If someone asked you how much of New Zealand was built upon, what would your guess be? 5% or 10%? More? Less? And to what extent would this affect your views on urban development and expansion?

There is a widespread view that too much of New Zealand is being built upon: along with cows, the main thing we are growing are houses, and that not only are there too many houses but they are also eating into valuable farmland and nature.

There are many reasons for this view, but at a popular level the main reason might be that growth and development happen in areas where people tend to move or travel. People also tend to go where other people are and then complain about there being ‘too many people’. Many folk see new development and extrapolate out to development they cannot see, which often does not exist.

A look at the numbers bears that out: less than 1% of New Zealand is built up, including landfill and highways. Clearly New Zealand is not filling up. Compared to other countries in Europe, New Zealand has very few people and very little land built upon. About 9% of the United Kingdom is built up and 15% of the Netherlands. Even the United States, with more than 300 million people, has only 5% built on land.

Of course, not all of New Zealand can be developed, but the notion that there is cause for concern at this point in time (or in the next few hundred years) is untrue.

As it is, New Zealand is both absolutely and relatively undeveloped. This is to be expected for a nation that is only 170-years-old and with a population of 4.4 million people and covering an area equivalent to the United Kingdom.

This background is important to understand as some of the key objections to so-called urban sprawl in housing policy, or the notion that New Zealand should be extremely concerned with towns taking up a bit of land, are well rehearsed.

There may be legitimate reasons why local authorities don’t like urban sprawl much, particularly around infrastructure, but abstract concerns about land being taken up should not be one.

Priced Out: How New Zealand lost its housing affordability was released by The New Zealand Initiative this week.

I was told the story of a teacher in Ontario who reluctantly participated in a project to improve her students’ learning. After several months she found that “her students performed better than she had even expected herself.” When she told her story, she wept. She felt she had let down hundreds of students over her 20 years of teaching by not having high enough expectations.

The power of expectations was demonstrated beautifully in 1968 in a seminal piece of research. Researchers deceived teachers into thinking a group of students were ‘late bloomers’ who would see great progress over the course of the year. Those expectations became a self-fulfilling prophecy. By the end of the year, the fake late bloomers became real late bloomers, with higher levels of IQ relative to their peers.

A culture of high expectations is one of the commonalities of high-performing education systems. Jurisdictions that have a way to go, like England, are attempting to change the culture in recognising how transformative higher expectations can be for children’s lives. It’s no longer excusable to say that a student from a poor background can’t achieve at the same level as someone from a rich background.

The Canadian province of Ontario is an example of a jurisdiction that has successfully changed the culture of expectations. In combination with a series of reforms to improve student learning, it seems to have had a bearing on results. Over a 10-year period, from 2003 to 2012, high-school graduation rates have steadily climbed from 68% to 83%.

Having low expectations is not to be confused with a lack of dedication. Teachers in Ontario were as caring and dedicated 10 years ago as they are today – it’s simply that they didn’t have a culture of believing that all students had the potential to learn and achieve.

So how did they change the culture? First, they identified and shone the light on ‘lighthouse’ schools that had progressed against the expected odds to show what is possible. Second, they provided funding to each lighthouse school to connect with a school that was struggling, matching schools by the demographic profile of their students so they could share their secrets to success.

In New Zealand, socio-economic background has a larger bearing on student achievement than it does in other OECD countries, and poorer achievement among Maori and Pacific students is often lamented.

Shining the light on failure identifies the problem. Shining the light on success has the potential to transform not only the expectations but also the reality of student success.

Privatisation provides an interesting case study for free-marketeers. Almost everyone is opposed to the notion, yet those same people often buy the stock. So what is it about privatisation that everyone hates?

There are at least three arguments why voters may dislike privatisation. First, there is Bryan Caplan’s voter bias argument. Caplan has argued that voters suffer from four sources of bias – an anti-market bias, an anti-foreign bias, a make work bias, and a pessimism bias. Privatisation as a policy hits all them. Government using markets to sell assets to foreigners who will lay off workers? That couldn’t possibly work.

