“Genuinely On Your Side”
“Genuinely On Your Side”
Speech To Manufacturers and Exporters Association
Thank you for the invitation to be here.
There are some who falsely portray New Zealand First as a party singularly focused on the plight of our seniors.
It is true that we do promote policies that ensure our seniors have security in retirement – that is after all a clear signal as to the values and strength of our society.
But it would be a mistake to label us as myopic in our focus.
Our focus is on the overall health and wellbeing of our economy and society.
We were equally adamant about the need for Export Year 2007 and lowering business tax as we were with ensuring we had 1000 more police on the streets and any number of our achievements since 2005.
The list is as long as it is diverse and it proves one critical point – say what you like about New Zealand First, but we deliver.
And we believe that our future economic prosperity lies in supporting organisations such as yours.
Indeed, we believe that if it is fundamental to our future prosperity and the ability of future governments to deliver the standard of living and services that New Zealanders expect, then we need to dramatically bolster our export performance.
Put simply, either we export or we die - economically speaking.
These are trying times for exporters and your efforts act as a ray of light and hope for our economy.
We cannot escape the reality that the current monetary policy orthodoxy, with its singular focus on inflation at the expense of all other economic factors, is creating a huge imbalance in our economy.
Our dollar is overvalued because our interest rates are so disproportionately high compared to other developed nations.
We are a source of easy money for currency traders the world over.
The flaw in the system is this. Interest rates impact on far more than just interest rates and interest rates are not the silver bullet the theory claims they are in combating inflation.
But there is a further complicating factor which the theory ignores – why are we trying to combat imported inflation, over which we have no control, by hammering our economy through high interest rates.
No other country in the developed world does this.
Let me give you an example.
Just recently one of our major weekly business papers published an article containing an exchange of letters between the Governor of the Bank of England and the Chancellor of the Exchequer.
The exchange in summary has the Governor explaining to the Chancellor that he was not prepared to endanger the broader British economy by increasing interest rates while trying to combat imported inflation.
It did not make economic sense.
So my question to you tonight is – why if it is good enough for Britain to have this sort of common sense and flexibility in its monetary policy, why is it not good enough for New Zealand?
We’ll tell you why – and we have seen it in the recent Select Committee Inquiry into monetary policy – the two old parties are so wedded to the status quo and too intimidated to make a change even though the evidence is starring them in the face.
New Zealand First is the only party which has for more than a decade been saying we must rewrite the Reserve Bank Act.
Now this is an obscure piece of legislation that very few New Zealanders understand and even fewer have actually read.
The job of the Reserve Bank should be to maintain stability in the economy in terms of employment and growth as well as keeping inflation under control – as it is for example in the UK and the US.
We have to break out of the straightjacket that requires the bank to take a single minded hard line on inflation, irrespective of the performance of the economy, and irrespective of the fact that much of New Zealand’s inflation results from rising import costs rather than inflation generated here.
Unless we have the courage to rewrite the Reserve Bank Act, high interest rates and an overvalued dollar will continue to cripple our economy.
As the June Monetary policy statement noted – the dogma of the Reserve Bank means that 95,000 people must lose their jobs so the Governor can keep his.
The New Zealand based economic think tank BERL, which actually works on New Zealand based solutions not imported ones, has tackled this matter and written an extremely good paper on it.
They have arrived at the same conclusions as New Zealand First – that the Reserve Bank Act needs to be rewritten.
In fact Mark Weldon – the head of the New Zealand Stock Exchange – has also expressed this view publicly.
So we have been joined by some pretty sound economic minds on this matter.
The BERL research offered four steps in rewriting the Reserve Bank Act which we want to raise tonight.
1 – To include the balance of payments and full employment (along with inflation) as equally important objectives for the Reserve Bank,
2 – To formally empower the Reserve Bank to manage the liquidity of the financial system,
3 – To facilitate open market operations involving long term, as well as short term securities, and;
4 – To facilitate a transparent "sterilised float" of the New Zealand Dollar.
These are all extremely well thought out, and most importantly, New Zealand driven ideas.
You see if the mandate to save those 95, 000 jobs were in place then the Reserve Bank would behave differently.
If export growth and addressing our outrageously large balance of payments deficit was a priority then the Reserve Bank would behave differently.
The fact is that addressing inflation requires a concerted effort across a whole range of Government policy fronts, from immigration through to housing policies and the RMA, all need to be part of the effort to reduce inflation.
