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Some Sensible Polices To Secure Our Future

Some Sensible Polices To Secure Our Future

New Zealand Chambers of Commerce and Industry Election Manifesto 2005

The New Zealand Chambers of Commerce and Industry has no political allegiance. One of our strengths over our 150 year history in New Zealand is that we bring a practical and pragmatic view to political issues, particularly those of direct interest to our 22,000 members in 31 Chambers of Commerce operating throughout New Zealand.

NEW ZEALAND CHAMBERS OF COMMERCE AND INDUSTRY

The Chambers exist to promote, support, and encourage sustainable, profitable businesses. Business is the key wealth creator in our economy.

Sustainable, profitable businesses provide economic growth and ensure that additional resources are available to support our communities and create jobs for New Zealanders.

For businesses to achieve this, they themselves require an environment that is supportive, and a culture that encourages, rewards, and celebrates success in all its forms.

POLICIES FOR SUSTAINABLE BUSINESS GROWTH

To achieve sustainable growth, Government policy must be actively probusiness.

The Government cannot run the business sector, but it can support it and remove barriers to its success.

New Zealand Chambers recognise that sustainability involves economic, social and environmental dimensions.

. Government recognition of business as our economy’s wealth creator. Provides predictability in government policy and creates the foundation for successful government/business partnerships.

. Acknowledgement of the compelling link between sustainable, profitable business, economic growth and the well-being of our community and the individuals within it. Gears policy towards greater reliance on positive business and economic growth, and decreased reliance on welfare.

. The lowest possible tax base. Encourages investment and encourages people to see New Zealand as a great place to work.

. A low inflation environment. Brings predictability to the business environment, enhances the cost competitiveness.

. An emphasis on commercial research and development fostered and encouraged by the government. Allows the development of leading edge technologies, provides new opportunities and contributes to the effective differentiation of products and services.

. Leverage of the natural capital of our country through the use of information technology, biotechnology and production technology, and the active promotion of a positive enterprise culture. Maximises business opportunities nationally and globally.

. A high skill base and .exible labour market. Enhances capabilities and maximises output.

. Minimal compliance costs. Allows business to focus on core activity and assists international competitiveness.

. A .exible immigration policy. Increases our skill base.

. A supportive infrastructure. Allows the cost-effective production and distribution of products and services.

. An open economy. Removes distortion and reduces costs.

. A low tariff, low subsidy operating environment. Facilitates market activity.

. Positive government/business partnerships. Gives strength and focus to mutually-agreed outcomes.

. Strong international strategic alliances: government-to-government and business-to-business. Increases market access, enables easier identi.cation of market demand and provides technology-sharing opportunities.

ELECTION MANIFESTO 2005

In the run up to the 2005 General Election several issues stand out as requiring the attention of all political parties: . Sustaining strong growth in the economy, particularly through productivity growth;

. Improving New Zealand’s export performance;

. Controlling the size of Government;

. Investing in New Zealand’s infrastructure – particularly roads;

. Improving security of supply of electricity;

. Kyoto Protocol . Restoring con.dence in our education sector.

This booklet has been prepared to assist all political candidates and parties address these issues. In it we give advice on what needs to be done to achieve necessary outcomes in these key areas.

Where we are critical of past performance we are not pointing the .nger at any party or parties. Issues such as roading infrastructure have been neglected by all Governments for the past thirty years. Likewise problems in the electricity and education sectors have their origins in policies implemented by Governments which have one way or another involved most of the political parties currently represented in the New Zealand Parliament.

Our purpose is therefore not to criticise past problems or performance but to recommend what needs to be done in the future by what ever Government emerges from the 2005 election. Our policy recommendations are both practical and pragmatic and we believe that they can be easily adopted by all political parties wishing to implement business friendly policies.

GROWTH

New Zealand has enjoyed strong growth in recent years. This performance has been in part reward for the pain experienced in years gone by for the introduction of essential reforms. It has also re.ected an upswing in net migration, high prices for commodities, and a particularly buoyant property and construction sector. The Chambers of Commerce want to see New Zealand’s levels of growth continue to be in the top half of the OECD for many years to come. To achieve this goal the Chambers believe strongly that Government should be seeking to achieve an annual growth rate of around 4% per annum for the next 10 years.

The growth generated in recent years has been achieved by New Zealand producing the best labour market utilisation levels in the OECD.

