KEY POINTS:
General elections occur every three years in New Zealand, while the financial crisis we are seeing right now is a once-in-a-lifetime event.
In the United States, the epicentre of the crisis and arguably the country with the most to lose, presidential hopefuls John McCain and Barack Obama were
unable to put aside their rivalries in order to better address the crisis, but that's exactly what our leading politicians are being urged to do.
Sharemarket operator NZX and think tank the New Zealand Institute yesterday released their draft strategy on how New Zealand's productive sector could be given a helping hand to withstand the looming full impact of the credit crisis here.
The document has been published at the end of a week when NZX chief executive Mark Weldon has criticised politicians for their lack of leadership on how New Zealand's "real" economy, the productive sector, might be better buttressed against the crisis.
While we've been feeling the effects of the crisis for most of the year, mostly via higher interest rates, some of the more apparently alarmist earlier predictions of how bad things would get have come to pass over the past two or three weeks.
The crisis has, as feared, brought the world to the brink of a recession which is likely to reduce demand for our exports at the same time as the cost of overseas capital we rely so heavily on, is set to remain sky high.
"This is going to hit New Zealand very hard," Weldon told the Business Herald yesterday, just a few hours before the NZX-50 suffered its worst one-day decline since the 1987 crash.
Weldon and David Skilling from the New Zealand Institute say they have no quarrel with the way the Reserve Bank has responded and Skilling emphasises his belief in the central bank's expertise and its ability to do what is required with monetary policy.
Skilling also acknowledges that with an approaching election, politicians will always tend to be "risk averse" and stay on message.
But while Finance Minister Michael Cullen's "automatic stabilisers" are all very well in a fairly conventional business cycle, Skilling points out we're now facing "something a little bit different".
"Our view is that there is, in addition to the unwinding of a cycle, something of a more structural nature going on."
With New Zealand facing this sharp increase in the cost of capital, "we could have constraints placed on investment in the productive base of the economy and that's where our focus really is".
The two major political parties however, are "defining themselves on very narrow issues like tax which are just simply not going to get the job done in this context," says Weldon.
"We're trying to broaden that discussion out so at least, even if there's not a bipartisan conversation at least the people start asking different questions and moving away from the tax question."
In fact, Weldon and Skilling's ideas include proposals around tax, however they are more concerned with giving the productive sector a leg up than stimulating consumption which they argue will be the net effect of the income tax cuts the major parties are bickering over.
As previously disclosed their short-term measures include freeing small and medium-sized businesses from having to pay provisional tax for a couple of years in order to give them wiggle room in managing their cash flow. Furthermore, they want to allow 100 per cent tax depreciation on capital investment.
"With credit rationed and cashflow threatened, the recession here will deepen unless capital investment is prioritised and incentivised."
A well as retaining the research and development tax credit the National Party says it plans to scrap, they would also like to see temporary tax incentives to lure Kiwis back from overseas and to attract foreign firms.
Yesterday, a few hours after the document was released, Weldon told the Business Herald he'd already received a lot of emails from "very clued-up people who are very concerned with the lack of any real meaningful response communicated on how we're going to deal with it."
Not all supported the measures suggested, but generally backed Weldon and Skilling's view that policy makers needed to be proactive about the threat the crisis poses to our real economy. But asking opposing politicians to co-operate on formulating economic policy a month out from a general election?
Tell 'em they're dreaming!
"We've certainly put our heads above the parapet on this one," says Weldon.
"What you would love to see is real leadership here and actual caring for New Zealand and to some extent that might require people to work together.
"I actually think the NZ public prizes honesty, fairness and teamwork and would appreciate it if someone stood up and said 'hey, why don't we have a bipartisan conversation around what are a couple of things that we can mutually agree on here' and then debate the differences but at the moment we don't see that."
The New Zealand Institute's Skilling admits there is a strong element of idealism to what he and Weldon are hoping to achieve, but that is "tempered with an understanding of the reality of the electoral process".
"This is not 'kumbaya, let's all agree and we'll live happily ever after'.
"It is election season and we know the limitations of that, but by the same token if this just gets taken hostage by 'he said, she said' issues, we're going to lose a few months. The sooner we can start grappling seriously with both the scale of the bumps but also what are the various options on the table, the better."
