'400,000 will leave in next 15 years'

Don Brash releasing detail of the first 2025 Taskforce report in November last year. Photo / Mark Mitchell

New Zealand will lose another 400,000 people to Australia over the next 15 years, based on current projections of the income gap between the two countries, the 2025 taskforce says.

The taskforce, chaired by Don Brash, is charged with providing recommendations on how to close the income gap by 2025.

In its second report, released yesterday, it says OECD projections of each country's growth prospects would see the gap widen from 35 per cent to 42 per cent.

"Can we close the gap?" Brash asked yesterday. "To paraphrase President Obama [in a recent appearance on The Daily Show]: Yes we can, but it may take a little time."

It would require an unwavering focus on policies that would see the New Zealand economy grow nearly 2 per cent per annum faster than Australia over that period.

Some steps the Government had taken over the past two years - like income tax cuts - are likely to have improved the country's growth prospects, Brash said, but others - like tax changes which have effectively increased the tax burden on business - are likely to have detracted from them.

"On balance New Zealand is still a long way from the kind of policies needed to have any chance of closing the gap with Australia by 2025, or even of making serious progress towards that goal."

The report recommends cutting Government spending and tax rates, and a rapid return to a structural fiscal surplus.

It wants to "shift the boundary" between private and public sectors, with more of the former and less of the latter, including in health and education.

It favours at least the partial privatisation of state-owned enterprises.

It calls for more robust and transparent cost/benefit analyses of major infrastructure projects, including plans for ultra-fast broadband.

It is sceptical of the return on public sector research and development and advocates a freeze on that spending coupled with less micro-management of how it is distributed.

It wants a more inviting regime for foreign investment and is critical of the uncertainty recent Government statements and regulatory changes have engendered.

And it favours "institutionalising" better processes for vetting Government spending and regulation - either in the form of a taxpayer's bill of rights or an "independent fiscal council" akin to the Congressional Budget Office in the United States.

Finance Minister Bill English said the Government would consider some of the taskforce's ideas, but disagreed with the report's authors on the ideal speed of the reform.

"History shows that reforms done at breakneck speed tend to be fairly counterproductive," he said.

"If you don't take the time to convince people of the benefits of change there's a good chance the next government will simply reverse them."

The Government was already moving in some of the directions suggested.

"As well as cutting personal and corporate taxes, we have put a cap on new government spending, have put better incentives into the welfare system and are reviewing major regulation. But any changes must meet the tests of fairness and equity, be consistent with our election promises and occur at a sustainable pace."

Labour's finance spokesman David Cunliffe's response was scathing.

"Don Brash's ideological nonsense - with an unwavering focus on the free market and privatisation, and to hell with anything else like social policies - don't provide a path New Zealanders want to go down," he said.

"If we are going to persuade Kiwis not to follow their dreams on the other side of the Tasman, we need to be promoting a value-added and high-tech economy, monetary policy that assists our exporters, policies that address the savings gap, and tax and social policies that are fair for all Kiwis. National is doing none of this. Instead it's wasting money on this taskforce. It should scrap it now."