The 2025 Taskforce

As investors in the NZ share market we should all applaud the appointment of Don Brash to head a task force to improve NZ’s productivity. If we do see an improvement, that should lead to improved share market returns and a better standard of living for all New Zealanders. Few would complain about that.

But I do have a few complaints. For a start, the stated aim of the task force is not clear. It has been variously stated as:

• Matching Australia’s productivity by 2025
• Bridging the gap between Australia’s living standards and ours
• Matching average Australian incomes.

Whatever goal we choose, it needs to be precise. How exactly do we plan to measure productivity/living standards/incomes? For example, are we talking pre or post tax incomes? Are different living costs going to be factored in?

And when we talk blithely about closing the gap, let’s not fondly imagine that Australia is going to hang about marking time and waiting for us to catch up! Our target will be a moving feast. Cynics might say that is exactly what the Government wants because if they fail, which I fear they will, no one will be able to actually figure that out.

Why the heck would we want to compare ourselves to Australia anyway? Rodney Hide says it’s because we love beating Australia. How pathetic is that? This is not about envy or beating anyone. NZ is far more likely to prosper if we cooperate with Australia rather than trying to beat them. As our major trading partner, the better Australia does, the better we are likely to do.

Performance measurement experts often warn that a focus on inappropriate targets can lead to perverse outcomes and a focus on beating Australia is a good example of exactly that. If the taskforce focuses on beating Australia rather than on the improved products, services and benefits the Government wants to see delivered to all New Zealanders, my prediction is that it will do more harm than good.

So, we have a new taskforce with an unclear, imprecise, inappropriate target that is focussed on the wrong thing. It couldn’t get worse than that could it? Well unfortunately it can and it does – the target is not relevant either. What is the point of trying to compare our economy based primarily on dairying and forestry with an Australian economy based primarily on mineral wealth?

Maybe we can rely on Labour leader Phil Goff to bring some sanity to proceedings? Don’t hold your breath folks. Phil reckons the whole thing is about privatisation and right wing ideology!

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