In a new world, new thinking is required: Sir Roger Douglas and Professor Robert MacCulloch

In their new paper ‘In a new world, new thinking is required’, Hon Sir Roger Douglas and Professor Robert MacCulloch argue the prioritisation of resources is crucial to New Zealand’s economic recovery in the wake of Covid-19.

They argue that New Zealand can either “muddle through as we are – relying on policies that haven’t worked since the 1950s and which are ill-suited to our quickly changing world – or we can opt for a reset, introducing social and economic policies that will make New Zealand not only a richer but more equitable place to live; a country where every New Zealander has the chance to take control of their lives and secure a better future for themselves and their families.”

They say the Covid-19 outbreak has “not only precipitated a health emergency, but also an economic crisis, unparalleled in modern history,” and that a Government needs to provide a clear framework for recovery, implementing policies which prioritise those most affected by the societal and economic lockdown necessitated by the outbreak.

The paper says this prioritization has been lacking to date, with the wage subsidy scheme unfairly advantaging big business and the professional elite, at the cost of money and resources which could have been better directed towards assisting the newly unemployed – namely workers, their families, and small business owners.

“This can be seen most obviously in the implementation of the Wage Subsidy Bill. Whilst the scheme, which already comes at a cost of $10 billion, has undoubtedly provided short term support to those who needed it – workers and small businesses – it has also been used to prop up corporate monoliths and institutions who should have been left to fend for themselves or – at the very least – should have received assistance in the form of a loan, instead of a handout.”

They say that poorly targeted support in the form of helicopter payments, wage subsidies, or broad-based tax cuts is wasteful, and will only entrench the inequalities that existed prior to the pandemic. In addition, the time and costs that come with planning large-scale infrastructure projects means they “should not be regarded as a panacea, aiding economic recovery.”

The paper calls for clear, innovative policies, which prioritise those most in need and also lay the groundwork for further social and economic reform in the medium-to-long term.

It challenges the government to identify – and eliminate – unnecessary spending, privilege, and waste.

“It can find an extra $15 billion per annum by doing so, contributing to the recovery in the short term, and – more generally – to implementing wider scale reform once the immediate crisis has been put behind it.”

Suggestions for $15-16b in savings made include:

Ending Waste: By removing KiwiSaver tax breaks and subsidies, by ending future government contributions to the New Zealand Super Fund, by retargeting income derived from those funds, and by reducing the excessive Votes available to government departments, we can quickly access approximately $9 billion per annum.
Eliminating Privilege: Unnecessary privilege is entrenched in New Zealand society. By ending corporate grants and tax breaks, by stopping the Provincial Fund, by removing high-income families (approximately 15 per cent of the population) from access to working for families and winter energy subsidies, and by ending tertiary education grants for students other than those from low capital and low-income families, we can make further savings around $7b per annum.

The paper says that these annual savings will not be enough to cover the cost of revitalizing New Zealand’s economy post-Covid, but will make a significant contribution in the short-term towards managing the recovery, ensuring that money is available for those who most need it, and mitigating – at least to a degree – the debt we impose upon our younger generations.

In the medium to long term, they can be used to fulfil the objectives outlined earlier in the paper, helping to not only create a fair and prosperous New Zealand, but one much better placed to handle a crisis like Covid-19 in the future.

You can view and download a full copy of the paper here:

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