Bernard Hickey: Govt asleep at wheel on currency

Warner Brothers got an instant deal from our government.

This week voters and people in business started to get a more granular idea of how this Government operates behind the scenes.

Details from emails released under the Official Information Act show how it dealt with Warner Brothers over threats to the green-light decision needed to start filming The Hobbit.

There wasn't much negotiation. Warner Brothers asked for a law change to specify all film workers were contractors rather than employees and the Government did it under urgency in a day. It also kicked in US$25 million in extra tax rebates and marketing costs to keep Warner Brothers sweet. It was classic John Key dealmaking: do whatever it takes to make the deal happen.

The Auditor-General's report on negotiations on the SkyCity convention centre show how the Government gave SkyCity special treatment in which Key's office suggested "regulatory relief" to get the deal done. A pattern is developing here. The Government will change rules and give subsidies to those sectors and companies it likes.

Another set of examples crops up around farming. The Government has set aside $80 million in this year's budget to invest in irrigation schemes to help sheep farms convert to dairy farms and intensify production. Also this week, the Government declared a drought in Northland, which meant Government grants were available to Rural Support Trusts and special Rural Assistance Payments to farmers.

Yet, regularly, the Government claims allegiance to the principles of "level playing fields" and "laissez faire" policy when it suits.

Its refusal to intervene in the currency markets or to consider helping manufacturing exporters are examples of it choosing to say there is nothing it can or should do. The Government also refused to invest in a second internet cable, claiming the market was working to solve the problem.

How is a weather event different from the "economic headwinds" of a painfully high currency? How is a faster, cheaper broadband connection to help export services different from subsidies for dairy farmers?

The difference is in who is asking. Manufacturing exporters, such as Hamilton Jet, have said they cannot profitably invest in new production and productivity-enhancing equipment with a currency at such high levels.

Hundreds of exporting jobs are lost every month as the Government twiddles its thumbs. Unfortunately, there are more votes in cheap petrol and discounted flat screen televisions than there are in a fairly valued exchange rate.

What is desperately needed is the right types of people asking for a tilting of the playing field. There is no way the Lord of the Rings movies would have been green-lighted in the late 1990s with a currency over US80c. It averaged US54c during the lead-up and making of the first Tolkien trilogy.

One of the Government's biggest supporters, Federated Farmers, has until now been remarkably quiet on the currency. Its comments this week about the drought, highlighting the currency's unjustifiably high level, were the first signs of a cracking of that resolve.

This only highlights the Government's lack of consistency and adherence to coherent strategy and its bias for doing deals with mates.

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