Then there is Thomas Sowell’s conflict of visions. Privatisation as a policy goes to the very core of the political debate. What is the appropriate role and function of the state in civil society and in the economy?

For those of us who suspect the answer to that question is ‘minimal, at best’, privatisation is an uncontroversial policy. For others not so much.

The thing to remember is that elite opinion holds that the state can and should do more, not less. This remains the case 30 years on from the Thatcher, Reagan, Douglas, and Hawke-Keating eras.

State ownership has many plausible theoretical arguments to support it. The theoretical arguments for privatisation seems weak. It is the empirical evidence that supports the principle of privatisation for many people. But without a clear theoretical basis for the policy, we run into the third problem that privatisation policy faces.

The promoter’s problem suggests that you can’t always trust the person trying to sell you something. Given that voters have such poor opinions of politicians, this might be especially true for a privatisation policy. It is easy to believe that past privatisations may have been successful, but that is no guarantee that future privatisations will be.

To be sure, not all privatisations are successful and some can be described as having failed after the fact. But the rate of failure is lower for all firms.

To my mind, privatisation is always a good thing. But there is a sting in the tail. Very often the proceeds of privatisation are used to buy down debt – in other words, validate past irresponsible government spending. The capacity for debt and deficit is unlimited while the stock of government assets that can be sold off is limited.

The challenge is to embed privatisation schemes into a broader reform agenda.

Sinclair Davidson is Professor of Institutional Economics at the Royal Melbourne Institute of Technology (RMIT). He will be speaking at The New Zealand Initiative on Monday, June 17. There are some spaces left. Click here to register.
 

When the financial crisis started about six years ago, the global policy response was a mixture of monetary and fiscal stimulus. Governments increased spending and hoped for multiplier effects. Meanwhile, central banks slashed interest rates, and when that was not deemed enough, started purchasing assets on a giant scale.

Critics at the time pointed out that the extra government spending might only leave behind more debt and that the multiplier effect, if it existed at all, could be a flash-in-the-pan. They also warned that fresh injections of cheap money could lead to new bubbles that distorted prices and might not be reversible without causing considerable damage.

All such warnings were brushed aside. Politicians and central bankers claimed a) there was no alternative, and b) there would be a benign exit from these strategies as soon as the global economy returned to normal.

Well, six years down the track, it appears the critics have been right with their warnings all along. Despite the concerted efforts of fiscal and monetary policy, Europe, the United States, Japan, and Britain still have not managed to overcome their economic malaise. All their money bought were rallies in bonds, equities and property.

This is bad enough, but what is even worse is that there is no workable exit from their strategy.

Any piece of good economic news is now seen as a threat, and not as a positive. If the economy actually picked up, interest rates would need to be raised to prevent a sudden rise in consumer prices. After all, that’s what the world’s central bankers have been promising for years.

But now, the same central bankers realise they cannot do so without triggering price collapses in precisely those markets into which their ‘cheap’ money previously went.

It is a dilemma from which there is no non-scary escape. The central banks most heavily engaged in the policy of cheap money are condemned to continue their dangerous and ultimately disastrous policies if they do not want to risk a financial crisis that would make the global financial crisis look like a walk in the park. Neither can they continue current policy because that will only make the eventual correction even worse.

The global economy may appear to have calmed somewhat since those stormy days when Lehman Brothers collapsed in late 2008. But it’s just the calm before an even fiercer storm.

There are many facets to New Zealand’s housing affordability conundrum, but the bottom line is there is a shortage of houses, and there is a shortage of new houses (dwellings) being built.

Supply is not meeting demand as in other markets and prices are absorbing the difference.

Despite a richer and larger population, New Zealand’s rate of building since the 1980s has not reached the levels of the 1960s and 1970s. As a result, New Zealand’s new house building is lagging with a growing shortfall.

The number of new houses built dropped from a record 34,400 in 1974 to about 15,000 in 2012. Although New Zealand’s economy improved in the 1990s and early 2000s, housing completions have seldom reached the rate of new household formation.

