Greens and Labour get stuck into National's record

Labour leader David Shearer says the country needs a plan to build up savings. Photo / Mark Mitchell

The National Government has dug itself into a hole with poor economic management and poor choices, says Greens co-leader Russel Norman, while Labour leader David Shearer says it has no plan for building up pools of capital and investing in the economy.

The rebalancing of the economy which Finance Minister Bill English had rightly identified as needed upon taking office, was not happening, Norman told a pre-Budget press conference yesterday.

He pointed to a deteriorating current account balance, mounting foreign debt and the contraction in manufacturing output over the last three years.

"We can't just rely on dairying. We need elaborately transformed manufactures."

The Government had made poor fiscal choices, Norman said. The 2010 "tax switch" was not in fact revenue neutral - costing $2.2 billion over its first 18 months.

"The Government has disputed this but has not put up any numbers of its own to refute it."

It had engaged in poor-quality spending, Norman said.

The billions being sunk into roads of national significance locked in dependence on oil, ignoring warnings from the International Monetary Fund this year that real oil prices will have to double over the next 10 years.

Meanwhile, subsidies to emitters, including farmers, under the emissions trading scheme would only increase the adjustment costs they faced later.

By contrast a "smart, green" economic agenda would focus on the opportunities in green growth, including Mighty River Power's expertise in geothermal generation.

And imposing a capital gains tax would divert capital from speculative to productive investment as well as boosting government revenue in the longer term.

Shearer, meanwhile, told a business audience in Christchurch that instead of seeing how it could sell our productive assets the Government should be looking at how to build up more of them.

"What' s missing is a plan to build our savings," Shearer said.

"Last week I went to see a large forestry company that's foreign-owned. They want to introduce more New Zealand equity into their business," he said.

"But they pointed out to me there is a shortage of large New Zealand investment funds that can make long-term investments in the hundreds of millions of dollars in a cyclical asset like forests."

Like Norman, Shearer sees the tax system as rewarding investment in housing speculation while exporters and the productive sector generally are starved of the investment capital they need.

A pro-growth tax policy would reinstate tax credits for research and development, he said.

The Government's voucher scheme meant most companies missed out.

"It also means a capital gains tax that will encourage people to invest in productive parts of our economy rather than speculate.

"And frankly a system that is fairer," he said.

"It doesn't matter how you earn a dollar, everyone should contribute."