Part 1 of this post noted the end of the “Washington Consensus” in economics. Part 2 noted that newly naked economists need some new clothes. In this part I want to stimulate discussion about priorities for the NZ debate going forward.
In the 2010 Budget debate I reckon Labour won the argument that average Kiwis will be worse off after 5.9% inflation next year devours their “tax switch”.
The next stage of the debate will focus on which policies deliver on rebalancing our economy and leaving NZ families better off.
Let’s cut to the chase on “rebalancing”.
The NZ economy is “unbalanced” because:
- we borrowed too much from overseas lenders, building a huge national debt
- we spent it on bidding up property prices, not making things we can sell
- we export too little and keep bleeding on our current account
- we are slipping behind in innovation, technology and productivity
The heart of the rebalancing process therefore requires:
- lifting savings
- growing exports
- innovating more
- reducing (mainly private) international debt
Policies that would logically achieve that include:
- boosting (not cutting) Kiwisaver and other savings vehicles
- pre-funding (not suspending) the NZ Super Fund
- monetary reform to improve exports (not over reliance on the OCR)
- modernising and strengthening (not cutting) economic development
- comprehensive innovation policies (including R & D tax credits)
- fiscal responsibility and credibility (not more borrowing for tax cuts)
We need a government that has a credible and coherent economic strategy. Confidence is eroded by stop-start, poll-driven initiatives.
Our future is weakened by an underlying agenda that will worsen inequality, driving wedges between Kiwis, their communities and their environment.
Time for a reality check. This is not only a government that has no coherent plan to credibly achieve the rebalancing NZ needs.
Its short-termism and flip flops mask an underlying agenda – whether made explicit or kept implicit – that is individualistic and materialistic.
It does not reflect the Kiwi way, nor embody our highest aspirations.
Their policies are flawed. Their vision is narrow. Their time is limited.
Dylan, get some faith about the ability of this country to pull ahead, and some faith about the possibility of us crafting a unique solution for our unique circumstances.
I have a strong dislike for those who wax on about everyone else’s amazing competitive advantages “and woe betide us we don’t have that” when their main competitive advantage they actually had was a mindset of getting ahead in the world and a mindset of giving it a go.
These used to be 100% NZ qualities and they should be again.
The Irish did give massive subsidies/tax advantages to American and other mulitinationals to set up manufacturing in Ireland notabley in pharmaceuticals and high technology electronics.
Loota I also have a strong dislike for people who won’t admit that most of the other countries of the world are bigger and better than us in every way and think they are being optomistic but really they are just being utterly ignorant in the face of the crystal clear facts that our economy is relatively tiny. e.g the National party. Bill English: ‘WE CAN BEAT THOSE AUSSIES!’ What no we can’t they have 5x the population land mass tons more resources and wealth and these are FACTS.
But you know, there is absolutely nothing wrong with these facts. We have a small population but in comparison to that population we have plenty of land. We have enough resources and wealth to go around and can make alot of good out of what we have.
But Loota something does become terribley wrong with the fact that we have a relatively small economy when we model our entire economy and economic policies to fit an economy that is not small and is competitive in the world market. We have a general lack of wealth and capital compared to alot of other countries and we are NOT competitive in the world market and we have thrown ourselves into a situation where we have to be. And that is why we import way more than we export and that is the way it always be and I have no faith in New Zealand or it’s people and I will continue to have none until we realise these facts.
David, I am confused many are struggling to financially manage their own affairs, I gather that the top tax bracket will be increased. We have to fund the cost of capital (interest costs) on the likes of HP, credit cards, mortgages. Those who are financially capable can activy participate in Kiwisaver. So then how can we pay off debt, live and then have enough to become net savers??
Your points are very commendable yet under our low wage and high cost country where does this ability to save come from. Are you suggesting that our living std should be reduced by at least16% just to become cash neutral to a stage of inflows = outflows (Should I divest from any Sky shares and other investments related to so called luxuries?).
Further to my last I would like to point out that current the Kiwisaver scheme introduced by Labour is a massive tax cut to the wealthy, as an analysis of those who have taken the scheme up shows the percentage is highest in the higher income brackets and lowest in the low income brackets… Only going compulsary can rectify this…
Dylan said:
Thanks I think you’ve made your low opinion on the future of NZ and its people quite clear. I honestly hope you never seek to represent this country in any way shape or form.
You know I dont agree with you on much Loota, but I do like your optimism, and heaven help us if our goals are not aspirational at times
juliana, cheers for your note; the nice thing about a spirited debate is that we show that we actually do care about the issues and about what is happening even if our views are sometimes in opposition.
U betcha! Keep up the good fight:) And things could worse in ur camp too..imagine you could be dim economics lecturer with a sea of earnest and equally dim students.
Duh!
(drool 
)
Stop that drooling this instand spud!
sheesh..dont you hate the typos….”instant”
Ha!
Loota this isn’t about optomism or pessimism it is about reality and ignorance, typically I will say the glass is half full but where we differ is that I will not pretend the glass is half full when it isn’t
Dylan have you ever tried coaching a sports team which has had all the odds declared against them, and inspired them to move to the next level of performance, instead of saying – “sorry, I’m just being realistic, but you guys are never going to be any good.”
By the way I’m currently reading “Global Trade and Conflicting National Interests” (Gomory and Baumol) and in this single book there are plenty of ideas of use to NZ.
The glass is definitely half full.
Loota if I was coaching a sports team which had the odds declared against them I would change my game plan
Also Loota it’s not that simple a comparison to make is it, economies and sports teams. If you had a team of 4 people would you pit them against a team of 400?