The trend can be explained by several key changes to New Zealand’s economy, culture, and legislative arrangements in the past half century.

New Zealand’s historically high rates of home ownership were due, at least in part, to subsidised house building. This was a key plank of the post-War welfare state.

Capitalisation of the family benefit and 3% State Advance Corporations loans for new house building were extended to 7,500 applicants annually from the early 1960s to the mid-1970s.

However, along with withdrawal of the unaffordable building subsidies and a corporatist approach to building, there was a change in social norms.

This fear of ‘urban sprawl’ grew, and has resulted in urban limits and restrictive and prescriptive zoning. It has conferred a virtual monopoly market power on landowners at the city fringes.

As New Zealand has become more prosperous, green agendas of more affluent New Zealanders have trumped traditional egalitarian social aspirations, such as suburban homeownership.

Given that less than 1% of New Zealand is built upon even after including landfill and roads, fears of ‘using up all our farmland’ are grossly exaggerated.

Expectations have also changed.

Since the 1980s, houses in New Zealand have not only become more expensive but also bigger with better fit-outs. Many first-home buyers now have an unrealistic expectation of what standard of house is available at what price.

Although a slim majority of New Zealanders now think rising house prices are undesirable, the current policy quagmire has created a situation where the interests of those who are lucky enough to own property are often opposed to the interests of non-owners.

Priced Out; How New Zealand lost its Housing Affordability by Hon Dr Michael Bassett and Luke Malpass is being launched in Wellington on Tuesday 11 June.

The week when I was due to meet Michael Gove, The week when I was due to meet Michael Gove, England’s controversial Secretary of State for Education, New Zealand’s own Minister of Education, Hekia Parata, released a damning review of the New Zealand Teachers Council (NZTC) alongside a proposal to reform it into a more professional body.

This was timely. I was about to ask Mr Gove for his thoughts on strengthening the profession – something the proposed reform of the NZTC is aiming to do. This was also uncanny. England’s equivalent of the NZTC, the General Teaching Council, was also damned. Mr Gove scrapped it in 2010 claiming it was doing little to raise professionalism.

Broadly, the reformed NZTC would be independent from unions, more independent from government, and most importantly, led by teachers. It “would become the voice and face of the profession”.

Teacher unions in New Zealand claim to provide a voice for the profession, alongside the potentially conflicting mission of representing industrial issues. But teachers also need a platform for contributing to the debate and where they cannot be accused of acting in self-interest.

Unions are supportive; the New Zealand Educational Institute (NZEI), for example, called for “a voice that is not constrained by political, industrial, or sectoral perspectives”.

To their credit, unions have attempted to be this voice in the absence of the NZTC fulfilling its mandate to do so. Much of this comes down to resourcing. The unions’ resource base helps turn their volume up – loud. Full-time teachers pay eight times in union membership fees as for their teacher registration fees to NZTC.

The reformed NZTC is also proposed to be more independent from government. A professional body representing those who actually teach, free from ideology and government-of-the-day policy timed with the dance of electoral cycles, is critical.

Mirroring the reform in New Zealand, there is also discussion underway in England to establish a Royal College of Teachers. But my interview with Mr Gove revealed a crucially important difference – he believes that teachers, not politicians, should lead the way.

The legal structure, governance, and funding of the reformed NZTC will determine whether the professional body is truly owned and led by teachers. This is critical because real improvement in education has to be driven by teachers.

Mr Gove said that in England, the Royal College should not be “an arm of the state or an echo chamber for discontent”. The key challenge for Ms Parata is ensuring that the NZTC isn’t either.

Rose Patterson is working on The New Zealand Initiative's project on teacher quality. She has just visited the United Kingdom as part of her research. Watch Rose talk about her findings on our YouTube channel.

When New Zealand First leader Winston Peters delivered his ‘Supercity of Sin’ speech last Friday, it was a frontal assault on Chinese migration.

Despite his protestations that he and his party were not anti-China, or even anti-migration, the dog-whistling was all too clear. Mr Peters deliberately put Chinese migration in the context of prostitution, corruption, and drug and people trafficking – as if all of Auckland’s (and New Zealand’s) problems were an imported disease.

