Slower, dearer, harder: Is New Zealand broken?

Saturday, 2 July 2022

It’s life, but is it life as we knew it?

It’s been a standout day in Godzone, so far, touch tōtara.

There was no need to buy petrol, cheese or a house, the power stayed on, the mortgage payments stayed set at painful, rather than excruciating.

When I went outside to see if the goods ordered months ago had finally arrived, there they were.

And whew, the garage wasn’t ramraided, the Gib board remained stacked inside. No-one approached with a sharp weapon, or menaced family and friends.

* Not shelling out - how a family of 14 gets by on less than $1000 a week

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New Zealanders tighten their belts as increasing grocery, petrol and housing costs create a perfect storm.

* Prices likely to keep rising faster for longer, economist suggests

But is that the best we can hope for in 2022? Is New Zealand broken?

No it is not, Finance Minister Grant Robertson said last week.

“We are also seeing increases in reported psychological distress, particularly among younger people,” Chief Executive and Secretary to the Treasury Dr Caralee McLiesh.

His view was the economy has strong underlying fundamentals to withstand the economic challenges we “undoubtedly are facing”.

But everyday life seems to be getting more difficult, more costly, more tiring.

Sorting even the simple things appears harder than it used to be. Slower, dearer, harder seems a suitable motto.

Finance Minister Grant Robertson says the economic fundamentals are strong.

Mortgage rates are up, rents are up, petrol prices keep hitting record new highs and the grocery shop is soaking up what’s left of our money – all while KiwiSaver and house values plummet, the opposite of a year or so ago, when the country seemed to be on a spending bender.

There’s also pressure on the health system, with countless stories of people waiting hours for ambulances, or being turned away from ED, as another wave of Covid smashes up against the winter flu season.

Statistics point to worsening levels of life satisfaction, self-reported health, loneliness, psychological distress, educational achievement and school attendance.

Cameron Bagrie: People thinking you can fund this with tax cuts as well, are whistling dixie.

“We are also seeing increases in reported psychological distress, particularly among younger people,” Treasury boss Dr Caralee McLiesh said in the Wellbeing Trends Report in April.

On the plus side, employment, air quality, incomes, E coli levels in rivers, and hours of work are on the improve.

Broken is too strong a word for where New Zealand is at, independent economist Cameron Bagrie tells Stuff.

He agrees with Robertson, up to a point. There are strong economic fundamentals, but they are eroding, he says.

“New Zealand's economic foundations are starting to crack pretty severely.

“If we do not see a substantial change in economic direction, there is a risk the whole house gets blown down,” he says.

“You need those strong economic foundations and more and more of the pillars are starting to take knocks. A lot of warning bells are starting to ring. We are not heading to a nice place.”

The typical Kiwi is saying “this is not the New Zealand I grew up in”, says Bagrie, and he can’t see anyone offering a political solution.

A water main burst: failing infrastructure is an issue.

No political plan

“Too many things have got out of balance between the economic and the social ledger. And at the moment I do not see any political party with any sort of plan to bring those ledgers closer together.”

Staff shortages are cutting, businesses are closing due to lack of workers, as stressed staff who remain cope with queues, endless emails and phone calls.

In the public sector about 49,000 passports are waiting to be processed, as the Department of Internal Affairs battles a 400% increase in demand since January, as Covid affected almost a third of its staff.

GPs, schools and businesses are struggling to provide their usual services with so many workers falling ill from flu or Covid.

Auckland’s Middlemore Hospital confirmed a patient died last month, after leaving an overloaded ED, and hospital staffing-shortages led to a Wellington woman waiting two days to deliver her dead baby.

Health Minister Andrew Little has reiterated he is “confident” in the healthcare system.

But as 2022 hits halfway, we are becoming all too familiar with the phrase “we are experiencing higher than expected demand” – code for “we are unstaffed, or we can’t find staff, or Covid has thinned our ranks”.

Stir in Infrastructure issues, which cause suburbs to be plunged into darkness by power cuts, or supply chain problems, affecting even our ability to buy a sofa, or a piece of white ware, which can now take months to arrive.

Valocity head of valuations James Wilson provides his assessment of the housing market. (First published April 29, 2022)

And then there’s the high cost of housing, the quality of the stock, and supply chain issues choking off crucial materials.

Covid had highlighted “fundamental structural problems in regard to things like the quality of our infrastructure,” Bagrie says.

