When better is better than more

Last year John Key, ex-banker, went to his first National party conference as Prime Minister as the adulated winner who had restored the party to power. This year he is the Prime Minister who has taken the party into uncomfortable territory in his dealings with iwi leaders. Next year will he be the economic game-changing Prime Minister?

Key’s prime ministership so far looks like one aimed more at keeping the party in power than at finding pathways to new riches. Trying to finesse Labour through his alliance with the Maori party and koreros with iwi leaders groups in part aims to embed a broader National voting base.

But actually that, plus loose cannoning by Gerry Brownlee on mining national parks and a bumpy road to super-Auckland, have taken some gloss off his popularity and, in consequence, the party’s. Many Nationalists like national parks. Many are conservative on, or blind to, Maori aspirations and uneasy with Key’s ground-breaking concessions. Super-Auckland stumbles trashed National’s Mt Albert by-election campaign.

National loyalists are much more at home with economic policy. Key’s tax cuts will be celebrated at this conference. Nationalists believe, self-interestedly and as an article of ideology, in lower taxes — though they also believe, self-interestedly, in loopholes and some will lose access to Working for Families credits and student allowances for their kids, along with depreciation on building investments.

But tax cuts don’t automatically make an economy that will keep those kids in this country. Key has yet to signpost a convincing path back to parity with Australia in standard and quality of life.

So far his focus has been on more rather than better: more roads — Labour’s greatly expanded programme is starting to deliver and National will claim credit — more broadband, more aquaculture, more dairying, more mining.

Key’s own personal mission as Tourism Minister, to bring cycle-tourists to the last bikeshed on the planet, will bring some higher spenders than commodity travellers from China. He backs a convention centre. But he has done little else to drive a step-change shift into higher-earning niche tourism.

That is the test of his “ambition” for his country. More doesn’t do much for catching Australian real incomes. That needs better.

Better needs innovation, lots of it, well capitalised. Key so far has been parsimonious there. He is said to be intending to keep tourism in a second term and not switch to science.

That leaves institutional change — tax and regulation. And there his ministers have been very busy.

Rodney Hide, in harness with Bill English, has been rewriting lawmaking rules to require an explicitly principled approach. Nick Smith, Maurice Williamson and Phil Heatley have been streamlining resources, building and aquaculture regulation.

The biggest reform programme is Simon Power’s. That is part remedial and part forward-looking.

So the Reserve Bank now includes in its prudential surveillance the few finance companies still standing. A new super-regulator, incorporating the Securities Commission, will oversee the financial markets, with, belatedly, more powers. The rules on securities trustees, financial advice and financial advisers have been tightened (though financial advisers legislation is being reworked to meet difficulties facing large institutions). KiwiSaver schemes are to be supervised.

There is legislation on auditors, financial reporting and insolvency, company law, copyright and cartels. Plus a busy programme of work on the single economic market with Australia.

The Securities Act is being rewritten, which takes care of many of the Capital Markets Development Taskforce’s 60 recommendations. Power is sympathetic to many of the rest and has acted on some. Next term Key will sell minority shareholdings in state-owned enterprises, especially the electricity generators, to mum-and-dad investors. That will help deepen capital markets.

Somewhat less feet-on-the-ground is the attempt to set up this country as a timezone-advantaged “hub” for financial services in the Asia-Pacific, specialising in high-value middle and back office functions for the funds management industry, which one senior minister describes as “speculative” — a bit like the airy 1980s talk of a “Switzerland of the South Pacific”.

Speculative it may be. But it is an attempt to think outside the box — to think better rather than more. A fine-tuned financial sector should help. There will be hardly a word of disagreement at the conference on that.

And when Nationalists come back for their second victory conference in 2012 they might turn their, and Key’s, attention to innovation. That, rather than conservative navigation by polls, would more safely deliver a third term in a turbulent and rebalancing global economy.