Government chooses slower economic growth

The new government’s decision to cancel investment in the Interislander ferry service has shocked business leaders. Photo: Lynn Grieveson

TL;DR: The new National-ACT-NZ First Government announced yesterday it had cancelled a $3 billion plan to build two new ferries and terminals that would have supported growth in the numbers of passengers, cars and freight crossing the Cook Strait for decades to come.

In effect, the decision will limit the ability of Aotearoa-New Zealand Inc to keep growing its population by 1.5%-2.0% and GDP by 3% per annum for the next 20 to 30 years because the Interislander is literally the connection point of two major parts of our economy.

The Cabinet decision announced yesterday shocked business leaders on both sides of the strait because it is essentially telling them they can’t plan for growth. It was framed as a short-term cost-saving decision that would be replaced by a more economical version of the same project. In reality, the growth part of the project was just cancelled.

That may be the right thing to do in a world that needs to reduce emissions dramatically and for a planet that cannot afford compounded economic growth of 3% per annum for decades to come. But that is not how the decision is being framed and it’s encumbent on the Government to now explain to its supporters and those shocked business leaders how it will deliver the growth it no doubt wants, but without the new ferries or connections.

Meanwhile, it’s worth considering whether this is what degrowth actually looks like in our modern political economy, where high inflation and interest rates caused by excess demand for limited supply forces a reduction in growth capacity in the long term. Perhaps this is the planet’s way of slowing us down.

Usually at this point in the edition, there’s a paywall that only paying subscribers can see below and hear more detail and analysis in the podcast above. But we’d love you to join the community of paying subscribers, who can read and comment on everything inside the paywall all the time and get access to our weekly ‘Hoon’ webinar on the news of the week on Thursday’s at 5pm here via YouTubeLive for an hour. The 50%-off offer is open to new subscribers until December 21. I also invite paying subscribers to again vote in our poll below on whether we should open up all our articles immediately to everyone until Gravy Day.

cheers

Bernard