If Cullen wants to party, he must lift the beat

As far as tap-dancing routines go, the performance by the Government's top duo last Friday could have conjured up a picture of Gene Kelly and Debbie Reynolds in their hit musical Singin' in the Rain.

But for business people at events in Auckland and Wellington, it seemed more as if Prime Minister Helen Clark and Treasurer Michael Cullen had crashed the New Year's Eve party at the Holiday Inn as they launched their bridge-building exercise to business - except, unlike Fred Astaire, they were both stone-cold sober and the audience wasn't laughing.

Still, by the end of Helen Clark's solo routine in Auckland, she had thawed out a bit.

The audience even warmed when the Prime Minister said she was prepared to take another look at the Government's unpopular decision to break its election policy to introduce tax write-offs for research and development.

As she put it, Treasury had "scared the pants" off Dr Cullen over the amount of tax revenue which would be forgone if R&D write-offs were brought in.

As business put it: You've kept all your other promises, why break this one?

It's the latter point which genuinely concerns the Prime Minister.

She went to the election pledging to form a Government which would keep its promises. The fundamental point, that her own integrity is now under question because of the Government's failure to deliver the writeoffs, does rankle.

Those speaking to her after the Auckland lunch were in no doubt that she would ensure the issue was revisited.

After all, there is no reason for R&D grants and tax writeoffs to be mutually exclusive - each can be targeted to different parts of the market.

Grants ca be made to fledgling enterprises where the Government can play nanny-state and direct investment; write-offs to those companies and entrepreneurs who are already playing with the grownups, and who are competing internationally against companies receiving substantial tax incentives from their home countries.

The export guarantee scheme is now back on the drawing boards as well, Helen Clark has affirmed.

For a Government which rode to power on pledges to introduce a knowledge-based, high-skills, high-growth economy, it is surreal that it took seven months for the Prime Minister to finally front up to an Auckland Chamber of Commerce luncheon.

Helen Clark had refused to debate with her counterpart Jenny Shipley in front of that key Auckland business audience during the election campaign.

But she could have saved herself a lot of angst if the Government had focused on quickly delivering its Vision for the 21st Century, and had built the bridge to business from the moment the election was bagged.

Dr Cullen mucked up his own performance a month ago when he whacked into business people for going into an "ideological funk" over the Employment Relations Bill.

His six-year timeframe for economic policy success does not have the required sense of urgency to engage business. And a casual look at the Herald's website also shows many are unimpressed by his Budget.

They are yet to warm to him personally - the Prime Minister attracts more individual respect for her forthright approach.

They may not like what she says - but her messages are unequivocal.

Mrs Shipley failed miserably to capitalise on the fantastic opportunity Apec presented by taking business people with her on all the trips she made to various Asia-Pacific countries in the countdown to the leaders' meeting in Auckland last September.

Helen Clark has a chance to cement a warmer relationships with business people during the trade missions she leads.

But all that is in the future. The Government now has a hard sales job to do on the Budget numbers. International credit-rating agencies will not be seduced by the claims of fiscal probity.

Dr Cullen's decision to bring spending forward into the first year will have consequences.

The Budget's bottom-line is not robust, as a quick study of the growth track shows.

If the Reserve Bank takes the view that it needs to again tighten substantially to keep growing inflation in line, rising interest rates will dampen economic growth further.

Under this scenario Dr Cullen's ability to deliver future surpluses without raising revenues or cutting spending substantially will come under threat.

He will need to step up the tap-dancing routine if he is to persuade business to come to the party.

Budget 2000 feature

Minister's budget statement

Budget speech