Gareth Morgan, Director of Gareth Morgan Investments
The decision by the Australian government to impose a $NZ 16,550 tariff on imported second hand cars is another bonanza for NZ and blow to Australian industrial competitiveness. So long as Australian politicians protect industries for the direct jobs they generate, oblivious of the net losses inflicted on overall Australian economic welfare, national income and jobs, NZ exporters to Australia can’t lose. Already the evidence is that the special privilege CER bestows on NZ producers is proving a goldmine for NZ-sited businesses focussed on exploiting the ongoing deterioration of Australian competitiveness. The export performance to Australia over the last few years has been tremendous, defying the traditional drag imposed by a slowing Australian economy.
A fundamental maxim of attaining internationally competitive product, is that once it’s secured such producers no longer face demand constraints. The international demand for competitive product is infinite. Further, firms whose managers are of sufficient quality to ensure internationally competitive product is the priority, then break free of the shackles placed on their firm by the vagaries of the domestic market. This result is becoming more frequent amongst NZ producers and is the antithesis of the Porter view that a strong domestic market is necessary for international success.
Back to cars, and we are indeed blessed by having a Minister of Commerce who wouldn’t dream of degenerating to the Muldoonist standards of surrendering to pressure group lobbies and raising their protection to the detriment of all other New Zealanders. One only has to talk to those businesses who have taken advantage of the better value cars that used imports are, to see the benefits secured. Imagine the cost pressures on the Auckland Health Board and subsequent loss of health services if they had again to pay the higher costs for vehicles that Australians now face. It’s mystifying why Australians still elect politicians so dim that they’re incapable of carrying out even rudimentary analysis to confirm countervailing duties impede, rather than promote employment.
In their quest to protect jobs at any cost the Australian government is prepared to sacrifice the national income gains international competitiveness can deliver. NZ growth is coming from producers who have responded to the improved international competitive environment – not from sunset activities such as manufacture solely for the domestic market. For small economies in particular, such businesses will continue to die – government interventions only raising the cost of their demise. Many business deaths have occurred in NZ as we’ve restructured. Their demise is a precondition to the economy’s success.
New Zealanders can go to their beds this budget eve secure in the belief that National’s term in opposition cleansed them of their protectionist expediencies. No longer is there a place for a Minister who kowtows to the naked self interest of commercial lobbyists courting official protection of their internationally uncompetitive business under the guise of “job creation”. National ministers have indeed lifted their economics expertise since the improvident regime of Muldoon.