Some more market to catch Australia — or not?

You may not be aware of it but an election is imminent. That at least is the impression you would have got if you had been in the serried ranks at the National party conference.

Speech after speech — notably from Peter Goodfellow, the presidency’s most wooden speaker since Ned Holt 40 years back — urged delegates to get prepared and not to be complacent about the next election. John Key managed to indicate an election in both 12 months and 16 months — that is, before and after the rugby world cup.

Umm… isn’t that next year? Yes, but National isn’t taking chances. Consistent with election-year fears for security from internal controversy, Goodfellow banned the media from most of the “policy breakout forums”, the last place for open debate since the earlier closure of the party policy advisory group breakfasts. Labour was more open even in the Clark years.

Even good news was off-limits. Having been invited by a senior party member to hear a positive report about some high-technology companies at a breakfast forum, I was barred entry by Goodfellow. Fair enough: the programme said “closed”. But is it democratic? Doesn’t National take $1 million of taxpayers’ money each election?

Moreover, the secrecy was unnecessary. In the corridors there were some minor niggles (a stalwart blackballed from government appointments, another annoyed with a minister for a “lie”) but any “national” party worth its salt and in good health takes those in its stride. Delegates were hugely enthusiastic for their ministers and their “Dear Leader”, as Bill English has taken to calling Key since his visit to Communist Vietnam and China.

The presidency was sorted with minimum fuss. The “right” three were elected to the board. “Continuity” was preserved, a far cry from the decades of shifting divisive faultlines dating back to Sir George Chapman’s premature putsch against Holt in 1971 which reflected tension over the prime ministership and a minority push for more-market policies.

More-market has long since won. This past weekend the unifying theme was economic growth.

Even Conservation Minister Kate Wilkinson was on cue, spelling out large returns on spending in the DoC estate in the only set of open forums. Social Development Minister Paula Bennett got much delegate feedback from pointing out that not rescuing the 20,000 kids known to be abused, beaten or live in violent, neglectful “families” (and possibly up to 40,000 more out of sight) does not ensure those kids will, as adults, be able to work and pay present adults’ future superannuation: an economic argument for investing in wraparound help.

Key wound up the happy event with his well-foreshadowed employer-friendly employment law changes.

These are relatively moderate, typical of Key’s caution. But at the margin they will reduce some protection for employees — significantly in the case of the 90-day rule, judging by the quarter of small-employer 90-day employees who were fired.

And reducing protections tends to lower real wages overall by reducing some at the margin. That is not an obvious fast way to close the wide wage gap with Australia.

The economic rationale lies in a longer-term dynamic effect: businesses’ profits lift, they invest more, which over time lifts real wages. But in the Australasian context most of the big wage gap opened up after the big employment deregulation 20 years back when Australia kept employee and wage protections high — though there may have been other factors and the economy is now more resilient and thus better at preserving jobs through recessions.

It is that pay differential which lures employees to Australia, not the rate of rise in GDP or the GDP-per-capita difference. Just lifting average GDP-per-capita to Australian levels won’t stop the exodus unless higher wealth here from employer-friendly changes is distributed to wage and salary earners — that is, unless “all boats rise”. In the past 20 years middling and lower-end boats have either not risen at all (in real terms) or not nearly as fast as high-end boats.

This is the snag in Key’s push for more dairy farms and tourists. Farmers and hotel owners and managers get better off and the country gets more cashflow. GDP-per-capita goes up. But both pay most employees low wages. That doesn’t fix the wage gap.

So Key has to look elsewhere for his prime ministership to succeed on his economic criteria. Mining is a high-wage activity. And he now talks more about research and innovation — though he has yet to get real money out of Bill English (compare Singapore’s $US700 million on clean tech with Key’s $10.5 million a year for the Global Research Alliance).

There is a wider electoral point for National: the very people who exit to Australia are probably mostly get-up-and-go sorts who would vote National if they stayed. The spectre is Dunedin, Labour-voting for decades as Dunedinites drifted north (and now west) for higher pay.

Perhaps all Labour has to do is wait, not think.