Is the New Zealand Economy actually that strong? - The Opportunities Party

Today The Opportunities Party is pleased be unveiling a policy that’s close to my political heart, professional experience and personal background as a business operator, an investor, and professional economist. 

Without skiting, I can say I probably have more business experience than any other party leaders contesting the coming election — and possibly more than all of them combined. 

As the child of Welsh migrants, I know how important the right economic opportunities are for people getting their best foot on the ladder. 

As the father of one of the country’s most successful online entrepreneurs, and a director of that enterprise from zero to hero I know the satisfaction that comes from seeing a New Zealand enterprise seizing the right opportunity, executing an idea that was not original and building an enterprise that changed New Zealand’s commercial scene.

As a fund manager I demonstrated how that sector could improve it’s ethical and performance criteria so that the business objective aligned far more strongly with the clients’. I’m pleased to see Kiwibank has expanded that business and maintained the ethics and values that it was built on.

As a professional economist, sadly, I know that the national economic story we see today really is a tale of two New Zealands.

One of those New Zealands has the superficial appearance of doing reasonably well.

Or at least that’s how it looks if you measure progress by GDP or even by GDP per capita. Or if you measure collective success on the basis of how well an Auckland property investor who started out early, might be doing by 2017.

But those broad-brush measures shouldn’t blind us to the existence of another New Zealand – A NZ that will undermine our apparent prosperity if we do not address its issues.

They hide a persistent rise in inequality.

They cover up stubborn levels of poverty.

They mask plunging rates of housing and rent affordability.

They obscure the painfully increasing gap for many New Zealanders between market wages and a living wage – one I’m now paying for through Working for Families.

Worst of all, perhaps, they have been at the expense of new innovations, enterprising start-ups and value-added exports. In my 30 years of consulting to and being a part of the business scene I am well aware of the most oft-heard complaint – shortage of access to capital. Of course it’s a massive constraint, I for one have been too busy playing the property speculation game with much of the surplus capital I have, rather than investing in NZ businesses. That has made me more than a handsome return on my capital. 

Addressing these issues requires real business policies — not the government and main opposition parties’ business-as-usual policies.

Much of the currently fractured economic story can be sheeted home to at least two huge policy mistakes that successive governments have failed to remedy. 

The first harks back more than a quarter century ago to the 1991 ‘mother of all’ budgets.

Talk about a lost opportunity.

That was the budget that delivered honey-drenched tax cuts for higher incomes like mine — along with an acid-doused withdrawal of social security safety nets for those most vulnerable. 

Supply side economics was supposed to deliver stronger economic growth that would trickle down to all.

27 years on, the failure is threatening our social fabric.

And band-aid measures such as Working for Families essentially acknowledge this magnificent error — but don’t actually do anything to change what it wrought.

Secondly, under the John Key government, a massive rise in property prices has meant housing affordability has plunged and tenants have found that after-accommodation costs, their discretionary incomes have collapsed.

If the prime minister thinks that’s working out well, perhaps he ought to spend a bit of time with virtually any young person or couple looking to one day own a house — or even in some cases simply rent a decent property.

The TOP economic policy is designed to lift the growth rate in per capita income while ensuring that more people receive the fruits from our national production.

The TOP vision is about greater efficiency of capital, total productivity and fairness – all 3 must rise:

  • First and foremost our reform of income tax policy deals with the major impediment to economic prosperity: unproductive investment of capital. All businesses must make at least the risk-free-rate of return over time otherwise they simply are not businesses – we are fooling ourselves, they are lifestyle blocks. They will be taxed on the assumption they do – this will have no affect at all on businesses that are sufficiently profitable, but it will spur performance from low performing businesses. Insofar as the policy applies also to household capital, namely housing – it will remove the tax loophole around property and will divert savings en masse toward investment in businesses. And about time
  • Reforming competition law to reduce the power held by big business over employees and competitors is essential if we are to shed this neoliberal XXX and get back to capitalism as it should be. 
  • A consequence of the tax reform is that we will be able to lower income tax rates by an average of at least 30% - in other words boost take home pay by 8%. Rewarding hard work by dropping income tax rates, controlling immigration of lower skilled labour and reforming the benefit system to introduce an Unconditional Basic Income – is all about future-proofing for a world of casualised work, mass layoffs from Artifical Intelligence, and low market wages for mundane work.
  • We have a substantial reform of NZ Superannuation already announced that cuts it in half for those who don’t need it. A further consequence of that reform is that the $34b NZ Superannuation Fund becomes redundant – the government no longer has the contingent liablility of the indecently high NZ Super on its books. We will use that fund to boost investment in infrastructure, in R&D and technology. Part of it at least will be invested in the form of convertibles in private sector business.
  • We will align the goals of business strength and environmental enhancement by making polluters pay for their environmental damage and helping businesses wean themselves off fossil fuels. Of course the key to this stuff is (a) have a strategy and (b) implement it with care. We do not want to unnecessarily destroy businesses – although I welcome warmly the creative destruction that standard capitalism imparts.

Innovation has long been recognised as critical for countries similar to ours seeking to generate their own sustainable economic growth.

We see it in Singapore. We see it in Denmark and Finland. We see it in basically in every country or jurisdiction New Zealand measures itself against.

 

But these other places now reap a return based on their good investment. We more often than not reap the return we do based on our good luck in the global roulette of commodity prices. The IP and technology that is latent within our primary industries is substantial, we need to leverage it – volume of commodities sold is not necessarily the most smart option. Business structures in that sector need to be examined.

New Zealand’s R&D spend relative to our GDP is abysmal by developed world standards.  

The countries against which we measure ourselves are running rings around us.

As a consequence, New Zealand has low productivity. Successive governments have recognised this without significantly moving beyond describing the problem. That is – they’re all hui and no doey. The $34bn fund will help change that.

And we are no longer attracting the best and brightest immigrants. We have opted for cheap labour to man our low margin businesses. I’m fine with that so long as it doesn’t impact on the wage rates or employment opportunities of New Zealanders. Plenty of countries use guest workers to back fill the jobs that locals don’t need to be doing. 

But here’s the question we need to be asking. Are too many of our own kids growing up without their own opportunities to lead the full business lives that many are capable of? Do we have a surfeit of modestly skilled locals that could do that work – if so why aren’t they? Uber targeted benefits with high abatement rates are an obvious culprit – some of the examples we can see of near 100% EMTRs would make your hair stand on end. 

Our immigration policy deals to both using guest workers at the low end in particular but also improving the strength of our links with foreign productive talent that could serve our interests.

In business, as in everything else, I am pleased our party is putting forward policies to create thousands of new opportunities for building one New Zealand.

 

To the old Establishment parties who have been responsible for causing this unreal gap in well-being, who steadfastly refuse to close the tax loophole around property and instead tilt at the windmills of rapacious landlords, immigrants and anyone else who’s not a voter being the problem - I say – stuff you, we’ve had enough of your ineffectual nonsense – it is time to get NZ democracy, production and social security back in the hands of all New Zealanders – and out of the claws of mealy equipped career politicians whose craven obssession with political self-preservation has taken NZ down this path of TWO New Zealands.

 

I’ll debate you on the veracity of ours and your economic policy, anytime, any place. Bring it on.

 

 

 

 

 


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