“When you can’t get stuff in and out of the country, quality infrastructure can mitigate some of those challenges, we didn’t have it,” he says.

“When we couldn’t use foreign labour, all of a sudden we realised we've been insufficiently investing in Kiwi talent for a long time.”

Society is finding the going just as tough as the economy is, sociology professor Paul Spoonley tells Stuff.

Distinguished Professor Emeritus Paul Spoonley is co-director of He Whenua Taurikura, the national centre for countering violent extremism.

Fears of a social recession

He talks of New Zealand entering a “social recession”, a period of disengagement and a spike in social stress, related to the profound negative effect of Covid isolation.

While overseas studies have confined the term to physical and mental health, Spoonley would include all forms of disengagement having harmful effects on individuals, households and communities.

“In the early stages of the Covid pandemic, New Zealand displayed very high rates of social cohesion and trust, as high as anywhere in the world,” he says.

“But as Covid becomes endemic, compounded by growing costs to individuals, households and sectors, the fragility of some of our institutions and communities has been exposed.”

Covid underscored the ethnic dimensions of inequality with Māori and Pasifika more likely to be on the wrong side of health provision, educational delivery or the ability to work from home.

The 23-day occupation at Parliament earlier this year closed several key streets in central Wellington, causing disruption for many businesses, schools and university departments.

Homeownership has fallen dramatically for those aged 30 to 45 with the BOMD (Bank of Mum and Dad) now the fifth-most important source of loans to help adult children into the housing market. With wealth closely tied to property ownership, that is alarm bell territory.

High income societies were finding labour hard to come by, through a combination of demography (a declining workforce as an ageing population and dropping fertility kick in) and a lack of workforce planning, Spoonley says.

Most countries now rely on immigrants to make up the difference between labour supply and demand, he says. We are not alone, the UK has 1.3 million unfilled vacancies, 500,000 more than normal.

“There are 40,000 unfilled nursing positions in England alone. Sound familiar?” Spoonley says.

Education crisis looms

Bagrie too pinpoints issues around society, such as the wealth gap widening, Government spending pushing up inflation, ethnic divides and a fall off in educational attainment.

Despite years of publicity and action by the Commerce Commission, extended warranties are still being pushed by retailers.

The last on that list will really hurt in three decades, he says.

“It’s not just about containing inflation, we’ve got to think about 10, 20, 30 years down the track,” he says.

“We’ve got a very divided society, ethnically, the haves versus the have-nots, wealth inequality… and educational attainment levels, whether you look at actual achievement, or attendance.

“If you wanted to pick a variable as to where New Zealand is going to be economically 30 years out, educational attainment today would be probably the best predictor.

“The fact that we've let that one go for a long time is flashing warning signs about where we are going to be about 30 years down the track.

“And for some reason, those warning bells have been slow to ring, or at least they’ve been ringing and they’ve been ignored.”

The Ministry of Education is seeing reductions in school attendance and early childhood education participation, with more absent due to illness, or learning at home due to self-isolation.

In an area where New Zealand was already weak prior to the pandemic, disruptions were higher in Auckland, Northland and Waikato; in low decile schools; and for Māori and Pacific students.

Consumer complaints climb

Structural problems, staffing shortfalls, supply chain disruptions work together to make New Zealand a more difficult place to get things done, with non-delivery of standard household items soaring.

Complaints to the Commerce Commission about non-delivery or late delivery of goods almost doubled from 2019 to 2020. They have remained at the new grumpy high level.

In pre-Covid 2019 there were 295 complaints to the commission related to ‘non-delivery’ or ‘delivery times’ general manager fair trading Vanessa Horne says. In 2020, they climbed 99% to 587.

Those numbers reflect all complaints related to delivery times and non-delivery within domestic appliance retail, retail clothing, retail, furniture retail, household consumables, and homeware, fabrics and soft goods.

A group of about 19 people live in Warwick House in Nelson, which used to be a B&B but since the pandemic has become a flatting community. The group includes artists, travellers and professionals.

Consumer protection research shows that in 2021, the impact of purchasing problems on everyday life had increased. Respondents described the impact as moderate (33%) or significant (14%) – up from a total of 40% in the previous study.

In the Wellbeing Trends Report, Secretary to the Treasury McLiesh highlighted the wealth gap between old and young. In the past each generation built on the wealth of the preceding one, which was now no longer the case.