We must also accept that a large portion of the inflation we are trying to combat is imported and so we must stop hurting our manufacturing and exporting base in a hopeless effort to fight a problem not of our making.
Now let us consider an absolutely critical factor in boosting our exports - getting the incentives right.
Now there is one incentive that all business people understand - lower taxes.
So if we want more people exporting successfully, it only stands to reason that we should incentivise the tax system to achieve this.
New Zealand First has long advocated a policy of having all new export earning taxed at 20 cents in the dollar.
It will take a dramatic step such as this to truly stimulate business activity toward exporting.
We must be bold on this front - the time for just accepting the status quo has long past.
We must also look to balancing taxation on capital in addition to revenue.
In this way we put the incentives where they will have the best effect.
But we must go even further.
The New Zealand economy has been for far too long unable to generate the level of exports that would sustain our standard of living expectations as New Zealanders.
In fruitless efforts to maintain that standard, we are now almost totally dependent on other people’s and other nation’s money.
And like National before it, the Government has been happy to see that dependency deepen to the point where our economy is like a raft in a stormy sea.
As the sub-prime credit crunch in the US bites, we feel the pain here, with 28 companies now either folding or not trading, 160,000 people affected and over $3 billion of lost money.
But until we come to grips with the question of foreign ownership, and opening the floodgates to foreign money, the prospects for significant improvement in the living standards of most New Zealanders will be limited.
It’s time to take a strategic view of foreign ownership.
Because we cannot expect the boardrooms of Sydney, London and New York – where our fate is increasingly determined – to put New Zealand's interests first.
New Zealand’s deepening external indebtedness must be addressed.
This reliance on foreign money is a road to nowhere and makes us highly vulnerable to foreign capital markets.
We are a nation of small and medium sized business people.
Over 60 per cent of our workforce work for employers who employ less than 100 people.
When you consider that a large portion of those who work for larger employers actually work for the government sector, then the folly of the fixation by our political opponents on the needs of big business becomes clear.
The demands of small and medium sized business are quite different from those of big business.
These are engineering workshops; builders; cafe, bar and restaurant owners; hairdressers; farmers and computer businesses.
Many make goods and services for export – they are people like yourselves.
They are not IBM, McDonalds or the Ford motor company.
These small companies are by nature more intimate with their employees who are often family and friends.
The reality is that for salary and wage earners, you are more likely to be employed by a small or medium sized business.
What small business needs is a serious reduction in compliance costs.
This is their single greatest concern and as a party committed to fixing things it is a priority for us.
We will also be supporting the simple maxim that ‘a small business which is able to export effectively can become a better business’.
A small business able to operate efficiently and effectively can become a bigger business.
We believe that in order to achieve this several policy prescriptions are needed – aimed at achieving greater productivity.
This is really driven at three levels – bolstering R&D, building human capital and enhancing the basic capital of production, tools, plant equipment, and laws around patents.
New Zealanders have always been innovative and creative.
But being at the cutting edge must begin with incentives for Research and Development.
This must be a blend of tax incentives, grants and creating synergies between our institutions of higher learning and business.
There are pockets of this – but it does not go to anywhere near the lengths it needs to.
Linked to R&D is the need to develop human capital.
This means not just in work training and up-skilling, but taking a longer term view of what skills, knowledge and competencies are going to be required to compete on the international stage.
And this must occur across all levels, from our primary and secondary education, through to tertiary education in its many forms.
If we are to grow our productivity then being at the leading edge of technology and the basic machinery of production is a must.
We must create the infrastructure to achieve this – particularly in relation to information technology where we have lagged behind the rest of the developed world for too long.
And we must place more investment into productive enterprise.
This after all is where business makes its returns.
Now at this election you will here a lot of platitudes and rhetoric.
Everybody wants to be a friend of business.
But we would ask you to ask all political parties the hard questions.
Will you re-write the Reserve Bank Act to ensure our exporters are not punished for imported inflation?
Will you address foreign ownership and foreign investment, which makes other countries rich while New Zealand business struggles?
Will you incentivise the tax system to dramatically grow our exports?
Will you deal with the fundamentals of improved productivity – R&D, human capital and the basic machinery of production?
Check their answers against New Zealand First’s.
We can tick every box because we are genuinely on your side.
So we would ask that when you consider ticking another type of box later this year – you think of the one party who has and who will continue to deliver for you.
The one party that puts New Zealanders and New Zealand business first.