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The ‘economic transformation’ illusion

Rich: The ‘economic transformation’ illusion

The Labour-led Government started this term promising a greater focus on the economy.

Their spin-doctors have labelled this great new strategy "economic transformation".

This meaningless phrase litters many speeches from Labour MPs in the House; it is liberally sprinkled through press releases and other propaganda. It’s a mantra repeated with an almost religious fervour.

Putting aside the fact that most in the Labour caucus don’t have a blind clue what the phrase means, talking about economic transformation in late 2006 begs the question: what have you been doing for the past seven years?

It also begs the other question you are all no doubt asking: Isn’t transforming the economy something you set out to do in your first term, not your third?

Since the last election we've had a number of announcements from Labour that have been presented as part of this new strategy.

But when you try to dig into the detail, the strategy is like a pavlova - it looks substantial but there's little substance.

Amidst the sugary fluff there is nothing to transform the economy into one which can sustain the incomes and lifestyles of New Zealanders, let alone address our long-term economic decline relative to other countries.

Take the recent announcement by Trevor Mallard about State Owned Enterprises being told to spread their wings.

While sounding proactive, the announcement in a large part simply restated the status quo.

SOEs have traditionally had the ability to expand into new markets and they will continue to do so.

Even a leading ex-Labour Cabinet Minister has said publicly that the recent announcement will make little tangible difference to the way SOEs actually do business.

But I am not so sure, given that Trevor Mallard will want a few high profile projects for use as photo opportunities to show evidence that the new regime is working.

Concerns remain whether these projects will crowd out the private sector, whether SOE boards have the right directors to make such big decisions, and whether Trevor Mallard and Michael Cullen, an ex-teacher and an ex-historian, are the right people to sign off on such deals.

The more Mr Mallard was interviewed on SOE expansion, the more the Government’s murky thinking on SOEs was exposed.

Treasury, the Ministry of Economic Development and the Crown Company Monitoring Advisory Unit all expressed concerns - but still the Government ploughed ahead.

The Government’s most bizarre reason for state owned enterprises embarking on this new journey was a desire to make SOEs less boring, less predictable places for their staff to work in.

This was concerning news to Kiwis who actually like their mail service and electricity supply to be relatively boring and predictable.

No other shareholder or business owner in the country overseeing $2 billion worth of assets would embark on new business investments just to keep staff from getting bored.

Trevor Mallard then told the country, to the total bemusement of the business community, that if state owned enterprises fell over, that was okay because the Government still owned the assets!

Somebody should explain to him the significance of the liability side of the balance sheet.

And this is the guy who wants to be Michael Cullen’s replacement!

Right now, Michael Cullen is probably wishing Jim Anderton was still Minister of Economic Development.

Those were easier days, when economic development was heavy on photo opportunities and light on sound economic development policy.

All Jim wanted to do was establish a few business grant schemes, travel the country handing out cheques and say cheese for the cameras – a kind of ‘Robin Hood meets Grumpy pensioner’ combination – except he robbed from the taxpayer to give to a lucky few selected industries.

Unlike Trevor, Jim didn’t do interviews where he openly admitted he wanted to be Minister of Finance.

Unlike Trevor, Jim didn’t talk about revenue issues and didn’t muse publicly about economic policy.

And unlike Helen Clark and Trevor, Jim certainly didn’t continually mention Dr Cullen’s age to create the impression that pureed food and zimmerframes are the next logical step for the retiring finance man.

Enter from stage left – and I mean left - Trevor Mallard, the Labour party bovver boy transformed into a statesman.

On the first day in the job, he realised that what the Opposition has been saying about Jim’s Jobs Machine was right.

It was more a Jobs Joke than a Jobs Machine; little more than a mishmash of over 50 different grant schemes that no one could understand.

The Jobs Machine has handed out tens of millions of dollars since 2000 and not one official report can say what kiwis got from that expenditure.

The officials’ reports have been damning. They’ve confirmed many of the schemes were poorly thought through, not based on evidence, and perceived as being unfair.