It is easy to point out how ridiculous such insinuations are. All it takes is a glimpse at crime statistics, and David Farrar’s Kiwiblog did just that:

What Winston will never tell you is that overall Chinese New Zealanders commit far, far fewer crimes than other New Zealanders … The Asian crime rate is 52 apprehensions per 10,000 population. Caucasians are five times higher at 254, Pacific 10 times higher at 545, and Maori sadly at around 25 times the rate at 1,240.

The picture is the same, not just for the general crime rate, but also for different types of crime: sexual crimes, burglaries, and robberies. Unless Asian criminals are simply better at evading justice, it is clear that they are less, not more, criminally inclined than other New Zealand residents of different ethnicities.

However, there are better reasons to be positive about Chinese migration than Asians just being more law-abiding people. As they say, you can be free of any vices without possessing a single virtue.

As it turns out, there is a lot that is virtuous about the Chinese.

Economic historian Niall Ferguson argues that the Protestant work ethic, which once made the West rich, has migrated eastwards. Asian countries are showing a greater passion for discipline, effort, and achievement than the old, industrialised world.

Nowhere is this more apparent than in the education results of Asian migrants. A few years ago, a study published in the American Sociological Review examined the Programme for International Student Assessment (PISA) scores of migrant children. It found that Chinese students in New Zealand performed better at maths than students from any other country.

Similar results were reported from other Western countries. Generally speaking, children of Asian descent were better than other migrants, and often also better than the native population, in educational achievement.

Far from demonising Chinese immigration in populist fear campaigns, New Zealand should be celebrating the opportunities and potential that Asian migrants bring to this country.

It is a difficult time for social democrats. Since the fall of the Berlin Wall and liberalisation programmes here and abroad, old school socialists and social democrats have struggled to come to terms with the changing tides of time. The more recent collapse of the Anthony Giddens inspired ‘third-way’ Clintonism and Blairism have added to these woes.

The political third way represented by these leaders is what former Clinton adviser Dick Morris called triangulation: a fancy term for the political practice of screwing your enemies by selling out your friends. It was politics, not ideology.

It was therefore interesting to read Professor Elizabeth Rata’s recent speech to the New Zealand Fabian society. (One of the few times you will hear about the Fabians from me!).

Rata argued that New Zealand’s old-fashioned social democratic egalitarianism, and its attendant commitment to redistributive justice and a concern for the wellbeing of the ordinary fellow, is being replaced by a new cultural identity politics. Commitment to fair shares is being traded in for correct identity on the amorphous ground of ‘culture’. She is concerned about universalism being lost to a set of different tribes. The key group Rata was concerned with in this address was Mâori, but the principle can be extended to many other groups.

This was interesting because it gave voice to a concern that has been plaguing (primarily, but not exclusively) the political left for some time. Since the collapse of a clear-cut economics of social democratic belief, the way to garner votes is to get a collection of identity politics groups, or groups concerned with increasing the social dividends to their constituencies.

The difficulty with this is that it may work as a political strategy for a while, but is profoundly anti-egalitarian because it prioritises who you are over what you do as a person. Surely this is the antithesis of social democratic or indeed egalitarian thought: that who you are by dint of birth should not affect your treatment by state or society.

And herein lies the rub for modern social democrats: without a modern commitment to fair shares, politics becomes little more than an exercise in knitting together groups of patronage, in a manner that rejects claims to universalism. No wonder the political left loves MMP so much – it entrenches tribes of support at the expense of the median voter and the common good.
 

By now, householders must be used to being exhorted by politicians, economists, and international agencies to save more.

Yet, some policies encourage them to borrow in order to save or invest. 

This is one likely effect of Kiwisaver subsidies. For some years, government led by example by contributing to the New Zealand Super Fund. These contributions were funded by not reducing government borrowing.

Some argue that higher household savings would reduce the balance of payments deficits directly, take the heat off the housing market, reduce the foreign capital inflow, and lower the exchange rate and interest rates, thereby promoting investment and economic growth.

