Is globalisation good or bad? What will a job look like in 10 years time? And is tech coming to kill us all? We’re answering those questions and more in our new pop-up section looking at the changing New Zealand economy. Spinoff editor Duncan Greive explains what it’s all about.
Today we launch ‘The New Economy’, a pop-up section sponsored by Kiwibank, which will be home to a series of videos starring economist Shamubeel Eaqub and directed by The Spinoff’s very own José Barbosa. Both the section and the video series attempt to do the same thing: to get us all to think a little more critically about New Zealand’s economy – how it was made, the forces acting on it, and where it’s headed.
To some those are going to sound like dry topics, but I feel like they’re actually critically important for our society. So we’ve attempted to fill them with the chaos and humour which infects our whole site, and I hope they travel a long way. Kiwibank’s aim and ours is to get our audience to be more conscious in their consumption and think about where the dollars are going, and what they’re fuelling.
This is ultimately the argument which founded Kiwibank, and which continues to be the best argument in its favour: that while all the banks provide a very similar service, the profits of the New Zealand-owned institutions stay here, and Kiwibank’s flow back into the public purse through its ownership structure. The big four Australian banks are amongst the world’s most profitable, and New Zealand their most profitable territory on a per capita basis – yet their profits flow across the Tasman to their parent companies at a dazzling rate.
That is most powerfully demonstrated with ‘the ticker’, which sits in the advertising spaces throughout this section. It contains two numbers, which are being set in motion today, October 28. They’re based on Reserve Bank statistics, so are fundamentally rock solid. One shows the outflow of profit through the big four banks; the second, profit remaining in New Zealand through our (much smaller) locally-owned banking sector. The relative size and pace of growth of each number demonstrates in very powerful terms what is happening every day in this country – that while we have a solid and stable banking sector, we also have huge amounts of money flowing off-shore, unlikely to return.
This is part of a wider contemporary phenomenon: the movement of capital in the wake of the successive waves of globalisation and information technology that has permeated all open economies over recent decades. While often-maligned, that’s not the purpose of this section by any means. Globalisation has been amongst the most extraordinarily transformative forces of the 20th century, hauling billions of people out of extreme poverty and allowing the widespread distribution of consumer goods and services once the preserve of only the very rich and privileged. Among the infinite flow on effects: the devices which created a technological revolution that allowed us to found and quickly grow The Spinoff to a business with a dozen employees and a monthly audience of over 400,000 in a little over two years. Truly, we’re not complaining.
But globalisation is not without its challenges. In certain sectors in particular, a robust local alternative to dominant multinational players can serve as a balancing force which creates a better functioning market. More than one person has pointed out to me that Kiwibank lead interest rate cuts all the way down – as a startup looking to gain market share, that was a key way to win it. Inevitably, the Australian banks followed.
The big four were behaving rationally: they have vast home lending books and need margin to protect those from the kind of property related shocks which had proven so destructive in the US, Spain and Ireland in particular in the post-GFC era. Yet Kiwibank’s willingness to frequently pass on OCR cuts has helped save homeowners money across all banks, and ensure a better functioning market for all banking customers.
That’s not just important for mortgage holders. As Liam Dann pointed out in the Herald the other week, even after the passage of the Unitary Plan indicated that we might finally get the supply shock we need, banks are tightening up lending to developers again – because they’re even more exposed to housing now than they were in 2010. Without a substantial New Zealand-owned bank our entire economy is at the mercy of entities beyond our control.
None of this is to scorn the Australian banks for their behaviour. Simply to point out that what’s good for them and their balance sheets isn’t necessarily good for us all. As Shamubeel says at the end of the first video, it’s about finding a balance – between the good that a large and well-organised international banking presence in New Zealand brings, and the counterweight of locally owned and operated banks.
This piece is by way of explanation and argument – but also declaration. This is sponsored content, and will be flagged as such on the site. It is also, however, something that exercises me greatly. And we would not be hosting this, nor would I write this piece, if we didn’t wholeheartedly believe in the foundation on which the argument is built. Below is the first of the six videos, featuring an economist flying through space to explain the impact of globalisation, amongst other things. We hope you like it.
Starring: Shamubeel Eaqub
Directed by: José Barbosa
The New Economy content is brought to you by The Spinoff in association with Kiwibank.