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Apprentices fit the bill for now

GRANT MILLER
Last updated 12:08 28/01/2013

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OPINION: Fourteen thousand more apprentices than usual will start training in the next five years because of an apprenticeships revamp, according to Prime Minister John Key.

Ensuring that people have the right skills to contribute to the work force is about making sure future growth is based on investment, exports and savings, he says.

It's hard to quibble with this.

A few people will not be comfortable with the logic of foreign investment leading to the creation of jobs but better ideas that are known to work are in short supply.

Labour and the Green Party are also vulnerable to Mr Key's accusation that they're keen on "wasteful and unaffordable spending", and their economic management would amount to "meddling and choking off private sector investment".

The broader context is a world that remains in economic difficulty after a serious reality check, and nobody's really sure what the long-term fix might be.

So what went wrong, internationally?

Greed.

Growth based on insecure foundations is unsustainable.

Easy credit and toxic debt could swirl about for only so long before the chickens came home to roost.

When the day of reckoning came, the knock-on effects then took their toll - an American housing crisis led on to a global financial crisis and, in this interconnected world, largely innocent players such as New Zealand had their prospects dented.

We have come out of this mess OK but our economy remains a bit sluggish.

What then, can we do?

I'm not sure that economies can be "kick-started" by governments - economies are not that simple. They can be manipulated, certainly. But tweak X and you affect Y. Loosen the purse strings or print money and you cause inflation, which eats away at the value of citizens' money.

Prop up one sector of the economy with subsidies and you create distortions that can cause problems later on.

Spend too much public money on projects and you risk crowding out the private sector.

Economic stimulus packages rarely work as well as intended.

As Mr Key put it: "You only get jobs and growth in the economy when people invest money, at their own risk, in setting up a business or expanding an existing business."

You can bet the people who drive our economic decision-making are familiar with this tricky terrain, which is why they favour a tweak here, a signal there, instead of more dramatic change.

They are wise to be cautious.

But chances have been missed to deal with imbalances - Kiwis' high level of investment in housing is questionable, for example.

And I sense that, still, economists and Treasury boffins are crunching the numbers the way they always did and operating on roughly the same assumptions as before things went haywire in 2008.

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My instinct is that, deep down, they view ups and downs as cyclical. If there's a "new normal", they haven't yet figured out precisely what that means.

As Labour leader David Shearer put it: "The global landscape has changed as a result of the financial crisis. It's not just a blip. National hasn't woken up to the fact."

I think he's right there, though he is yet to come up with answers himself.

Politicians, in the end, feel they must be seen to be doing something.

Ours are not immune.

It appears to me the Government is relying on the Christchurch rebuild as an economic stimulant.

There is no question the activity will help but the Government knows it is not a cure-all.

Obviously there will be long-term benefits but the degree of impact on the overall economy, long term, is insubstantial.

If the mindset is one where the economy depends on stimulus to prop it up, it will not work. What happens when this economic caffeine wears off?

Boosting apprenticeships allows the Government to talk with credibility about being hands on in managing the economy while its other planks may fail to inspire. What's heartening is the element of investing in the future by encouraging productive work.

The drive for more apprentices is potentially a good thing, especially if they can find enough work after the Christchurch rebuild.

The worry is that we may have found a short-term fix to mask longer-term structural problems.

Getting economic policy right is more about creating the right environment.

Given the lack of serious reform, the Government must think the framework is about right.

* Grant Miller is the Manawatu Standard's head of content and a politics junkie.

- Manawatu Standard

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