Not so fast. Economics 101, circa 1970, posited that counterintuitively, a spontaneous increase in the propensity of citizens to save could reduce national aggregate savings. Here is why: Less consumer spending means less business turnover. Investment spending falls. The two combine to lower national income. Households have less money to spend and save. Unemployment rises. Aggregate savings could fall.

These are not the outcomes that those exhorting higher household savings have in mind.

Sure enough, after 2008, concerns that household spending was too low to sustain economic activity induced the IMF and many others to call on politicians to sustain government spending, at least until consumer spending confidence returned.

These calls for continued government spending, after decades of excess, must be among the most congenial public spending rationales offered to politicians.

Between fiscal years 2001 and 2009, core Crown spending per capita, excluding losses and finance costs, rose 31% faster than inflation and population growth. In 2008–09, spending was the highest in the history of New Zealand on this measure (around $15,750 in today’s dollars).

On the Budget 2013 figures, it will be fractionally below $15,000 in fiscal year 2015. This is still 23% higher than in fiscal year 2001. Government spending in 2015 will still be higher than in fiscal year 2008 on this measure. This is not fiscal austerity.

The public policy message for households is that they can’t win. They are apparently expected to save more, consume more, and pay more in taxes to close fiscal deficits.

Higher per capita incomes could achieve that. But this requires productivity growth. That’s a shame. Budget 2013’s productivity growth forecasts are dire. That is what this policy debate should focus on.
 

At first glance, the glowing reports about Finnish education make it sound like a magical fairyland. Some of the myths surrounding the legend of Finland’s education system are that teachers’ work is easy and there are no high-stakes tests.

Actually, teachers work very hard in Finland. But a lot of it starts before teachers even begin their training.

A prospective teacher first applies to one of 11 universities in Finland. It’s a popular career. Last year, the University of Helsinki received 1,800 applications for 120 places for its primary teaching programme.

The selection process is competitive and tough. The entry requirement is the Finnish matriculation exam or equivalent, a high-stakes exam at the end of secondary school (first myth busted).

A two-stage selection process begins next. In the first stage, applicants undertake a nationwide reading comprehension test (another high-stakes exam) that requires extensive preparation (hard work). This is a deliberate move to ensure only the most motivated and the brightest candidates advance to the second stage.

Stage two includes interviews, observed teaching, and group situations to filter applicants with the personal qualities to become a good teacher.

Next, all teachers, including primary school teachers, have to gain a specialised master’s degree (hard work) in education to begin teaching (second myth busted).

Figures support the view that teachers can finally relax once they start teaching, and the life of a teacher does seem easier in Finland. OECD figures on teaching hours show New Zealand teachers spend 50% more time in the classroom than their Finnish counterparts. US teachers spend more time still.

This doesn’t mean teaching is an easy job in Finland. One Finnish teacher told me she was really looking forward to the holidays. Teachers get tired in Finland, too. But how tiring must it be for a New Zealand teacher who on average works substantially more hours than a Finnish teacher does without being rewarded with nearly the same levels of student success?

Finland does better with fewer teacher hours. Some of this can be explained by very different schools and students in Finland and New Zealand. But it comes back to the issue of investing in teachers upfront and ensuring it is hard work to become a teacher in the first place.

Rose Patterson is working on The New Zealand Initiative's project on teacher quality. She has just visited Finland as part of her research. Watch Rose talk about her findings on our YouTube channel.

It was difficult not to be underwhelmed after reading the government and Auckland Council’s Housing Accord released a couple of weeks ago. It was a manual of what has failed in almost every housing market in the world and showed one common problem: everyone agrees to build more houses and sets an arbitrary target without following through.

The problem with targets is that they are often mistaken for action and if the target is not reached, momentum for change can be lost.

However, subsequent budget day announcements improved on the original accord.

The Housing Accord is a deal between the Beehive and Queen Street to cooperate on building 39,000 houses in Auckland over the next three years to ease the shortage of housing available for purchase.

