Dialogue: Wanted: a vision for New Zealand

By ALASDAIR THOMPSON*

Budgets are turning points. They tell us if the Government is putting its money where its mouth is. More important than the Budget are the values and policies expressed through the Government's vision and goals. The Budget, indeed all public policies and ministerial decisions, ought to promote the Government's vision for New Zealand.

So what is its vision? Judging from the last Budget, one might have deduced that it was aimed at closing the gaps through the re-distribution of wealth. There was not much in it about wealth creation. Since then, there have been signs that the Government wants growth from an innovative knowledge-based economy plus a good dose of old-style state-funded regional development.

The vision of Business New Zealand, the new national organisation representing business, employers and manufacturers, is of successful business lifting New Zealanders' living standards.

Among its key goals are a national growth strategy to retain a First World national income, regaining our place in the OECD's top 10, Government action affecting business and employment to complement the growth strategy, and community understanding that business success means success for everyone.

If the Government shares this vision and supports Business New Zealand's goals, it will deliver a bold Budget that:

* Gives priority to education to ensure no child gets left behind and that we greatly increase the number of maths, science, engineering and creative arts graduates. Why? Because wealth creation requires innovative creativity.

* Releases the power of research and development in the private sector.

* Fosters a big increase in greenfield New Zealand enterprises.

* Creates an environment that develops new technologies and promotes technology transfer from abroad.

* Promotes local and foreign investment.

According to Competitive Auckland's research, Auckland needs to increase its per capita income by 45 per cent to catch up with Sydney.

The mal-implementation of the Resource Management Act, for example, will undo any good of an otherwise growth-focused Budget.

With confidence again shaky, business is not at all certain how long the present business environment will support its ambitions. It is muddling along okay from one interest rate announcement to the next.

The Budget must therefore build higher levels of confidence, generate enthusiasm, galvanise business and promote growth.

Of course, fiscal discipline is required because growth depends on low interest and inflation rates. Unfortunately, last year's front loading of expenditure led to the $300 million blowout this year. This means the thrust of Government spending must now be focused on growth, not redistribution.

If our GDP growth averaged 4 per cent for the next 10 years, New Zealand would only maintain its standing relative to other OECD countries, not improve on it.

The per capita GDP of Australians means our transtasman neighbours are 33 per cent better off financially than we are, and Australia ranks only 12th on the list of OECD wealthy countries. We are 21st. The gulf between us is causing many distortions, the most pressing of which is the transtasman flight of our skills and production base. On education and the need for higher skills, business favours skewing the fees structure to ensure more young people take science, maths and engineering related subjects. We are backing more investment in education.

It will do no good, though, to spend up large on education if there are no jobs requiring the people so trained. That amounts to giving our wealth to richer countries.

A start has been made with some initiatives to grow businesses where higher skills will be in demand. Seed, catalyst, and venture capital provision for start-up companies is proving attractive, as are better R&D investment rules, and technology development grants. So far they're not proving exciting to overseas investors.

Something more is needed. The Employers & Manufacturers Association (Northern) is calling for a reduction of company tax to 20 per cent over six years to boost new investment. That growth will also feed the Government's coffers and bring a higher standard of living.

* Alasdair Thompson is chief executive of the Employers & Manufacturers Association (Northern).