New Government already seeing unintended consequences

The unfortunate thing about believing that government is the solution to every problem is the Law of Unintended Consequences. This law says that almost any government action will produce unintended, and generally negative, consequences. The new New Zealand Government certainly believes that it has the solution to every problem, real or imagined, that prevails in this country with literally hundreds of new policies in their manifesto and coalition agreement. But they are already seeing unintended consequences of their policies, even before they have had time to enact any of them.

The most obvious example of this was today's headline in Wellington's DominionPost newspaper reporting that the city is heading for its worst rental crisis ever, with a sudden contraction in the number of properties being offered for rent. Property Investor's Association president Richard Bacon blames the new government's policies including the Healthy Homes Guarantee Bill, which is intended to raise the standards of properties offered for rent, saying that many landlords are pulling their properties out of the rental market in anticipation of higher compliance costs. So rather than getting healthier homes, many tenants will be getting no home at all.

Another example is the increase of the minimum wage to $20/hour. Muriel Newman points out in this article (based on figures from the Ministry of Business, Innovation and Employment), that this increase to one of the highest minimum wage levels in the world could destroy over 60,000 jobs. So rather than getting higher wages, many workers will be getting no wages at all.

A third example is the new government's policy of building 100,000 new homes. The details of how they are to go about this are still sketchy but if the government funds and constructs these houses, it will have an enormous effect on our already highly constrained building industry, diverting resources from private house construction. The real cause of the lack of new houses is the Resource Management Act, which enables local government to severely constrain the supply of land for house construction and to impose huge compliance costs on builders and developers, but the government has said it will not touch this draconian law. At the same time, the government intends to pursue a looser monetary policy, which will further inflate the real estate bubble. I am prepared to bet that the unintended consequences of these policies will be to further reduce the supply, and increase the price, of new housing.

I could go on. One doesn't need to be a genius to figure out the unintended consequences of almost every one of the new government's policies - they are obvious to anyone with a basic understanding of economics and human nature. But those with faith in the religion of big government don't want to hear facts and reason.