After a massive amount of fiscal and monetary stimulus, New Zealand’s economy overheated. The Reserve Bank of New Zealand (RBNZ) faces an uphill battle to bring inflation under control. It tries to do so by dampening demand. I wrote about this in last week’s Insights.
But the key to stabilising our economy is not merely to rein in demand – it should also bolster the supply side. And this is what I want to spell out today.
First, let’s open our doors to foreign direct investment (FDI). FDI brings fresh capital, innovation, and know-how. New Zealand must become a magnet for investors, shedding its reputation for being hard to navigate. We need to simplify regulations and foster an attractive business environment for international investors.
Second, we must properly reform our resource management laws. The current system is cumbersome, slow, and discourages development. David Parker’s replacement is even worse. We need a different approach that streamlines planning processes. Doing this would speed up much-needed housing and infrastructure projects, creating jobs and boosting our economy.
Third, it is time to embrace immigration. Migrants bring skills, diversity, and dynamism to our economy. Let’s open our borders, welcome talent from around the world, and design an immigration system that meets our labour market needs.
Fourth, we should rid ourselves of restrictive licensing arrangements. This will encourage entrepreneurship, enabling businesses to flourish and generate employment opportunities. It is madness, for example, that the Nursing Council can obstruct the establishment of additional nursing training capacity.
Fifth, it is time to reward councils for growth. By implementing tax-sharing arrangements with central government, we can ensure local authorities and local communities have an interest in promoting economic development in their regions.
Sixth, we must declutter our bureaucracy. Unnecessary regulations stifle business and create inefficiencies. By eliminating red tape, we can unleash the productive capacity of our economy and empower businesses to thrive.
The focus of economic policymakers must shift to the supply side. New Zealand must enact bold reforms to grow from its current economic crisis.
By embracing FDI, simplifying resource management laws, opening our borders, eliminating restrictive licensing, incentivising councils, and cutting bureaucracy, we can create a more prosperous and resilient future for all.
So, let’s not just talk about economic reform – let’s demand it, especially in this election year.