Same old same old won’t fix the economy

25 November 2011

A real change in economic policy is needed from whoever forms the next government say the New Zealand Manufacturers and Exporters Association (NZMEA). It is clear that our policy framework has encouraged consumption fuelled by debt rather than savings and export investment; this must change if our economic decline is to be reversed.

NZMEA Chief Executive John Walley says, “All political parties agree we have to grow the real (traded) economy, what differs is how that will be done - the right argues that more of the same will fix it, but under the policy 'status quo' the real economy has been in decline since 2003. In our view change is fundamentally necessary, and it is a triumph of hope over experience to anticipate better outcomes while changing nothing.”

“Changenz.co.nz talks about the past and current decline and the required changes as we see them. It is clear that Labour have adopted some of these positions - new policy targets for the Reserve Bank and a Capital Gains Tax. It must be acknowledged that they have moved on from the economic position they held in the past.”

“On the other hand the minimum wage rise and further welfare commitments will undo some of those advantages and show a lack or understanding of where the world is today. National’s don’t rock the boat strategy at least does not impose extra costs on businesses. No party ticks all the boxes.”

Whatever happens on Saturday, for the real economy to grow faster policy settings have to be rebalanced. We must borrow less through a mix of tax changes and spending cuts, and most importantly earn more by:

• Targeting monetary policy at non-traded inflation.
• Balancing the tax mix to include capital gains.
• Fiscal incentives to support traded sector investments.

“Sooner or later such changes will have to be implemented – our creditors will insist if we continue to ignore the traded economy.”

ENDS

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