KEY POINTS:
Those hoping for a real stoush between the country's two opposing finance gurus at today's Mood of the Boardroom breakfast would have been disappointed.
Indeed, rather than being poles apart, the tenor of the debate between the finance minister and his shadow opposition representative was remarkably civil, given the timing - just a week after a momentous Budget and a year out from a pivotal general election.
Finance Minister Michael Cullen and National finance spokesman Bill English addressed a group of Auckland CEOs this morning, at the fourth annual New Zealand Herald Mood of the Boardroom debate.
Following a Budget that had reduced the company tax rate to 30c from 33c, it wasn't surprising that Dr Cullen got a cordial welcome from the business leaders.
Ultimately, though, the audience was sympathetic to Bill English's message and decidedly cynical to that of Dr Cullen; but, as the TV ad says, "they would be, wouldn't they".
National's Bill English spoke first and said that his party - presuming they take over the Treasury benches next year - would find themselves in a position markedly different from that which previous incoming National governments had faced.
It was traditional, he said, for National to have to begin their tenure in government with a sharp correction, following years of overspending under a Labour administration.
However, he had to admit that National, if successful next year, would inherit an economy that was fundamentally healthy.
He told the CEOs that he had been speaking to an investors' group yesterday, and there was universal agreement that the cut in the maximum tax rate for Portfolio Investment Entities (PIEs) in the Budget was a move in the right direction.
The top tax rate on investment income earned on behalf of individuals who invest in savings vehicles that choose to use new PIE tax rules will, like the company tax rate, fall to 30 per cent from 33 per cent.
The PIEs are expected to improve returns from a wide range of savings and investment vehicles as well as from KiwiSaver, say industry experts.
Mr English countered Michael Cullen's assertion that savings was the single key to our future prosperity.
"Improving our level of savings (ie, Kiwisaver) is certainly important, but it's only one ingredient in a fiscal recipe", he said.
The nation's economic "bloodstream has got clogged up with cholesterol", he stated, citing infrastructure hassles, bloated local government and the high number of public servants.
This message was what the predominantly right-wing audience came to hear.
In his chance to reply, Michael Cullen's speech had the air of a man who was aware that his government's time on the Treasury benches was just about up, but who wanted to be remembered as a Finance Minister responsible for introducing the country's largest fiscal reform in 20 years.
Echoing a message the Reserve Bank has been hammering for years, the economy is still growing "unsustainably fast", Dr Cullen told the assemblage.
He said the Government faced the challenge of what to do about that, and it was clear that people needed to save more and invest more.
Dr Cullen challenged his audience to dispute the urgency of the challenge, and said it was why he had introduced measures in the budget to encourage people to switch from spending to saving.
Another challenge was raising productivity, and that was why the budget invested more than a billion dollars a year in "the biggest business tax package in 20 years".
Dr Cullen said the Government was removing demand from the economy and running a tight fiscal policy.
"I want to ask how many exporters here want the Government to run a looser fiscal policy," he said.
"A looser fiscal stance would fuel inflation, and the Reserve Bank would certainly increase interest rates. The exchange rate would stay high -- businesses would be punished."
Dr Cullen said the National Party should say what it wanted.
"I don't know their answer because it changes daily, or even in the course of a single speech."
Dr Cullen said National's finance spokesman, Bill English, argued for a tighter stance in front of business audiences.
But at the same time party leader John Key attacked the size of the surplus and the regional petrol tax to pay for new roads, while promising tax cuts.
"You cannot plausibly increase spending, cut taxes, reduce the fiscal surplus and then say you support a tighter fiscal policy," he said.
"The prescription offered by the Opposition is clearly to spend your way to prosperity. Doing that is like trying to eat yourself thin -- that hasn't worked for me and it won't work for the economy."
On climate change, Bill English said the fact that the CEOs in the Mood of the Boardroom survey had shown a high degree of cynicism about the science surrounding carbon emissions was a reminder to government not to jump blindly into following 'flavour of the month' environmental solutions.
In contrast, Dr Cullen said the facts about climate change were 'indisputable', and New Zealand's reputation on the international stage was at risk if we ignored the need for carbon neutrality.
A question over sensible management of public/private partnerships (PPPs) was replied to cautiously by both participants, while both recognised the need for such partnerships to work effectively and efficiently.
A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non-medical services while the hospital itself provides medical services.
The main benefits usually attributed to PPPs are accelerated provision of infrastructure projects as a result of using private sector finance, and better value for money due to private sector innovation and whole-of-life cost minimisation.
One question from the floor criticised the government's move to hike rates in Auckland to pay for regional infrastructure.
"The money has to come from somewhere", shrugged the Finance Minister. "It doesn't seem appropriate to increase tax revenue from PAYE or GST in order to ease the burden on millionaire home owners."
- additional reporting from NZPA
