Dialogue: Long term is real concern

By DAVID CARTER*

The New Zealand economy looks like having a relatively good year in 2002.

I say relatively, because few would doubt that the economy is going through a bit of a soft patch. However, when compared with what is going on in the United States and parts of Asia and Europe, a soft patch doesn't seem too bad.

So we're doing relatively well because, in the short term, others are hitting a rough patch. That's nothing to do with good management - it's more to do with good luck.

Prospects for a global recovery in the second half of the year look promising, and hopefully New Zealand will see some benefit of that. However, what concerns me is that while our economy goes through this period of relative strength, it diverts attention away from the real issue - New Zealand's long-term, relative economic decline.

The main constraint to our economy is a lack of confidence caused by a lack of certainty. Incredibly, the Labour-Alliance Government remains blissfully unaware of the damage its various actions and statements make to business confidence.

New Zealand's economic policies of the late 80s and 90s were more resistant to global weakness and primed for growth. However, the policies of the present Government are, in the main, growth-inhibiting.

Since the election we have had a fall in the exchange rate as New Zealand has moved off the international investment community's radar screen; many of our best and brightest have taken their talents elsewhere; long-term growth forecasts are for only a little over 2 per cent a year; and we have the highest corporate tax rate in the Asian region.

The Government doesn't seem to understand that the best thing it can do to make life easier for business is to let business get on with doing business.

This means providing an environment that encourages entrepreneurial activity and supports small business people who want to take a risk. Instead this Government is putting up (or, in the case of the Resource Management Act, failing to fix) roadblocks to success.

All these factors suggest to me that if the pundits are correct and the global economy does pick up - and we recover on the back of it - there is no reason to expect that we will be any closer to clawing our way back up the relative wealth tables.

There is only one way to do that - greater productivity. It may sound obvious, but the reality is that the only way New Zealanders can start doing better than everyone else in the world is to work and learn harder and faster.

However, there are a few things that the Government can do - and should be doing - to make this happen.

We need to get the incentives right to retain and attract skills and capital in an increasingly globalised world. We want our kids to be entrepreneurial and innovative and to earn the rewards for that effort, but we want them to be able to do that at home - not overseas.

National fundamentally believes that lower taxes are a part of that equation. We will look to lower taxes progressively and in a sustained manner over time, while ensuring that we can meet the growing costs of health and education.

Education is the best investment we can make in our nation's future. The Government is dumbing-down the education sector and taking an overly bureaucratic, one-size-fits-all approach to one of the most important ways we can develop our people.

We need to let teachers get on with teaching, rather than filling out forms for Wellington. Schools also need to be free to respond to the needs of their specific communities.

Business also needs to be unshackled from bureaucratic red tape. Any new regulation should have to prove it will do more good than harm. Many of the Government's recent initiatives resoundingly fail this test.

The most important job to do in this area is to fix the RMA.

Just as much as we need to unshackle the economy from bureaucratic red tape, we need to remove the physical roadblocks to a faster growing economy.

Bill English recently outlined a public investment policy framework that would enable Government investment to be directed, in partnership with the private sector, to make sure our framework supports - rather than hinders - our ability to grow.

Growth is important - and not just for the sake of growth itself. Growth means more jobs, higher incomes and will allow all New Zealanders to be able to afford the world-class social services we all want to enjoy.

* David Carter is National's associate finance spokesman.