Published in The Australian (Sydney), 8 July 2026
Fourteen New Zealand restaurants picked up a Michelin star last week, the first time Michelin had rated New Zealand at all. One reached two stars. None got three, the rating Michelin reserves for restaurants worth a special journey. New Zealand is, of course, always worth a visit, apparently just not for its restaurants.
The government paid Guide Michelin NZ$6.3 million out of its tourism budget to include New Zealand in its ratings.
Tourism Minister Louise Upston said the result confirmed what New Zealanders already knew about their food, though she did not say what that was.
Prime Minister Christopher Luxon was blunter, noting that New Zealand at least has a Michelin Guide, unlike Australia, which declined to pay for one. That is one way to win a contest.
Pity the inspectors only bothered visiting four of New Zealand’s cities, so plenty of its superb regional food went unnoticed.
That should be a minor embarrassment for a food guide, except that the guide is not really about food. It is a government strategy to develop markets and industries.
Governments on both sides of the Tasman have long believed that, if only they spend money with enough conviction, markets will come to agree with them.
Australia’s Treasurer believes it too, and he has found a guru to back him up. Jim Chalmers likes to cite Mariana Mazzucato, an Italian-born economist at University College London, when he talks up the Albanese government’s signature industrial policy, Future Made in Australia.
Mazzucato made her name arguing that the state, not private enterprise, quietly built the technology behind the smartphone. Her big idea is that market failure is more common than economists think. If nobody invests in the goals she believes matter, that counts too. Governments should act like venture capitalists, pouring money into selected enterprises, the way the Apollo program put men on the moon.
It sounds like a novel insight, but it is just old-fashioned industrial policy with a flash new label.
Market failure, in conventional economics, has a specific meaning. It can be a public good nobody will build because no one can be charged for using it. It can be a cost dumped on somebody else, or a deal that falls through because one side knows what the other lacks. In each case, economists say the market has failed. Governments cannot necessarily fix these failures.
Mazzucato is at least upfront that she takes a wider view of market failure. Fixing a market that exists, she has written, is a different job from building one that does not. She counts the latter as failure too.
Chalmers has seized on the looser definition as an excuse to fund his preferred projects. The Treasurer calls the lack of government funding for quantum computing a market failure, although the market has obviously not broken down. On that basis, Canberra and Brisbane have already put $940 million into one venture, PsiQuantum.
There is nothing new in a government trying to build industries the market will not. New Zealand tried it after the oil shocks of the 1970s. It was called Think Big.
Worried about oil prices, Prime Minister Robert Muldoon decided the government would simply build the industries the market was not building. It put up a synthetic petrol plant at Motunui and expanded the oil refinery at Marsden Point.
Then came a methanol plant at Waitara, and a plan to make the Glenbrook steel mill five times bigger. Treasury advised that the steel project carried a net present value of minus $225 million, a polite way of saying it would lose money before a single tonne was made. Cabinet approved it anyway, weeks before an election Muldoon badly wanted to win.
Public debt went from NZ$4.2 billion when Muldoon took office to NZ$21.9 billion when he left it, nine years later. Together, the Think Big projects are usually costed at between NZ$7 billion and NZ$11 billion in the money of the day.
Then the oil price, on which the whole bet rested, collapsed instead of climbing. By 1984 New Zealand was in a currency crisis, its debt swollen and its foundations weakened. Think Big had helped load the country up for the fall.
New Zealand’s failure should have been a warning against this kind of scheme. But Australia soon ran a smaller version of the same experiment. I saw that one up close. In 2008 Canberra put $6.2 billion into a car industry rescue dressed up as a green plan.
The money went to Toyota, which needed none of it, and to GM Holden and Ford Australia, which needed plenty. Industrial policy is usually accused of picking winners. This scheme, I wrote in a 2009 paper for the Centre for Independent Studies, could not even manage that. It was subsidising winners and losers alike.
The industry did not thank me for it. Andrew McKellar, then head of the Federal Chamber of Automotive Industries, called the analysis “cynical” and “misguided”, the product of an ideological paradigm with “little or no basis in reality”.
Reality caught up with the industry soon enough. By 2017, Australia’s car factories were gone, and decades of subsidies had bought nothing except a later closing date.
None of this means governments should never engage in industrial policy. Real market failure does happen. The strongest case is basic research, whose gains flow to everyone, not just to whoever funded it. That is what Mazzucato’s smartphone story shows: governments funding science, not picking companies.
But quantum computers and mineral refineries are not that kind of case. Their gains are private and patentable. The technology exists somewhere, and so does the capital. It has simply not chosen to land in Adelaide or Auckland. Calling that market failure is not economics. It is a spurious justification for a spending decision that had already been made.
New Zealand’s Michelin bill is a rounding error next to Think Big or the Australian car plan, but the underlying belief is the same: if a government wants to promote an industry badly enough and pays for it, the world will follow, at least for a while.
Chalmers’s mission economy will now run the same experiment with far bigger numbers. Wellington could have saved him the trouble. Pay your favourite companies by all means, but do not be surprised if the third star never comes.
