Don Brash: Economic growth key to living standards

COMMENT

The results of the Mood of the Boardroom survey come as no surprise. It confirms what New Zealanders have known for quite some time - this is a most business-unfriendly Government.

That is bad news for investment, which, in turn, is bad news for the prospect of lifting New Zealand's productivity.

Given that rising productivity is what drives incomes higher, this is all bad news for our chances of closing the income gap that has opened with Australia and elsewhere.

Employment relations legislation, holidays legislation, the health and safety in employment legislation, the Resource Management Act and the Treaty of Waitangi - these are issues that have been identified as hugely damaging for productivity and growth.

The fact that nearly 95 per cent of those surveyed do not think we have a growth strategy to sustain business success is truly worrying. It should worry all of us, but especially the Government.

One of the top priorities for a National government would be to improve New Zealand's sustainable rate of economic growth. Stronger economic growth is absolutely critical to raising living standards for all of us.

The present Government's policies will most likely see the $175 a week gap in living standards between the average New Zealander and the average Australian grow wider.

To catch up to Australia's average standard of living within 10 years, our gross domestic product per capita would need to grow at an average rate of almost 5 per cent. Treasury's latest projections show GDP per capita growth deteriorating to 1.5 per cent in 2014.

Early in the Government's first term, Michael Cullen said he thought it would be clear by the middle of 2004 whether the Government's policies were on the right track in terms of improving New Zealand's economic growth rate.

Unless we see an enormous turnaround in Treasury forecasts, it is abundantly clear that he is going to be very disappointed.

The Government continues to staunchly deny that higher taxes hinder growth.

It has introduced a multitude of taxes that have collectively raised $3.6 billion in extra tax, which equates to an average of $2600 a household over the past four years.

National is committed to reducing and flattening tax rates.

But our immediate priorities upon election would be to provide tax relief for low- and middle-income families, and cut the corporate tax rate to at least match the 30 per cent rate in Australia.

Cuts in the top personal income tax rate will be implemented gradually. It will allow us to address other priorities in education, retraining the long-term unemployed, and better policing of our communities.

It must be emphasised that reducing tax over time does not require government spending to be slashed - what is required is that the growth rate of government spending is kept below the growth rate of the economy. That requires discipline.

National is also absolutely committed to returning more flexibility to our increasingly regulated labour market.

It is bizarre that New Zealand should try to imitate the industrial relations law of European countries, where unemployment rates are stuck at about 10 per cent. While we try to emulate their failed policies, they are busy trying to repair the self-inflicted damage.

It is clear that urgent repairs are needed in New Zealand, too.

New Zealanders have identified the Resource Management Act as another area of prime concern. That cumbersome legislation, with its maze of consultation obligations, is suffocating development and holding up important projects.

National has already commissioned an independent study to identify ways of removing treaty clauses from that legislation. That fits with our focus of reducing the widespread abuse of the consultative process. We want to streamline the act so investors can proceed with projects with certainty and minimum cost.

A growing economy has emboldened the Government to load costs on to business and introduce labour market laws highly favourable to its union supporters.

These are things the Government can control, unlike the exchange rate, and the costs of these policies will show up when the country encounters a less favourable economic environment.

As with most New Zealanders, the treaty is causing serious concerns among business leaders.

Treasury advice to the Minister of Finance, released under the Official Information Act, warns that uncertainty generated by unresolved treaty debates could potentially have quite a large impact on economic growth.

That advice was given to the minister when the seabed and foreshore had been on the political agenda for only four months. Six months later, the economic and social fallout has increased dramatically as the Government continues to dither over important issues.

What's clear from the Herald survey is that the mood of the boardroom is anything but upbeat.

The findings should serve as a real wake-up call for the Government, which has been strangling businesses with compliance costs and suffocating them in new taxes and consultation requirements.