“Since the turn of this century the gap between the wealth of the over 65s and under 35s has more than doubled,” she said. “We estimate that at least half of this gap can be attributed to the growth in house prices.”

That had broader implications for Aotearoa, she said.

Increased distress levels

“We are also seeing increases in reported psychological distress, particularly among younger people,” she said.

“Those under-25 are least likely to report a high sense of belonging to Aotearoa New Zealand, are least likely to report that life is worthwhile, and are less likely to vote than young people in other OECD countries.”

Loneliness was highest in the 15-24 age group, and increased “substantially” from 2014 to 2018. Those figures were pre-Covid, ahead of lockdowns and further isolation.

Jeff Wang is the owner of the Bottle O store in Mt Roskill. He bought it in March and has already been robbed four times

Young people were more likely to rent homes than in the past, and rentals were more likely to be crowded, less healthy and less stable.

Treasury efforts to understand what drives life satisfaction, found - in order of importance - it was mental health, income adequacy, and trust in institutions and people that were most strongly correlated with wellbeing.

“The key question is how we respond,” Spoonley says.

“Growing inequality and precariousness all present major policy challenges. Is there adequate innovation and creative thinking to respond to this very new world?

“I would ask this question of employers and employer groups, as much as of the Government.”

So what can be done?

In the Wellbeing Trends Report, McLiesh says there are many policy tools that can address supply constraints across the economy and support productivity and resilience.

She points to infrastructure investment, tax policy, strengthening trade connections, innovation policy and improving human capital, calling for “consistency and coherence” across a range of Governments.

“The obvious and clichéd conclusion is that there is no ‘silver bullet’ to the challenge,” she says.

Reforms addressing supply constraints have started, from air freight support, to decoupling building consents from specific brands, and longer-term changes such as Resource Management Act reforms.

Measures to ease labour market constraints are also critical, she says.

Building costs and timeframes are blowing out, and there is a rising risk of liquidations.(First published July 2022)

“Labour availability is the key binding constraint on economic activity.”

Bagrie, meanwhile, says we shouldn’t get too gloomy. “We can't just say New Zealand is broken. New Zealand is a great place, but … cracks are appearing very quickly, and they’re big cracks, and not the sorts of things you can ignore.

“You can't ignore inflation. You can't just keep on spending and think it’s going to fix inflation. ”

Why isn’t the government doing more?

Since buying his Mt Roskill liquor store in March, Jeff Wang has been targeted by thieves four times, with the latest attack a ramraid in the early hours of Wednesday morning.

He’s one of countless small businesses targeted by a wave of ramraids post-Covid, which has also seen a spike in gang shootings, and a 30 per cent rise in violent crimes in the Auckland CBD.

Wang says he doesn’t feel safe, and wonders why more isn’t being done to prevent repeat offending.

“I can upgrade shutters and locks, and take stuff home, but that’s not a long-term solution.”

His customers have been loyal, and supported him through the rough patch, he says.

“It’s not their fault, and it’s not my fault, but every time there’s a ram raid I have to restock.”

“The Government should take some more tough ways to stop the criminals.”

Young people can’t see a way out, so they give up

While Wang has been hit by crime and socioeconomic disconnect, Wellington builder Duncan Field has felt the effect of infrastructure and economic woes.

He has been facing battles to get Gib, and experienced builders.

When Stuff called one problem had just been solved; the Gib board had arrived.

“In saying that, we ordered it in February,” Field says.

Now his more pressing issue is finding experienced builders, to upgrade the skills of young chippies.

April’s Quarterly Survey of Business Opinion suggested labour availability was the key binding constraint on economic activity.

“Qualified staff is our biggest issue, there’s a lot of hammer hands and labourers, but trying to find qualified builders to lead the boys is the thing,” Field says. “It’s from a lack of investment from many years ago.”

A hard-working day outside was seen as not as inviting as an office job in front of a computer, paying the same.

“There’s a shortsightedness,” Field says.

“They don’t think ‘if I train really hard and get good at this, I can make a load of money for myself, and have my freedom, and the sorts of things that people want’.

“Whether it’s a general problem with society, the youth can’t see a way out. It’s ‘I’m never going to own a house, I’m never going to have that’, so they just give up, and just do what’s easiest to get by.”

- additional reporting by Craig Hoyle