KEY POINTS:
Prime Minister John Key plans a jobs summit as part of what he labels a "rolling maul" of initiatives to try to keep as many New Zealanders in work as possible during 2009.
Key, who flew back to Auckland overnight from his Hawaiian holiday pad, wants his inner circle of Cabinet ministers to focus on policy initiatives to help New Zealand firms to keep employees on their books for longer.
The jobs summit is one of several initiatives that the PM is expected to table at tomorrow afternoon's special Beehive meeting of Cabinet ministers holding major economic portfolios. Also on the agenda will be a discussion on the branding of the forthcoming Budget (Bill English's first as Finance Minister), the liquidity drivers affecting the New Zealand economy, taxation and other initiatives to ease the burden on stressed firms, skills, infrastructure and the overall level of corporate taxation.
Of immediate interest are informal reports that a number of good New Zealand firms are finding it difficult to get bank funding. Key is understood to be quite concerned that the Australian trading banks - which lobbied the previous Government furiously for a wholesale deposit banking scheme during the election campaign - may not be keeping their side of the bargain by ensuring that funding lines remain open to Kiwi commercial customers.
It is an area which could yet spark a Government row with the Australian banks if an investigation into the informal reports finds suspicions are well-founded.
But it could also lead to the Government either directly (through using its own balance sheet), or, indirectly (by calling on the New Zealand Superannuation Fund) providing capital to some select companies to help them survive a tough patch. Not quite analogous with the General Motors' scenario - but a step in that direction.
Such policies are fraught with risk but the fact they are being floated indicates the new Government may be prepared to take a less orthodox approach than its predecessor to economic policy.
Another left-field idea would result in companies being paid the equivalent of the dole to "hoard labour" through limited time periods rather than laying off employees.
The Prime Minister has attracted plenty of well-aimed jibes from his political opponents for sitting on his hands while other political leaders develop major fiscal stimulus packages.
He will no doubt stress (again) that the Government did introduce a stimulatory package before Christmas, but that the Government decided not to put all its cards on the table at once, preferring to develop further initiatives to roll out this year as an ongoing confidence booster.
The stress on household budgets has clearly lessened since the October 1 tax cuts came into effect, interest rates dropped and petrol prices eased.
But the potential effects of the financial crisis have yet to sink in with most New Zealanders.
The jobs focus is well-timed. Yesterday's report by the New Zealand Institute of Economic Research reveals one-third of local businesses plan to shed staff in the next three months - the highest since June 1991.
But the decision by credit rating agency Standard and Poor's to attach a negative outlook to New Zealand's foreign currency rating will also concentrate minds on just how much additional fiscal stimulus is prudent given the external outlook.
Behind scenes, private sector players like NZX chief executive Mark Weldon, and former NZ Institute chief executive David Skilling have proposed various mechanisms to bolster employment.
The duo's paper "Economy on the Edge: Swan Dive or Belly Flop" created plenty of discussion during last year's election campaign. Key has since met Weldon three times and discussed some elements with Skilling.
Key is known to be attracted by the pair's ideas on various taxation initiatives to mitigate the economic shock wrought by the international recession, such as reducing the burden businesses face meeting provisional tax requirements when cash flows are lumpy.
Weldon and Skilling view the provisional tax regime in its present form as a real risk to firms' viability and hence jobs.
Weldon isolates three areas which he believes the Key Government should address in the short-term:
- Provisional tax relief.
- Expanding the Super Fund's role.
- Cutting the corporate tax to spur business investment.
His overall contention is that Key should leverage the downturn as a game-changer to make the New Zealand economy more effective.
Others in Key's private sector "kitchen Cabinet" - like Microsoft's Chris Liddell (a Kiwi ex-pat) have been in touch with Key during the break.
The PM is known to want to effect much closer links between his Government, the private sector and the public service. Thus the jobs summit will be a drive for closer engagement between private firm chief executives, business organisation heads, unions and public service representatives.
Key has rejected the notion of holding another Catching the Knowledge Wave type summit - like the Clark Government co-hosted - in favour of more targeted, smaller affairs which will result in work programmes.
Likewise, he has been running the ruler over the Government's Growth and Innovation Advisory Board which he is understood to view as a fig leaf devised by the Clark Government to obscure the reality that it was not close to business.
English, armed by the S&P report, will be in a powerful position at tomorrow's meeting. Economic Development Minister Gerry Brownlee, State-Owned Enterprises Minister Simon Power, States Services Minister Tony Ryall and Communications and Transport Minister Steven Joyce are also participating. They will want to ensure that any decisions do not jeopardise the external view of New Zealand.
Key's press statement on the Beehive meeting said the Government's aims for the economy include putting more money in New Zealanders' pockets, better control of government spending and more productive use of public money, and building a stronger economy with more jobs by making businesses more productive and competitive.
But other issues, which may form part of discussions over New Zealand's economic agenda, such as the Kyoto liability will surface relatively early this year.
Key is known to favour exploring whether New Zealand's potential Kyoto liability (expected to run into hundreds of millions of dollars) should be crystallised now. He also has an open mind on whether the emissions trading scheme, which is being reviewed by a parliamentary select committee, should include a transition carbon tax, or be pegged to a fixed carbon rate until the international trading regime matures.
Then there is the vexed issue of getting greater performance from the state-owned enterprises. The overall return on equity on the Crown's various commercial enterprises was just 4.8 per cent in the 2007/08 year. Expect some major additions to SOE and other Crown boards as the new Government swings into gear.
But the prime short-term focus will be jobs.
