Yes-man Luxon’s economic growth formula begins to crystallise

Friday, 24 January 2025

ANALYSIS: Christopher Luxon is saying “yes”, and he wants you to say “yes” too.

The prime minister’s talked-up economic plan began to crystallise on Thursday as his week of lectures on economic growth reached its crescendo: a “State of the Nation” speech delivered to Auckland’s great and good at the sparkly Cordis hotel.

“It is about saying yes, instead of no,” he said, looking through the teleprompters at the lunching Auckland Business Chamber crowd.

Opening the floodgates to tourism and international students? Yes.

Foreign capital buying into New Zealand? Yes, please.

How about more mining, “synthetic biology”, and concerts at Eden Park? Yes, yes, yes.

But even Luxon knows it’s not as easy as saying “yes”. Not only because some at his Cabinet table might be inclined to say “no”.

Having started the week at Premier House appointing Nicola Willis the “minister of economic growth”, and further expounding on his Government’s enthusiasm for growth in all forms at a Hamilton “caucus retreat” on Wednesday, Luxon offered up two new announcements in the Thursday speech.

It was delivered with typical gravity-defying optimism to the extent that Luxon effusively redrew the world map, claiming New Zealand was primed for opportunity as it was “smack bang in the middle” of the Indo-Pacific. Why it still takes 10 hours to fly to Singapore is anyone’s guess.

The first announcement was an already-promised shopfront for economic investment, to be called Invest New Zealand, set up within New Zealand Trade and Enterprise to court international investors.

It was immediately criticised by the Taxpayers’ Union as bureaucratic growth, not economic growth, and comparisons with prior efforts such as post-quake “Invest Christchurch” are apparent.

But Luxon said it would be different, staffed with people who have the “different skill set” need to get in front of pension funds and and much talked-of “handshake”.

“The reality is the sovereign wealth funds have very little literacy of New Zealand, and actually what's available to invest in here,” he said, of his reasoning.

Less discussed on Thursday were changes to foreign investment law and regulation the Government says is needed to get foreign capital to say “Yes”. Here’s where a “No” might creep in.

Luxon plans to hold an international investment conference in New Zealand in the coming months. However, Cabinet has yet to finalise a rewriting of the overseas investment rules, in part because of NZ First opposition to carte blanche foreign investment.

Winston Peters and his party, long-time opponents of foreign purchasing of houses and pastoral land, has been pushing back against efforts to convince them otherwise.

On Thursday, Luxon said there was a difference between creating an international investment “system” and selling houses to high-net worth foreigners, which NZ First had previously kiboshed.

“There's a difference in position between National and New Zealand First. But I just say to you that's not the showstopper here.”

The second announcement has again been in the works for some time, since before the election.

The Government has resolved to dismantle Callaghan Innovation and distil the seven Crown Research Institutes into three new “Public Research Organisations” focusing on bio-economy, earth sciences, and health and forensic sciences.

A fourth research organisation will be created to focus on the biggest buzzwords: artificial intelligence, quantum computing and synthetic biology. Policy changes will give researchers the ownership of their intellectual property, to incentivise commercial success.

If foreign investment in New Zealand business, science, and infrastructure is part of the medium-term plan to improve economic growth, such innovation is surely a longer-term goal.

For the immediate problem, Luxon has another familiar solution: pump up tourism and international student numbers.

Both have been creditable export earners for New Zealand in the past, but both come with challenging politics.

Before the Covid-19 pandemic, communities were fed up with tourists in numbers that infrastructure could not manage. Poor quality schools for international students had essentially become migrant work visa shops, at a time when high immigration had become politically unpalatable.

How such problems might be managed as the Government seeks to get this tried and tested way to get export dollars running hot remains to be seen.

Both the Auckland and Queenstown mayors have been pushing for a “bed tax” to help manage the burdens of tourism – but Luxon has given no clear indication the Government was on board.

But don’t be a naysayer.

After a summer of economic discontent – as mills closed due to high energy prices and pay packets felt thin after years of inflation – many have been looking at the Government and saying “No”.

The prime minister wants you to say “Yes”.