Nov 5, 2008

Swan Dive Or Belly Flop

We reported yesterday on the revised version of the think piece by Mark Weldon and David Skilling. We read this last night. Here are our views.

This is now a very significant document. It is an head on attack on some current elements of Government policy (eg the current R&D policy is described as "deeply flawed in design") and an endorsement of some of the ideas coming from John Key.

We agree fully on the need for an economic strategy. We have so called strategies right now but they are largely spin. It is great to see Weldon and Skilling try and and define essential components of that strategy.

Urgent Actions:
  • We think that we should be cautious on fiscal stimulus. we think that tax cuts are a great way to get money flowing in the economy. We are less happy with expanded Government expenditure unless this can be linked to likely productivity growth - eg key infrastructure. We really need to focus on improving the quality of Government expenditure.
  • We agree that RBNZ needs to keep cutting and like the goal of having our rates down to 2.5% to 3% above the Fed's rates.
  • We agree with the recommendations on provisional tax- this is just common sense.
  • Accelerated tax depreciation on capital investment is essential if we are to grow productivity.
  • Still thinking about the proposed review of the imputation regime and suggestions re Deposit insurance.

Drive to increase local investment and performance

  • We support debt financing of key infrastructure projects and agree with the note of caution. We like the idea of SOE bonds being offered to NZ investors and the idea of a 30-year NZ Government Treasury bond and long term infrastructure bonds.
  • Reforms of the CCMAU process are fully in line with our own thinking.
  • The idea of an ownership vehicle for the SOEs is also of some interest. We know the Singapore model well. It has made some mistakes though....
  • We, like you, support the idea of having more coordination of the various NZ Government investment funds. We are comfortable with National's 40% vision in the short to medium term.

Improve growth environment for New Zealand business

  • We support a compulsory savings scheme and agree that 2% is a good place to start.
  • We are happy to see housing removed from the LAQC regime but would oppose a capital gains tax.
  • Agree that we should try and develop an R&D scheme that works rather than one that creates more accountants jobs.
  • Agree fully on the need to reduce corporate tax.

Win in the global economy

  • We must get those well qualified and experienced Kiwis home.
  • Very open to use tax incentives to attract firms to NZ. Also keen to go out and buy some with our investment funds - should they fit.
  • Expanded investment offshore is critical. Integration with our FTA strategy is essential.

Public Private Sector Cohesion

In full agreement.


Thanks for doing this work. Lets hope that a new Government, whether it be Labour or National led picks up your ideas and runs with them.