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  • Robert MacCulloch

Back in May of this year, I wrote a report with a former Finance Minister that had a long title. It was called "In a New World, New thinking is Required: Why the Prioritization of Resources is Crucial to New Zealand’s Economic Recovery in the Wake of Covid-19". I believe that we were the first to specifically refer to the Warehouse Group, which claimed around $68 million under the wage subsidy scheme. However, our beef was with the NZ Treasury and Finance Minister, Grant Robertson, who we believed should have designed the scheme better. Indeed, companies like the Warehouse have a legal responsibility to their shareholders to maximize value so if this kind of public subsidy is on offer, then why not accept it?


Today it has been announced that the Warehouse is repaying the subsidy. The company had no obligation to repay. An apology for wasting public money should be coming from the NZ Government. Private companies acting completely within their legal rights have no reason to be sorry. The Warehouse should be applauded for an incredible act of social responsibility, which has gone a long way to rectifying the shortcomings of a scheme whose design was botched in the first place by our public officials in Wellington.


For sources, see:


https://www.rnz.co.nz/news/business/433335/the-warehouse-group-to-repay-68m-wage-subsidy#:~:text=The%20Warehouse%20Group%20will%20repay%20its%20%2468%20million%20wage%20subsidy


https://www.nzcpr.com/in-a-new-world-new-thinking-is-required/


  • Robert MacCulloch

Finance Minister, Grant Robertson, has announced, via the Beehive Website, that "Cabinet has agreed to the appointment of Dr Ganesh Nana to chair the Productivity Commission". In light of past media coverage along the following lines -"BERL chief economist Ganesh Nana says a capital gains tax will ensure the farming sector lifts its economic performance", as reported by Radio NZ - this appointment is unlikely to find favor with the business community. Robertson added, “I want to ensure that the Commission, like the Government, looks beyond GDP to find its measures of success, and has the wellbeing of current & future generations of NZ'ers front of mind as it generates new knowledge and advice".


The word "productivity" is understood by economists to measure how efficiently inputs, such as labour and capital, are used to produce a given level of output. A common measure is GDP per hour worked. A country with high productivity, defined in these terms, has high average wages and is able to afford, for example, a higher quality health-care system. Better health-care adds to well-being. Higher paid workers can also spend more time with their families, rather than long hours at work trying to make ends meet.


Consequently, the focus of a "Productivity Commission" should be on how to achieve higher output per worker, not concern itself with how that higher output is allocated by private individuals or the government to secure higher levels of well-being. That risks taking decision-making away from we, the people.


As a result, in my view, the Minister of Finance erred when he wrote "I want to ensure the Commission, like the Government, looks beyond GDP ....". It is not for unelected bureaucrats in the Commission to act "like the Government" . The Commission's focus should simply be on how to help increase Kiwi pay for each hour of work.


see:


https://www.beehive.govt.nz/release/dr-ganesh-nana-chair-productivity-commission


https://www.rnz.co.nz/news/political/80092/capital-gains-tax-would-lift-farming-sector-economist

 

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