Accelerated depreciation, buy Kiwi-made core of Labour manufacturing policy
By Pattrick Smellie
April 17 (BusinessDesk) – The Labour Party has unveiled its pitch to the manufacturing sector, adding accelerated depreciation for advanced manufacturing and promising to target more government procurement from local firms.
Labour leader David Cunliffe launched the policy to an Auckland business audience this morning, adding the depreciation and procurement policies to the known suite of Labour’s approach for manufacturing, including research and development tax credits, lower power prices, a more active monetary policy to create “a more stable exchange rate” and a suite of sector-specific “Economic Upgrade” packages.
“Our aim is to influence investment policy overall,” said Cunliffe. “To change the culture of investment in New Zealand so that firms, entrepreneurs, and investors feel confident in developing world-beating ideas here.”
Cunliffe offered little detail on the accelerated depreciation policy beyond saying it would cost $30 million in its first year, rising to $70 million over time and would target “advanced manufacturing”, defined by the Ministry of Business, Innovation and Employment as high and medium-high technology.
“We envisage extending it to all manufacturers over time,” said Cunliffe.
Economic upgrade packages, such as the one already announced for the wood processing industry, would be rolled out for other sectors.
On government procurement policy, Cunliffe pledged a target to increase by $200 million the value of contracts let to New Zealand rather than foreign firms, while remaining compliant with World Trade Organisation rules. That would be worth around 2,000 jobs, he said, citing low quality rolling stock bought from China by KiwiRail and the impending billion dollar revamp of the Inland Revenue Department’s computer system as examples where local industry should be able to participate.
Resumption of the Labour policy, dumped by National in 2009, of a 12.5 percent tax credit for research and development expenditure, was also reconfirmed.
Cunliffe rejected the mindset of “New Zealand as a tiny boat adrift in the turbulent seas” with “no alternative but to passively ride the cycle of global commodity prices”, characterising this as a “Thor Heyerdahl approach to economic strategy.”
“It creates a ‘Kontiki’ economy that drifts with the current, without a rudder or an engine,” he said, referring to the 1947 trans-Pacific crossing by Heyerdahl, a Norwegian ethnographer, in a hand-built raft to demonstrate ancient peoples could make long sea journeys.