Gareth Morgan, Director of Gareth Morgan Investments
Dunedin put on magnificent weather for the weekend's rugby test, made all visitors welcome as is its practice – from Scottish pipers at the airport, brochures galore on the city's after-match offerings and the complementary Saturday evening newspaper which covered not just the game but the investment case for siting in the city.
Pity about the game – from the sublime to the ridiculous, the All Black performance showed all the signs of a tank out of gas. Thank goodness they now get a chance to replenish their reserves. The issue then becomes whether the team, having been so strong can get up again after a well earned 'cup of tea' or whether too many have depleted their finite supplies of physical talent. If so, an infusion of new blood will be necessary for it to regain the heights of performance reached over the last two years. With the 199 World Cup approaching the team management have some unenviable choices to make if it's to ensure a peak performance is reached at that time.
In many ways the torpor stifling the All Black performance reminds one of that facing New Zealand economy once reform fatigue set in. Once the cup of tea extended into an extended period of being out to lunch and finally degenerated into total disregard for economic policy priorities, there was an inevitability that the economy would tip into a slump. In spite of vacuous cajoling from the Treasurer to "snap out of it" it's clear financial markets have serious doubts about the ability of the current political leadership to reverse the slide which their own abdication of policy leadership has precipitated. As with any team effort, if the coach cannot find the formula – fire the coach.
With the government sector constituting 35% of the economy, it's still ignorant to pretend that the antics of those in power are irrelevant. More is the pity perhaps but their policy intentions do matter. From an international investor perspective the financial portfolio has fallen into the hands of one without credibility who has nothing to offer in terms of raising national economic efficiency and worse, who's ongoing presence promises policy paralysis. Why would international investors retain 'long' New Zealand positions with this shadow over policy innovation persisting ? Already there has been a loss of business confidence as an expansionary government sector has been presaged. This has undermined employment growth and with the future of tax cuts now threatened by the coalition, households have little to be confident of.
In the face of such leadership incompetence one might expect the political coaches to be replaced. And there is some sign of discomfort within the ranks of National cabinet as the pro-reformers become more and more embarrassed by the incumbent leadership. But the longer paralysis at the top persists, the more likely the change in political leadership when it comes will be swift and comprehensive. Economic slides without an end in sight, tend to do that.
But back to the regional perspective and in particular Dunedin's weekend pitch to out-of -towners to not just visit, but to invest there. From passive exaltations of the advantages the region offers, to proactive initiatives such as offering local body rates relief to new business investors, the city is trying to reverse the trend slide in economic welfare. And further south in Invercargill they're running a competition to come up with the most practical idea to attract investment and reverse the population slide. While New Zealand generally has tipped into an economic slide, the deep south has been in one for a while.
At the national level we can see how easy it is for politicians to prcecipitate an economic slide; from the plight of these economically weaker regions, we can see how difficult it is to reverse one. Tolerating our political leadership abdicating responsibility for pursuing the economic reform agenda threatens all regions with an economic reversal, and will make life in the deep south even more emaciated. Relying on rugby internationals to provide the occasional economic fillip is an insufficient generator of regional riches – as Dunedin's weekend plea to visitors attests.