As a consequence we have the OECD’s lowest unemployment rate. While this is to be applauded, this is not all good news. Our high labour utilisation growth has allowed us to mask one of the lowest labour productivity rates in the OECD, and with our economy operating at near full employment, future economic growth is going to have to depend on a major improvement in productivity growth.

The New Zealand Chambers of Commerce and Industry welcome the emphasis being placed by the current Government on workplace productivity and believe that this a very positive step in the right direction.

We look forward to this work continuing after the election by whoever is the Government.

The Chambers believe, however, that there are some key drivers of productivity beyond the workplace and that these need to be as much in focus in future Government policy. Issues such as transport infrastructure, telecommunications infrastructure, education, the take up by business of technology, and research and development expenditure are all critical to the country’s productivity performance also.

The serious shortage of skilled labour is another issue impacting on our productivity performance. In part the answer to this problem lies in our education system, in part in vocational training, and it cannot be seen in isolation from our immigration policy. As it is not possible for our education system to respond in the short term to resolve current skills shortages, the Chambers of Commerce and Industry will be looking to Government to lift immigration quotas for skilled and business migrants and the means by which increased levels of skilled migration can be facilitated.

IMPROVING EXPORT PERFORMANCE With an economy of just over 4 million consumers it is critical for the growth of the economy that as many New Zealand companies as possible have the potential to export their goods and services, that the goods and services produced are internationally competitive, that New Zealand does all it can to maximise value from its exports, and that New Zealand exporters face the best possible access conditions in export markets.

Studies continue to show that most of New Zealand’s goods exports are concentrated in a relatively few companies. It is essential that this pool of export capable companies be expanded. Both Government and the private sector can play a role in achieving this expansion.

Following the forthcoming election the Chambers of Commerce and Industry would like to see Government review all programmes currently in place to ensure that they are appropriately targeted and that they are designed to attract the widest possible expansion in export interest. It is particularly important that Government programmes seek to involve the private sector as a delivery partner, that they emphasise the importance of expanding higher value manufactured goods and services exports.

The Chambers also wish Government to review remaining areas of industry protection in New Zealand. Supports such as import tariffs, and professional registration requirements can act to discourage international competitiveness and should be removed as quickly as possible.

The Chambers of Commerce and Industry support the Government’s international trade policy initiatives and want to see FTA partnerships expanded to include India, Japan, Korea, Taiwan, US, Canada, Mexico, EU and EFTA. The Chambers would also support increased resource being put into the current WTO negotiations. The Chambers want as much emphasis placed on achieving high quality outcomes in these negotiations on non-agricultural goods, and services as we do on agriculture. The Chambers also believe that the Government should move quickly to join the WTO Agreement on Government Procurement.

THE SIZE OF GOVERNMENT

The size of Government is also an issue of relevance – to the productivity agenda and the wider health of the economy. In New Zealand, governments (central and local) are responsible for around 40% of the economy and directly in.uence the behaviour of the remaining 60%. Government in New Zealand has rarely set the trend for productivity growth.

Source – 2004 Crown Financial statements and Budget Economic and .scal update The New Zealand Chambers of Commerce and Industry have argued for several years that Government – both central and local – should be seeking to reduce, rather than increase its size as a proportion of the economy.

To achieve this, the Chambers have been arguing that Government should restrict its annual growth to 1% a year – lower than the growth in the wider economy. Constraining growth in Government expenditure to 1% should reduce some of the pitfalls of “Big Government”: intrusive regulation, inef.cient public agencies, and lobbies for favours at the expense of others. It should also reduce the proportion of people’s income which will be put aside to pay taxes. This will increase incentives to work, and to invest in productivity.

It is a real concern to the Chambers that in 2005 many local government councils are proposing rates increases that are well above the rate of in.ation and the projected growth in the economy. The lack of scrutiny given to the growth in local government, and the quality of local government expenditure, is another issue that should be on the agenda for central government in the years ahead.