The accord will create ‘special housing areas’ that will operate for the next three years while the Resource Management Act reform process and the Auckland unitary plan are finalised. The unitary plan provides for 400,000 houses over the next 30 years, and the accord aims to get about 10% of this number built in 10% of the time.

Simple enough, but it is a hugely ambitious objective. To reach 400,000 houses, the average build rate needs to be 13,300 new houses per year over the next 30 years. The targets for the next three years are 9,000, 13,000, and 17,000, respectively. The current rate is about 3,600, while the average for the past 20 years has only been 7,400 houses per year.

Put simply, we need to nearly double the current rate of building, but this plan is only for three years.

However, the accord aims to reduce the time taken to get consents from three years to six months for greenfields and to three months for brownfields.

Another positive sign is the announcement that the central government will intervene if the Auckland Council doesn’t fix its consenting regime. The potential for centralisation is not positive, but the creation of some (limited) competition between potential consent providers is.

It also overrides all existing plans from previous councils, including zones, the metropolitan urban limit, and so on, until the unitary plan becomes active.

It is a good start, and the identified shortage of housing as a driver of price by both levels of government is positive – but beware of targets.

The 2025 Taskforce’s 2009 report put New Zealand’s income gap with Australia (2008) at 35%. The Organisation for Economic Co-operation and Development’s (OECD) latest statistics for real GDP per capita show that the income gap with Australia increased to just under 41% in 2011.

But how robust is this estimate?

On the available official national statistics, the widening gap seems to be a robust result. Real GDP per capita rose by 3.6% in Australia between 2008 and 2012 and by 1.7% in New Zealand, according to the Australian Bureau of Statistics (ABS) and Statistics New Zealand, respectively.

On this national income account basis, the income gap appears to have risen from 35% in 2008 to 38% in 2012 (and 2011).

So should readers conclude that the GDP per capita gap is OECD's 41%, 38% or much higher or lower?

The best answer is that there is no clear answer. There are too many ways of measuring GDP per capita and adjusting for exchange rates to provide a non-contentious conclusion.

First, GDP per capita can swing around greatly from year to year because of changes in the prices of exports relative to imports. That can make international comparisons very sensitive to the choice of the base year prices used to express the volume of production in dollar terms.

For example, the 35% gap for 2008 was measured using OECD base year prices for 2000. The OECD has since shifted to base year 2005 prices. The gap in 2008 on this basis was 41%!

Second, national currency income estimates must be compared using market exchange rates, or some other method. The most widely accepted method uses purchasing power parity (PPP) adjustment factors. There are many ways of calculating these factors and several reputable international agencies use different methods. Many show the gap to be above 40%.

The National-ACT coalition agreement makes Treasury responsible for reporting on New Zealand’s economic progress on this and related matters.

Hopefully, Treasury will be able to decide on the most authoritative estimate of income gaps.

Budget 2013 confirms the government's determination to achieve fiscal surpluses by 2014/15 by stopping the growth in government spending. Adjusted for inflation and population growth, projected government spending in 2014/15 will be 6% lower than in 2008/9, the year in which John Key's government took office.

Given that in 2008/9 core crown operating spending was 34.5% of GDP, up from 28.6% in 2004, there was clearly need for tight control of government finances.

It would be hard to find any economist supporting the view that it was sound for governments to spend fiscal surpluses in good times and then raise spending further in order to 'cushion' any subsequent recession.

Even so, these projections represent a very commendable achievement given the pressures to further increase government spending and borrowing in the aftermath of the global financial crisis and the Christchurch earthquake. We only have to look at Australia, Europe, and the United States to see how different things could have been for New Zealand.

The Budget shows the government remains determined to continue its programme of significant welfare reform, increased accountability for outcomes in education, partial privatisation, reform of the Resource Management Act, and achieving cost savings and productivity gains from the public sector. The thrust to ease up the supply of land for housing is a more recent, but also welcomed, focus.

Even so, there is a big gap between what the government is doing and what might be done to allow New Zealanders to better achieve their potential. The outlook for economic growth, export growth and the unemployment rate leave much to be desired.

