With the election over, it’s worth pausing to identify the country’s big economic challenges.
Regardless of the government, these are the things it must address.
First, housing. It’s hard to pick the most important issue, but housing has ripple effects throughout the economy.
When interest rates were lower, the cost of housing was manageable. With rates about 7% or 8%, mortgage costs are now a lot higher.
High housing costs make the economy less flexible and dynamic. It is harder for people to change jobs or move cities. That makes it harder for businesses to fill roles. Businesses end up understaffed or using whatever people they can find.
Second, the labour market. A business owner asked me ‘‘where are all the people?’’
Overall, statistics show there are still lots of workers.
However, many businesses are struggling to find the employees. There are also regions with very low unemployment. The processes that connect people to jobs don’t seem to be working well.
Third, the regions versus Auckland. Both areas say that the country depends on them.
The regions produce most of the exports — food and tourism. Auckland produces an outsized portion of total economic activity and is relatively efficient.
The truth is we need both.
The size and density of Auckland make it a great place for certain kinds of economic activity. It needs infrastructure and policies to do that even better.
We also need export dollars and it’s obvious where they come from. In addition, our primary industries are productive, compared with the rest of the economy. They need support from the central government as well.
Fourth, international trade. Strong trade relationships and rules-based international processes are important for New Zealand. Future opportunities can come from leveraging international connections.
The world has pulled back from a commitment to international openness.
Covid was part of that, but the trend started earlier. As a small country, New Zealand has an interest in turning that around.
Fifth, the environment. Underlying everything is a recognition that the environment is important. We are beginning to understand that the future will bring more issues like floods, droughts, storms and even pandemics.
Also, consumers are more aware of environmental issues. High-value international consumers want to worry less about the products they use and eat. By protecting the environment and telling that story, New Zealand has potential opportunities.
These are the issues I’ll be tracking as the new government gets under way.