As the economy reaches a turning point, the pending Cabinet review of NZ Inc assumes fresh importance. NZ has been in recession since the end of 2007, long before the global financial crisis erupted. Now when the emergency phase has passed, the Govt must look to rebuild the economy, and unleash the drivers of growth. Ministers dismiss the idea there’s a silver bullet to fix the economy: they are conscious the Clark-led coalition raised expectations, and failed to fulfil them, with the so-called “Knowledge Wave” and the “Growth and Innovation” strategies, as at the same time the competitiveness of industries was eroded by the exchange rate, propped up by high interest rates which attracted flows of “hot” money stoking the housing bubble.

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The country’s fundamental problems still persist. For the Govt, moving towards the half-way point of its first term, but still riding the wave of support which swept it into office, the choices are stark. Tinkering with the engine won’t be enough. It has to be turbo-charged. To do this requires not only technical know-how but political courage. Firing up the economy involves political risk. The test for John Key and his Cabinet is about to begin. The Govt must establish a national narrative on how it proposes to close the gap with Aust’s living standards, as it pledged in the last election campaign.

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