Strategies and plans aplenty but are there any new ideas?

BY COLIN JAMES

OPINION: It is a month for plans, strategies and discussion papers – infrastructure, road safety, mining in beautiful places, Crown research institutes, personal grievance and child abuse. There is more to come, not least the "New Zealand Inc" consolidation of overseas diplomatic, trade and migration work, geared to "catching up with Australia".

The big one last week was the 20-year infrastructure plan. Bill English oversees it, Steven Joyce does most of it and an advisory board has done the thinking, grounded in economic theory and analysis. Governments, and many local councils, let infrastructure investment lag behind economic growth in the 1990s and the first half of the 2000s. Because economic theory says economic performance is linked to infrastructure quality, central and local governments have been scrambling to trim the deficit.

Mr English's plan cites the Organisation for Economic Co-operation and Development: investment in infrastructure, and particularly in networks such as transport and communications, "seems to boost long-term economic output more than other kinds of physical investment".

It cites the World Economic Forum: inadequate infrastructure is second only to access to finance as a barrier to doing business in New Zealand.

Hence the plan's aspiration for real economic growth of 4.5 per cent a year, a grand ambition in boom times, let alone in the post-bubble world. The plan requires heavy investment in roads, broadband, ports, airports, energy and irrigation, plus schools and hospitals for a one-fifth growth in population projected over the 20 years.

Mr English has long argued that much better management of assets is needed to get the most from the investment. And a big proportion of his regulatory reform programme is geared to speeding infrastructure projects through planning, to adjusting transport and energy rules and to cutting local government red tape.

Put this alongside the sector-by-sector "grow the revenue" work and John Key's dismissal of Don Brash's first 2025 commission report, and a picture forms of a Cabinet that believes active government is a critical ingredient in economic performance. That is, the Key Cabinet thinks getting institutional settings right – tax, government spending and regulation, including, for example, how schools and welfare are organised – though necessary, is not sufficient.

Neither, actually, is investment in physical infrastructure. Ask what a school is. The infrastructure plan talks about school buildings. But teachers don't teach buildings and children don't learn buildings. Teachers teach and children learn knowledge, skills and how to think.

The real school infrastructure is what is inside the heads of the future workforce: how smart it is, how smartly it works and how it can make life better and richer.

That "soft" infrastructure might contribute more to faster economic growth than six-lane highways to carry more of the same, airports to land more of the same and water to grow more of the same.

Paula Bennett's Child Abuse Experts Forum, which reported on Wednesday, is relevant. Losing future workforce to bad or inadequate parenting is another infrastructure deficit market forces won't fix.

Add in the science deficit governments allowed to accumulate in the past 20 years. New ideas are infrastructure, too.

But even if Mr English were to stretch his mind to encompass this broader infrastructure and to develop state-of-the-art policies, will that help us catch up with Australia? Not necessarily. Phil McCann has been back in town, holding seminars with top Reserve Bank and Treasury officials to add to one last year with the Ministry for Economic Development.

Professor McCann is a "spatial economist", based in Holland and at Waikato University. In an extensively researched paper last year he argued that reducing the costs of doing business across borders, as New Zealand has done more than most, and over distance, as the internet has done, ends up concentrating the highest-earning activities in big centres.

"Non-routine" cutting-edge thinkers get more cutting-edge when they congregate face-to-face: the more the brainier. It's a matter of scale.

So global cities have arisen in super-regions, creating knowledge hubs paying the highest salaries. New Zealand is no super-region and Auckland no global city. If there is to be "scale" in this part of the world, it is in Sydney and Melbourne.

On this analysis, the westward migration is not a failure of institutions or infrastructure. It is a factor of scale and the incomes that go with scale. New Zealand teems with entrepreneurs who generate lots of new ideas – but to get to scale those ideas often go overseas. Mr English's risk is that too-many idea-makers will go, too.

Mr Key's man-of-science, Sir Peter Gluckman, understands this well. He deals overseas to take his new science to scale while keeping it here. When Mr English has built his roads, he might usefully drop by for a strategic chat.

ColinJames@synapsis.co.nz

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