Taxes are too high because wasteful and unnecessary spending is too high, for example, on interest free student loans and on New Zealand superannuation. High tax rates hold back income growth.

Unemployment remains too high in part because labour laws discourage job creation and high effective marginal tax rates deter job search. The waste of human capability is bad socially and economically.

International competitiveness would be improved by more vigorous action to raise public sector productivity and reduce tax and regulatory burdens.

Predictably, but regrettably, the Budget does little to defuse the fiscal time bomb that an ageing population poses for future spending on health care and retirement incomes. There is much still to be done after this still-laudable budget.

Early this week, the government announced a rather distasteful plan. In return for giving regulatory favours to the Sky City Casino in the form of more favourable gambling regulations, the casino will build a massive conference centre.

The natty new conference centre, called the New Zealand International Conference Centre (NZICC) will allegedly provide 1,000 jobs during construction and 800 during operation – and attract 33,000 people per year. The government has evidently been persuaded that an international conference centre will be of such importance, that a special deal is justified.

Whether government should be involved in regulating casinos is another question, but given that it is, dishing out favourable treatment to one gambling provider in return for building a swanky convention centre surely breaches every rule of regulation. The law should be blind to the player, be rules rather than exceptions, and should not involve deals with individual players on the understanding they’ll do the government a solid deal.

What’s next, a meat works being given an effluent dispensation if it builds a kindergarten?

In this context, the ‘safe gambling’ precautions have acted as a useful smokescreen. Giving mates rates to a business would not fly in any other industry, because in other industries competition is valued. But it seems to be tolerated because of public concern about gambling.

There is also grounds to argue against it on poor taste: New Zealand will now have an international convention centre to attract the good and great (although it is unclear why it will attract people to Auckland as opposed to Singapore or Bali) directly funded by a gambling racket. The government is protecting a casino for a kickback: the conference centre.

Don’t misunderstand me, I am not against gambling and couldn’t care less how many pokies or blackjack tables Sky City Casino has. People are entitled to a punt. Gambling is as old as prostitution and regulating against it is about as successful as regulating against human nature.

However, this deal is low-rent stuff. It is not, as one business leader said, "a good example of creativity and sound planning." It is a worrying sign of crony capitalism, of which the public should be sceptical.

And judging by the polls on the matter, most people are.

This sent the Germans into ‘PISA shock’.

Much of the large difference in student achievement between low and high performers has been attributed to the class structure built into the German school system. In most German states, children go to primary school till the age of nine or 10, and are then separated into one of three types of school.

In the traditional system, kids who are deemed not-so-academically bright go to Hauptschule (secondary school), generally leading to blue-collar jobs.

The brighter kids go to Realschule (middle school), leading to white-collar positions.

The brightest kids of them all go to Gymnasium, a grammar school preparing them for university.

The 2000 PISA study found that a child whose parents went to Gymnasium, of equal ability to a child whose parents went to Hauptschule, is three times more likely to go to a Gymnasium. Children are "divided between those deemed to pursue careers of knowledge workers and those who would end up working for the knowledge workers, mainly along socio-economic lines,” says Andreas Schleicher, head of the PISA study at the OECD.

The good news is that following the two less academic forms of schooling, Hauptschule and Realschule, students from around age 15 can now enter the country’s vocational training scheme in Germany. This three-year programme sees young people spending three to four days per week doing an apprenticeship in one of 350 professions of their choice, and the remainder of their week studying theory in school.

Although Germany’s vocational training system is seen as one of its greatest educational successes, it’s still unfair for kids from poorer backgrounds. In many states, Hauptschule kids are less likely than Realschule kids to get apprenticeships. They are stigmatised because Hauptschule essentially serves the educational ‘leftovers’.

Recognising that the system is not fair for all, many states have combined Realschule and Hauptschule into one school type. This, and a raft of reforms introduced since the shocking PISA 2000 results, has resulted in improved performance, particularly among the low-performing groups.

Germany is a great example of a country reflecting on its performance and taking a serious look at its system. ‘PISA shock’ jolted the Germans to reform.