A recent OECD report on the New Zealand economy has rightly raised concern at the in.ationary pressures on the economy, and has suggested that any easing of .scal policy will force the Reserve Bank to increase interest rates. However, this is being misinterpreted by some to suggest that tax cuts would lead to higher interest rates. This is not the case. Tax cuts

– particularly well targeted tax cuts aimed at improving productivity

– would not necessarily increase interest rates. Indeed tax cuts coupled with reductions in Government expenditure – or increases in the quality of Government expenditure are more likely to decrease in.ationary pressure – and therefore pressure on interest rates, than current policy settings which foresee continuing growth in Government expenditure. The Chambers of Commerce and Industry are .rmly of the view that pressure is mounting for some reductions in tax rates and that company tax rates will be a good place to start this process.

INVESTMENT IN ESSENTIAL INFRASTRUCTURE IS THE BEST GOVERNMENT EXPENDITURE

One of the most obvious constraints on growth and productivity in our economy is the state of our infrastructure. We have underinvested in road, rail, airports, sea ports and telecommunications for too long and the resulting bottlenecks are impacting negatively on our economic growth and economic growth potential.

Of these problems the situation facing New Zealand roads is the most acute. Auckland, Waikato, Tauranga and Wellington are facing the biggest challenges. Rectifying this problem must be amongst the highest of priorities for the next Government. Our .rst world economy just cannot maintain its position with a third world roading infrastructure.

A substantial increase in roading expenditure over the next ten years above that already programmed is going to be essential if we are going to turn this situation around. The expenditure also needs to be prioritised so that the particular problems being faced by Auckland, Wellington, the Bay of Plenty and Waikato are solved without compromising vital interests in other areas.

ENSURING CERTAINTY IN SUPPLY FOR ELECTRICITY

Along with roading, the availability and certainty of supply of suf.cient electricity at an internationally competitive price to allow the economy to grow, is a key concern for the New Zealand Chambers of Commerce and Industry. The fact that Transpower cannot guarantee supply to all areas in the winter of 2006 increases our concern.

Recent announcements by companies such as Meridian on boosting production capacity from renewable generation technology is encouraging.

We hope that all the proposals on the table can secure necessary consents. Failure of any important projects because of the Resource Management Act process will lead to renewed focus on the effectiveness of the RMA.

Decisions on the transmission of electricity to major users likewise face a range of obstacles in the planning processes. Again, the New Zealand Chambers of Commerce and Industry are looking to Government at Central and Local level to ensure that the RMA is used as intended, and that unnecessary obstacles are not put in the way of key decisions.

It is essential that the principle of national interest is recognised in these processes and given due consideration.

Pricing remains a key concern for Chamber members. The Chambers are keeping the operation of the current market under review. In this regard, the Chambers welcome the creation of an industry regulator – the Electricity Commission, and wish to see the Commission continue in this role following the General Election.

The Chambers are concerned that the Government’s proposed carbon tax is going to increase the cost of electricity. We oppose the carbon tax because we don’t believe it is the right instrument. If it is introduced the extra revenue raised by the carbon tax from electricity must be reinvested in measures which increase the ef.ciency and security of supply and which focus on making electricity usage by industry and the general consumer more ef.cient.

KYOTO PROTOCOL

The New Zealand Chambers of Commerce and Industry and many others inside and outside of Government have been saying that the Government’s Kyoto maths did not add up for years, only to be told repeatedly by Government Ministers and of.cials that we were wrong. Now we are being told that we were correct. Rather than feeling a ‘we told you so’ type satisfaction we are deeply alarmed .rst, that such an error has been made, and second, that the basis for such an important policy change was clearly so deeply .awed. The Government has admitted that its cost bene.t calculations were wrong. Incredibly, they have discovered this too late. We can’t withdraw from the Kyoto Protocol until 2008.

Noting that this is a policy area that has been supported by both National and Labour led Governments the New Zealand Chambers of Commerce and Industry want answers on a range of issues:

. How could this mistake have been made?

. What is being done to ensure that serious errors are never made again?

. Are the of.cials and/or Ministers responsible for such an enormous error being held accountable and how?

. Now that we know that the Kyoto Protocol is going to be a net cost to the economy, is the Government prepared to consult afresh with business and other interested parties with a view to considering the possibility of withdrawing from the Protocol in 2008 as we are entitled to do in accordance with Article 27 of the Protocol?

We welcome Government’s commitment for a peer review of the analysis that suggests that the Government’s earlier assessments were wrong But more needs to be done. The Chambers of Commerce and Industry want to know how this problem has developed, and we need to make sure that Government gets better advice in the future. Poor public policy and poor analysis are dangerous ingredients in any democracy.

