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By Pattrick Smellie

May 15 - Here's a radical thought for saving 22,000 jobs. I didn't think of it myself, the NZIER snuck it into their latest report on just what a tough Budget this is for John Key and Bill English.

Instead of giving the next two year's tax cuts, NZIER suggests cutting the ACC levy by the equivalent amount. According to the country's leading independent economic agency, that's worth 22,000 jobs.

Compare that to the somewhat measly - by comparison - 10,000 jobs that the NZIER says will be saved by the fiscal stimulus package already announced by the Government.

"Policies that reduce employment costs can create more employment per dollar spent than personal income tax cuts in the current environment," the Institute says.

So can obvious no-brainer changes to tax law of the sort announced this week relating to oil and gas exploration. Today's rules require a drilling rig to be in and out of New Zealand within six months unless the driller is willing to suffer significant additional tax liabilities.

That's a mad outcome. To force someone who has bothered to bring a drilling rig to the bottom of the world then to leave quickly makes no sense at all. And under this Government, whose conservative and wealth-focussed agenda becomes more visible by the day, there is no hesitation in going after valuable, carbon-producing minerals like oil and gas.

Speaking of that conservative agenda, the most intriguing aspect of this week's Families Commission imbroglio is the appointment of Bruce Pilbrow, a former Caltex senior executive who cut his teeth in marketing for Radio Rhema and who now runs a thriving, privately funded parenting initiative in Auckland. Backed by major corporate sponsors such as AMI Insurance, Air New Zealand, Toyota and a host of City Councils and lotteries grants, Parents Inc epitomises the kind of entrepreneurial, non-government delivery of social services that a more productive social policy environment might foster.

The fact that it also looks awfully like the kind of pay-off to the Christian Right of the sort that Nicky Hager derives income from is inescapable, as Key found to his cost in the firestorm created by Christine Rankin's appointment to the Commission. However, the important signal is the willingness to innovate outside bureaucratic structures, a feature of this Government's approach to policy-making elsewhere.

Similarly interesting to Bill English is the work of one-time Knowledge Waver Justine Munro's Centre for Social Innovation, which recently hosted former Tony Blair strategist Geoff Mulgan in seminars on new ways to unlock and deliver better social outcomes than a monolithic government agency is ever likely to produce.

English was already part-way down this track as Minister of Health in the Bolger Government and that kind of thinking is likely to be resurrected in this Budget.

One area where investment in future productivity is missing is tertiary education. While Key scrambled this week to extinguish suggestions that student loans would no longer be interest-free, English acknowledged that the big spending boost still occurring in education would be at the secondary level and below.

That puts a lot of acid on the quality of new policy covering research, science and technology, at a time when there is a growing, if reluctant, acceptance that the commercial imperatives on Crown Research Institutes are stifling creativity and innovation. Yet these are essential to New Zealand emerging stronger from the current world economic meltdown.

This is the second key point that the NZIER makes: " There are no free lunches – spending now has to be repaid so let's spend it wisely."

By that, the Institute means new spending should be on infrastructure that improves New Zealand's perpetually sickly national productivity.

However, it's not clear whether investment in knowledge counts as infrastructure spending.

As the Stock Exchange CEO Mark Weldon is demonstrating with his buy-up of agricultural publications and data sources, New Zealand's future is more clearly than ever in agriculture and that means a single-minded dedication to agricultural science and research which the Budget must acknowledge.

After all, every time Bill English takes his Crown car from Dunedin Airport home to Dipton, he passes farming assets that are worth the same if not more than the total market capitalisation of the NZX. That's worth thinking about.

The other naughty thought that NZIER pokes out there is the potential contribution of privatisations to balance up the Crown accounts which are heading into territory that will provoke a credit rating downgrade if not dealt with.

That's where the big piece of work on state-owned enterprise financial performance and transparency comes in. Around the traps in Wellington, the talk is of making SOE's subject to the same continuous disclosure requirements as a publicly-listed company. For some SOE's, that would be very scary and would quickly show up some pretty unexciting commercial performances.

At the same time, introducing that kind of rigour to SOE decision-making would quickly put them on a route to being valued and sold in the next term of a National-led Government.

Selling state assets remains almost unthinkable politically, but these days the unthinkable is the new thinkable.

Just look at the tumble the US dollar took this week when an influential Washington think-tank remarked aloud that maybe America's AAA credit rating was no longer deserved. Imagine if the world no longer felt it owed America a living. Imagine how much less it would owe a living to some pleasant but out-of-the-way debtor nation in the South Pacific.

We are some distance off that but that's the thing about the world economy at the moment: you can't take anything for granted.


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