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ACT's Policies for Creating Prosperity

Weekly Column by Dr Muriel Newman

My family immigrated to New Zealand in the fifties because of the opportunities for poor families to get ahead - excellent health and education systems, full employment, and a standard of living that ranked third-highest in the developed world.

On Monday I will watch my daughter leave our country to seek better opportunities abroad. She will join her brother who has already left. With hefty student loans to pay back, they have discovered that on entry-level graduate salaries, it is impossible to get ahead. So the cycle is complete: as a child I came to New Zealand because it offered a high standard of living. Now my kids are leaving because our living standard is so low - 21st place out of 30 OECD countries.

Nations like Singapore that used to be poor, Third World countries, have become some of the most prosperous in the world. The reason for our decline has been largely due to politics. Over the years, politicians have introduced laws and regulations based either on a genuine attempt to improve the country or on a calculated effort to buy votes.

Few politicians, however, have ever had a vision of jobs, growth and prosperity. In fact, over the last eighteen years since 1984 when New Zealand was on the brink of bankruptcy, we have only had four years where our Ministers of Finance were willing to adopt plans for growth - Roger Douglas did so in the mid-eighties and Ruth Richardson in the early nineties. In both cases, their leaders and colleagues lost their nerve because sticking to a plan for growth needs courage, discipline and commitment.

While making unpopular decisions is something that families do on a regular basis - "if you don't eat your vegies you can't have any pudding"; "you can't buy those jeans because we're saving up to go on holiday" - it is something that politicians, whose re-election depends on their popularity, find extremely difficult.

It has therefore been a lack of vision and courage that is holding New Zealand back. Last month's Budget sets where Labour intends to take the country. I searched for their way of halting our slide to Third World status. Instead I found that in spite of having had the best export prices for years, the government's projections for growth show they are planning to continue our decline. The government inherited a 4 percent growth rate, needed to retain our relativity in the OECD. They have delivered us 2 ½ percent growth and their projections show that we are headed for 2 percent in the medium future.

With a focus on buying votes, this government has failed to arrest our slide. It has failed to deliver any hope of better overall incomes. So what is a plan that would change the inevitable continued decline? It's not hard to find examples of basket-case economies that have been transformed into prosperity. Ontario and Alberta in Canada, and Wisconsin in the United States spring to mind because they have all successfully used same three-pronged approach: lowering taxes, reducing red tape that holds back small business, and reforming welfare by requiring the able-bodied to work. It is not rocket science, it is just common sense.

Letting people keep more of what they earn allows them to make better choices about where to spend their money than politicians and bureaucrats. Most New Zealanders would choose not to put their money into Maori TV or "Jim's" Bank, but would far rather use it to improve the outcomes for their own family.

Implementing the recommendations of the Government's McLeod Tax Revue by cutting company taxes to a rate lower than Australia and increasing the income of every working family would start the economy growing. Having company tax at 28 cents in the dollar would give New Zealand businesses an important competitive advantage, and reducing the top two rates of personal income tax to 28 cents and the third rate to 18 cents, would provide a well deserved boost to working households. These tax reductions would be funded largely from the surplus, since it makes little sense for government's to take more off taxpayers than it needs to.

Secondly, if we are serious about growing the economy, we need to put a bonfire under the rules and regulations that are such a burden on small business. In the last three years, compliance costs have increased by an estimated $26,000 - money that goes into the big black hole of bureaucracy. A complete overhaul in this area is necessary.

Thirdly, we need a welfare system that doesn't trap people in long-term dependency but provides work for those who can and security for those who can't. Asking people who are able-bodied to participate in a structured forty-hour week of work, training and organised job search would help them get into the habits and disciplines of work. Assistance with child-care, transport, relocation, or any other problems which create a barrier to work, would be provided so that the goal of welfare is work, independence and a better future. Encouraging people on welfare into the jobs created by lowering taxes and reducing compliance costs, would further reduce the tax bill, enabling lower taxes in the future.

That is the secret of continuing the growth in the economy giving New Zealanders the rising standard of living they deserve. ACT is the only party with such a plan to boost the economy; the only party that seems to care about our continuing slide to Third World status. New Zealanders deserve a better future that this government is delivering so that our children can come home and so that our grandchildren will be proud of a New Zealand that is the very best country in the world in which to live, work and raise a family.

Dr Muriel Newman, MP for ACT New Zealand, writes a weekly opinion piece on topical issues for a number of community newspapers. You are welcome to forward this column to anyone you think may be interested.

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