Trevor Mallard might be seen as some sort of fixit man in the economic development arena, but it needs to be appreciated that the mess he’s clearing up is all Labour’s creation.

These are the schemes born of the Labour-Alliance coalition.

The recent axing of some of the schemes has been less than honest.

When canning a thing called the ‘Enterprise Training Programme’, Mr Mallard claimed that a recent “evaluation found it worked well - both in terms of training and also by giving firms good opportunities to network with each other'”

So why drop it? Because the evaluation found no such thing.

It was a clear case of spin.

That recent report actually found that there was not the data to even do a thorough evaluation; they couldn’t tell whether the programme had worked or not; there was no follow up; and there had been no objectives for the programme in the first place.

There were other problems with that particular scheme but I think you get the picture.

Numerous Labour programmes have failed, and some of those failures should send a chilling message about New Zealand’s future prospects under a Labour Government.

Take another grant scheme called the Strategic Investment Fund, which is supposedly designed to encourage overseas investors to consider New Zealand.

Believe it or not, Jim Anderton said the fund was a “vital ingredient” in New Zealand’s economy.

Being a “vital ingredient” the Government should have been very concerned that only a couple of months before the end of the last financial year only 3% of the fund had been spent.

Usually a cost saving would be seen as a good thing, but in this case the message sent by the scheme’s lack of subscription was more sinister - overseas investors were not considering New Zealand.

NZTE has said that New Zealand simply wasn’t looking that attractive as an investment destination during the period and so there had been few applications in the last 12 months.

Certainly we don’t know exactly why investors are failing to consider New Zealand - but all of you would agree, I’m sure, that Labour’s propensity to regulate, confiscate and tax must play a big role.

That leads me onto Lianne Dalziel’s dazzling review of regulations.

Launched with all the hyperbole of a Ginzu knives commercial, Labour MPs just couldn’t understand the concept that launching a review isn’t what’s important – it’s following up on the recommendations that counts.

You’ll recall Ms Dalziel’s descriptions of her review: “horizontal, vertical, fast-track, in-depth, dynamic” - a sort of trapeze act style, red tape reviews.

“Nothing of this magnitude had been attempted before”, she cooed.

Except Ms Dalziel forgot that something of this magnitude had actually been attempted before in 2000.

Delegates may recall Paul Swain's red tape review, which he lauded at the time as the “most comprehensive response on the compliance costs issue in living memory”.

To hand it to Paul Swain, at least his review was able to consider all the issues of importance to business even if nothing happened as a result.

What's most concerning about the Dalziel review is that Labour has handicapped it from day one by excluding the big issues concerning business like tax, ACC, the Resource Management Act and labour laws.

As a business columnist in The Listener recently noted: that's like your doctor doing a health check but refusing to examine any major organs.

Ignoring the key business bugbears makes it impossible to achieve real change for business. I think this review will go nowhere.

Actually, I think Dr Cullen hoodwinked Lianne Dalziel.

She has made much of the fact that her announcement was so significant that it was given its own day post-Budget.

But a chance in the limelight was all she got.

Select Committee questions elicited the facts that she got no budget to do the review and no power to effect the changes that such a review might recommend.

National went into the last election with a comprehensive programme to help business – from changes to employment law to compliance costs and ACC choice.

The Government’s “economic transformation” strategy is all an illusion.

We cannot create better economic development opportunities in this country if issues such as business tax, the resource management, ACC, labour laws, educational standards are off the table.

And we must consider non-regulatory solutions before diving into legislation.

Labour’s reflex action is to regulate; National’s will be to think about other solutions before rushing to regulation.

Labour pretends to be business-friendly, pretends to drive an economic transformation agenda.

The truth is, Labour puts up with business and views it is a necessary evil.

Just to handicap business even further, it has passed legislation and regulations at an alarming rate - some 2000 new regulations since it became government.

And it continues to do so.

That’s not true economic development, that’s economic hindrance.

The shackles are firmly on the ankles of the productive sector of the economy.

We aim to take them off!



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