Prebble's Pre-Budget Presentation To WCC
Pre-Budget Presentation: Wellington Chamber of Commerce
Wednesday 7th Jun 2000 Richard Prebble Media Release -- Economy
ADVANCE EXTRACT FROM HON RICHARD PREBBLE’S PRE-BUDGET PRESENTATION TO WELLINGTON CHAMBER OF COMMERCE 12.30pm Thursday June 8 2000
“New Zealand faces an investment gap. The New Zealand economy needs an estimated $10 billion a year just to stand still.
To produce four percent GDP growth the economy requires a minimum of another $11 billion and perhaps as much as another $17 billion. That is, to grow the economy at its maximum rate requires between $21 billion and $27 billion of investment.
The New Zealand economy has never attracted this level of investment. The highest level was in 1997 of $20.236 billion and it has been falling ever since. In the last six months, anecdotal evidence shows investment has fallen dramatically.
Attracting sufficient investment to achieve a growing economy and jobs has been a chronic problem.
New Zealanders are not good savers so the country needs to attract overseas capital.
A flight of capital began when Winston Peters was Treasurer. The flight has grown. Reports note that companies that account for up to 60% of the New Zealand stock market capitalisation could be shifting off shore.
ACT is not aware of any new significant investment announced in the last six months not decided upon last year.
The banks’ surveys of business investment decisions indicate that all businesses, large and small, have put away their chequebooks.
Despite the high export prices from the low dollar, neither tourism nor farming appears to be ready to invest.
The Reserve Bank, Treasury and private forecasters' predictions of economic growth assume that capacity constraints will be overcome by investment. This is not necessarily so.
Investment depends on confidence, and remarkably the coalition has produced a collapse of confidence in the middle of a cyclical upswing.
The coalition underestimated the effect on business investment of its ACC re-nationalisation and the radical Employment Relations Bill.
Labour and Alliance Ministers, having been out of office during the 1990s, just do not understand how in a global economy investment and capital are mobile.
Why invest in New Zealand when US Treasury bonds pay 6%?
Why should our skilled young people who have training that has cost taxpayers hundreds of thousands of dollars stay to pay 39 cents tax when they can earn more overseas?
The budget does not deal with either problem.
I do not rule out the possibility of a major back down by Labour over the Employment Relations Bill. Advisors have told the government to make major amendments.
Every day the coalition delays in announcing what changes they will make is another week that investment decisions are not made.
Michael Cullen is going to see his budget shadowed by the Employment Relations Bill.
The smart move for the government would be to stop their worthless cancelling of straw man policies. Announcing that government is not going to adopt the Alliance parental leave policy, or the Alliance youth minimum wage policy, or the Alliance holiday manifesto does not restore business confidence.
Business never thought that Labour was going to try and implement these policies.
Business wants to know now whether the Employment Relations Bill is going to proceed as written. If not – what changes will be made?
Nothing in the budget will change the refusal of business to invest until Cullen and Clark back down over allowing unions to strike for multi-employment agreements; remove union monopoly rights from the Bill and reduce the compliance costs of the Bill.
The government needs to get on top of its coalition wrongs and realise that every day they delay in announcing a real change in policy over the Employment Relations Bill is another day business won’t invest in New Zealand.” ENDS For further information please contact Richard Prebble on 025 753 128