Waltzing with Matilda

Listener 15 September, 2002.

Keywords: Globalisation & Trade; Macroeconomics & Money

A hundred years ago, New Zealand turned down the chance to federate with Australia – to become one of its states, rather remain than an independent nation. Ten years earlier there was a groundswell in favour, but the prosperity and the social consolidation of the 1890s gave us the confidence to go it alone. How different it is today. A survey of the New Zealand elite, by Bob Cately, professor of political studies at the University of Otago, found 88 percent believing that New Zealand would benefit from a single economic union with Australia, and 55 percent that economic amalgamation would lead to political union. (His book Waltzing with Matilda describes the elite as parliamentarians, ‘businesses, business organizations, trade unions and some media outlets.’ He does not mention senior public servants but my impression is that they would have responded similarly.)

In contrast to a hundred years ago, the elite is no longer confident about New Zealand and our future. One should not be surprised. For the last two decades it has been pursuing policies which it claims would benefit New Zealand, and the resulting performance has been disastrous. Rather than admitting they failed, they have a new solution which amounts eventually to federation (if the Australians would have us).

Their argument, insofar as there is one, goes something like this. New Zealand is too small and too distant from the rest of the world. They say that is why New Zealand’s international GDP per capita ranking has been falling, and it will continue to fall. The argument is illogical. While it is true that our ranking has fallen – from about 6th in the OECD in 1950 to around 20th today, the decline has not been steady. There was even a longish period (1977-1985) when New Zealand grew slightly faster than the OECD average, although the country was not noticeably larger and closer then, than at other times. Moreover, if it is true that in 1950 we were one of the top rankers, were we larger and economically closer then than we are today?

And even suppose the argument were true. It does not follow we should join with Australia, for they are too far and too distant too. Were New Zealand to amalgamate with Australia we would make up a mere 2 percent of the OECD with the United States and the European Union each 35 percent, and Japan 14 percent. If the theory was correct joining up with Australia would be like jumping from one sinking boat to one sinking only a bit slower. Its logic insofar as it has one, is that Australia and New Zealand should become states of the United States.

Unfortunately the debate is being rigged to suppress alternatives. The elite is so besotted with its view that ‘balanced’ seminar panels on Australian-New Zealand relations consist only of those who support amalgamation, with the disagreement of how fast. Yet there is an alternative argument which goes something like this. It is true that New Zealand is small, and will remain small by international standards. It is also true that New Zealand is distant from the rest of the world, although economic distance is diminishing because of technological change (the consequence of which is globalisation). So a successful New Zealand will have a specialist economy with a structure which reflects its circumstances. Some of these particularities include the resource base of climate and geography which makes us relatively important in some food and fibre (meat, dairy, horticulture, fish and wool and wood). Other opportunities involve tourism, or activities where there are time and seasonal zone advantages (as in our translation service which turns texts around while Europeans sleep). I suspect an important feature is our life style. It may not be everybody’s preference, but it will attract and retain certain sorts of internationally-footloose highly-skilled workers who value it. They will work in businesses where size (economies of scale) are not important, and where costs of international distance are low. (Some computer software development is an example.).

Systematic analysis should be able to identify a portfolio of industries where we have an internationally competitive advantage, and which would generate other employment to service them. But rather than do this sort of exercise, we repeat the mistakes of the past, thinking unsystematically, ignoring evidence and theories which conflicts with our prejudices. No wonder the country is riddled with doubt and defeatism.

To be fair, the elite thinks any federation should not be subject to a referendum. The public is likely to be much less enthusiastic, perhaps because it has more commonsense. But one day there may be a vote which supports the union. Not because that is the best course for New Zealand, but because the elite has blocked off the better courses by limiting debate, and left New Zealand with no other option. TINA, there is no alternative, usually occurs when not only the vision is so narrow that it does not see the alternatives, but when those who say the emperor has no clothes are ignored.

<b.Footnote for Listener 16 January 1999


A recent visit to Sydney left me once more admiring Australian energy and enthusiasm. The city is in chaos as they rebuild the city for the 2000 Olympic Games. The motorway between the airport and city centre is costing $A700m (about five times Transit New Zealand’s annual capital budget). Displays of public commitment abound. I was trying to think of equivalents in New Zealand. Te Papa does not have a strong external image, while Skytower looks anorexically phallic. (Commercialised public monuments almost invariably look tacky.) My list is the sumptuous refurbishment of parliament buildings, some elegant city centre redevelopments, and the Otira viaduct.

It easy to bemoan our far poorer economic performance, for the Australians have handled their economic management far more intelligently. But the public images are Australians have had a faith in themselves, whereas New Zealanders have a subservient colonial cringe, adopting inappropriate policies relevant to a very different economy, because we had no faith in our ability to think for ourselves.

And so we muddle on as the poor cousin, lacking vitality, lacking confidence in ourselves, well illustrated by our inability to do anything well over the millennium celebration. By contrast, the Australians give the general impression that New Zealand could not organize a pissup in a brewery.