We also need to assure ourselves that the Kyoto Protocol is the best vehicle to achieve the worthy policy aim of reducing greenhouse gas emissions. If we conclude that the Protocol is not the best way forward then we should exercise our right to withdraw.

RESTORING FAITH IN OUR EDUCATION SYSTEM

The New Zealand Chambers of Commerce and Industry have been very concerned about the problems emerging in our education sector over the past few years. First, we saw a loss in con.dence in some specialist training institutions from offshore markets – particularly China. More recently we have seen a range of problems emerge with NCEA – The serious inconsistencies in last year’s scholarship results being the most obvious.

In both cases the Chambers believe the buck must stop with the Ministry of Education and the New Zealand Quali.cation Authority.

Recent administrative and corrective processes at NZQA are a step in the right direction, but we don’t see any accountability yet from the Ministry of Education.

The Chambers of Commerce are .rmly of the view that the restoration of faith in our education system must be one of the highest priorities for the next Government. If this requires increased expenditure – then we would support this.

Work done by the Chambers in talking to key players in the education system suggests that the problems in the sector are well understood.

Government must play a leadership role in assisting the education sector to ensure the delivery of high standard education by all New Zealand institutions, and ensure that last years problems with the NCEA exam system are not repeated.

POLICY OUTCOMES

Growing the economy by growing productivity

. Government should target annual growth of 4% a year.

. Future economic growth is going to have to depend on a major improvement in the productivity growth.

. Issues such as transport infrastructure, telecommunications infrastructure, education, the take up by business of technology, and research and development expenditure must also form part of the country’s productivity agenda.

. The Chambers of Commerce and industry will be looking to Government to lift immigration quotas for skilled and business migrants.

Improving export Performance . Government needs to work with the private sector to help up skill exporters and widen the export base.

. Government should remove protection which operates to keep areas of the economy uncompetitive.

. We want to see FTA partnerships expanded to include India, Japan, Korea, Taiwan, US, Canada, Mexico, EU and EFTA.

. The Chambers would also support increased resource being put into the current WTO negotiations.

. The Chambers want as much emphasis placed on achieving high quality outcomes in these negotiations on non-agricultural goods, and services as we do on agriculture.

. The Chambers believe that the Government should move quickly to join the WTO Agreement on Government Procurement.

Reducing the size of Government

. The Chambers have been arguing that Government should restrict its annual growth to 1% a year – lower than the growth in the wider economy.

. The lack of scrutiny given to the growth in local government, and the quality of local government expenditure, are further issues that should be on the agenda for central government in the years ahead.

. Pressure is mounting for some reductions in tax rates and that company tax rates or well targeted cuts aimed at encouraging productivity growth are a good place to start.

Investing in essential infrastructure

. A substantial increase in roading expenditure over the next ten years above that already programmed is going to be essential if we are going to turn this situation around.

. The expenditure also needs to be prioritised so that the particular problems being faced by Auckland, Wellington, the Bay of Plenty and Waikato are solved.

Ensuring electricity supply

. Ensure that the RMA does not act as unnecessary impediment to proposed electricity generation expansion or decisions on the transmission of electricity to key markets.

. Keep the Electricity Commission going following the General Election and ensure that its operation remains ef.cient.

. We oppose the carbon tax because we don’t believe it is the right instrument.

. We want Government to review policy in this area with the private sector to ensure that the best policies are being used to reduce emissions.

. Extra revenue raised by the carbon tax from electricity must be reinvested in measures which increase the ef.ciency and security of electricity supply and which focus on making electricity usage by industry and the general consumer more ef.cient.

Kyoto Protocol

. Government must consult afresh about the Kyoto Protocol.

. Government and business need to agree on whether the Kyoto Protocol is the best vehicle to achieve the worthy policy aim of reducing greenhouse gas emissions.

. If we conclude that the Protocol is not the best way forward then we should exercise our right to withdraw.

Restoring faith in our education sector . The Ministry of Education and the New Zealand Quali.cation Authority must be held fully accountable for the sector’s problems;

. Government must act quickly to ensure that standards are delivered throughout the sector;

. Government must ensure that variations in the standards for marking NCEA exams must not be repeated.

. Any extra resources required to restore full credibility in our education sector should be provided as a priority by the next Government.

ENDS

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