Ramp up China trade benefits, says Labour

David Parker. Photo / APN

Labour would seek to build on New Zealand's free-trade agreement with China by seeking top-level talks on securing Chinese investment in New Zealand ironsand extraction and steelmaking, says economic development spokesman David Parker.

The plan was part of Labour's "Roadmap for the Economy" launched yesterday by Parker, leader Phil Goff, finance spokesman David Cunliffe and commerce spokeswoman Lianne Dalziel.

As well as other previously announced plans to increase private savings, rejig the tax system, and alter monetary policy settings to tame export-sapping volatility in the New Zealand dollar, the package also included plans for big tax breaks to help build fledgling export companies.

Parker said many successful Asian economies used "the power of the state and state-owned organisations to co-ordinate and encourage success in identified sectors".

Taking that "industry targeting" approach, a Labour government would identify industries in which New Zealand had a comparative advantage or which had high growth potential and would then support growth and investment there.

Parker said New Zealand's free-trade agreement with China had seen an enormous increase in trade between the two countries, "but you will have seen criticism from some of those in China who represent New Zealand's interests that we haven't used that to the advantage of New Zealand".

Labour believed government to government discussions "should be used to broker relationships between China and New Zealand under our free-trade agreement to match the required capital and demand for steel with our ironsand and energy resources".

Meanwhile, on top of Labour's previously announced plan to reintroduce a research and development tax credit, it would also investigate introducing tax breaks of up to 20 per cent on domestic investment in "innovation-based and internationally focused" firms seeking to expand into export markets.

"An additional 50 per cent deduction would be allowed if their capital is lost", Parker said.

Labour would also give further tax breaks on overseas royalty income earned by New Zealand-based software and other intellectual property-rich firms.

At present, such firms without large local manufacturing bases were incentivised to move to lower tax jurisdictions overseas.

Parker said reducing the individual tax bill for such companies meant they would remain in New Zealand after achieving international scale and the total tax take would rise.

Finance Minister Bill English said he believed voters preferred National's steady approach to economic management given the international environment.

"On the campaign trail we've found the public and business quite realistic. The situation in Europe has deteriorated in just the last two or three days and people are looking for consistency and credibility and they know the Government's built up a track record of dealing with these quite big economic challenges.

"They've got no time at all for promised free stuff or for unlikely coalitions that don't actually know what they're doing."

Labour's economic plan "doesn't take into account the pressures from the Greens who have got big ideas about spending, borrowing and taxing".

Roadmap for the economy

Labour's economic development prescription:

* "Industry targeting" employing government clout to develop high growth or high potential industries.

* Investigate tax breaks for local companies on overseas royalties earned on intellectual property to keep them in New Zealand.

* Investigate a new 20 per cent tax break on investment in fledgling exporters.

* A 12.5 per cent research and development tax credit.

* Encourage state-owned enterprises to grow new subsidiaries which would raise private capital to develop products and services for export.

* Compulsory KiwiSaver to increase the pool of savings available for investment in local business.

* Changes to monetary policy to help control the exchange rate and interest rates.

* A capital gains tax to redirect investment out of property and into productive assets.