Investment Gap Widening, Says Prebble
ACT leader Richard Prebble today told the government they must make the growing investment gap the number one priority in the Budget.
“They may want to spend and try to cultivate fair weather friends, but the government needs to acknowledge that investment in New Zealand has stalled.
There has been a flight of capital and skilled labour from the country,” Mr Prebble said.
He said that overall, investment in New Zealand had been rising through the 1990s to a peak in 1997 of $20.236 billion.
Since then it has fallen. In the mid-1990s New Zealand had a positive net migration rate.
However, since 1997, New Zealand has been losing more people than it has gained. In April 2000, some 217 New Zealanders left each day permanently.
“This net migration and the outflow of investment is creating an investment gap. ACT believes total new investment this year will fall below $17 billion. $10 billion investment is needed for the economy just to stay still,” Mr Prebble said.
“A report I have received says that to grow the economy at 4% with outward migration would require $27 billion of investment. So the investment gap needed to finance Dr Cullen’s predicted 4% growth is a massive $10 billion. Lack of investment will choke off economic growth.”
“In the budget there is no recognition that there is even a problem. The problem is compounded because last year New Zealand's net domestic savings were just $2,104 million, the lowest for the 1990s. Michael Cullen's ideas to use the tax system to save for us will only distort the country's investment.”
Mr Prebble said the budget should address how to attract investment in a global economy. Investors were attracted to New Zealand by the four pillars of the economy. The Fiscal Responsibility Act, the independent Reserve Bank, the Employment Contracts Act, and the open economy.
“Dr Cullen both before the election and as recently as last week has claimed that the pillars of the economy are secure. Investors do not agree. The spending increases in this budget are fiscally irresponsible. The Reserve Bank is being reviewed. The Employment Contracts Act is being repealed. The Sealord decision, the review of the Reserve Bank and the repeal of the Zero Tariff Act are not the actions of an open economy,” Mr Prebble said.