The prime minister reckons chasing economic growth is the answer to what ails us. But there are many reasons to be sceptical, argues Gareth Hughes.

“2025 is all about going for economic growth,” says the prime minister. It was the central focus of his state of the nation address last week and he’s rejigging his ministers’ titles and the public science and foreign investment bodies to “unleash it”.

Having been the goal of every government since day dot, it’s about the most unoriginal clarion call a politician could ever make. The real question is – what growth, where and benefiting who?

Economic growth is a bit like running. You can run faster but if you’re running faster in no direction you are simply getting nowhere fast or worse, arriving quickly at a place you don’t want to be.

If the New Zealand economy was a runner, we’d be limping along with a bad stitch. Last year, 2,500 businesses went under, unemployment is at a four-year high and, excluding the Covid shock, we are in the deepest recession since 1991. Across a range of economic measures, the Economist has us coming in near the back of the pack at 33rd out of 37 OECD countries.

Is more economic growth the answer to what ails us? There are many reasons to be sceptical. Economic growth is measured by Gross Domestic Product (GDP) and it is a very narrow view of economic and national progress. High economic growth is not the same thing as a strong economy. 

We have known about the limitations of GDP for decades – oil spills, car crashes and new vape stores all boost it. GDP doesn’t take into account inequality, distribution of wealth or what we value as a society. GDP “measures everything except that which is worthwhile”, said Robert Kennedy 50 years ago. 

We should ask ourselves if GDP equals progress, how come the “richest countries” also have the highest rates of loneliness and biggest mental health crises? Even the economist who invented GDP, Simon Kuznets, warned it wasn’t a good tool to measure the progress of a country or the wellbeing of its citizens. 

Governments have focused forever on boosting GDP in the hope a rising economic tide lifts all boats. In reality the fruits of economic growth haven’t been shared fairly and decades of evidence has debunked trickle-down economics. WEAll Aotearoa’s research economist Paul Dalziel poses an interesting thought experiment – what do you think would happen to child poverty rates in a country that was 50% richer?

We did this trial here. New Zealand real per capita GDP grew about 50% between 1984 and 2014. What happened to child poverty in that generation? The absolute measure of child poverty was no lower in 2014 than in 1984 and the relative measure of child poverty was twice as high in 2014 despite 30 years of economic growth!

Despite the limitations, the government is doubling down on going for growth. Christopher Luxon says “when it comes to economic growth, we’ve slipped into a culture of saying no”. He wants us to say yes to more tourists, more mines in the conservation estate, more oil wells and, oddly specifically, more concerts at Eden Park.

We’ve chased economic growth for decades and the way we’ve gone about it has come at great cost. New Zealand’s unswimmable rivers, toxic mine sites, migrant exploitation and precarious, unsatisfying, low-paid jobs are testament to this fact. It’s the kind of mindset that led resources minister Shane Jones to say “if there is a mining opportunity and it’s impeded by a blind frog, goodbye, Freddie”. By focusing on the quantity rather than the quality of economic growth we end up squeezing the natural world and our people to increase the measure. 

This isn’t an argument to shrink our economy. At the moment our society is entirely structured around an ever-rising GDP and New Zealand’s deep recession is causing real pain in our communities. It’s like running faster and faster on a treadmill – if you slow down too much you risk catastrophically tripping off. 

We need to remember that even when the economy is growing quickly or described as a “rockstar”, too many New Zealanders are caught in cycles of poverty and despair, unable to find warm and safe housing or to buy sufficient food for the whole family. Economic growth accompanied by worsening social outcomes and climate catastrophe can hardly be considered progress.

We need to think smarter than just “unleashing economic growth”. There is a real risk New Zealand could weaken our long-term prospects by mindlessly chasing it. Every coal mine invested in over a renewable energy project locks us into a sunset industry and a hotter future. Focusing on tourism can perpetuate a low-wage economy and our lack of a capital gains tax, which almost every domestic and international economist recommends, leads to unproductive housing speculation. No country ever got rich selling houses to each other.

Every child growing up in poverty, every young couple locked out of housing, every scientist leaving New Zealand out of work and every dirty river undermines a stronger, healthier economy in the future.

The final word should go to Simon Kuznets, the creator of GDP, who nailed it in 1962: “Distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long term. Goals for more growth should specify more growth of what and for what.”

Nicola Willis, the new minister for economic growth, should ask, “Are we running faster towards a better future, or more of the same?”

Gareth Hughes is the director of WEAll Aotearoa and is a political commentator and former Green MP.