars a year and hoped something amazing would happen. This worked about as well as you’d expect. But now we have a policy stack making it easier and more desirable to deploy international capital into the country.
There’s a version of our future in which this is the perfect offering to the world at the perfect time. In an era of uncertainty, trade wars and great-power politics, what better place to build your new data centre or self-driving electric car factory than in a nation so insignificant we’re often missing from world maps? New Zealand will give you a tax incentive for that new semiconductor plant and suspend most of our environmental and building consent laws to help you get it built.
The money pours in; a service industry develops around the flourishing tech and manufacturing sectors; GDP soars and we all get rich. Nicola Willis becomes our first economic development minister to actually develop the economy.
Of course, there’s also a future in which Prime Minister Christopher Luxon pinballs around the globe but never closes any deals; Investment Boost merely helps existing New Zealand businesses buy new cars at the taxpayers’ expense; the most ambitious and talented graduates continue to flood the international departure lounges; and Treasury’s gloomy predictions come true: growth remains low.
National goes to the polls next year having overseen deterioration in nearly every economic and fiscal measure, and the nation decides between the coalition devils we know and the Labour-Green-Te Pāti Māori alternative: a different flavour of demonic. The centrist compromise so familiar during the first decades of MMP is off the table.