Credible Policies For Achieving Goals Lacking

Commendable Goals But Credible Policies For Achieving Them Still Lacking

"The government's confirmation of its commitment to restore New Zealand to the top half of the OECD rankings is welcome", Roger Kerr, executive director of the New Zealand Business Roundtable, said today in response to the government's economic statement.

"However, its own projections for economic growth in the recent Budget Policy Statement show no signs of improvement. Moreover, the programme outlined in the prime minister's statement is generally at variance with the directions being followed by more successful countries, with the advice the OECD has given New Zealand, and with that of leading speakers at the Knowledge Wave conference.

"A number of initiatives announced by the government such as those relating to immigration, trade and foreign investment are commendable", Mr Kerr said. "The problem is that they are small in scale and at most will have a small impact on the economy's growth rate. They cannot offset the negative impact on economic growth of past government moves such as increases in spending, taxation and regulatory burdens, and further initiatives including local government legislation, ratification of the Kyoto Protocol, new occupational health and safety regulation, paid parental leave and more costly holidays legislation.

"Higher growth rates will not be achieved unless the government addresses more fundamental issues", Mr Kerr said. "For example, no country has achieved sustained per capita growth rates of 4 percent or more with a government spending (central plus local) ratio equal to 40 percent of the economy, as in New Zealand. The key focus of a successful growth strategy must be on getting the basics right.

"Until problems of excessive spending, taxation, business regulation, education and welfare dependency are addressed in more fundamental ways, there is a credibility gap between goals of better performance and strategies for achieving them.

"The government's closer dialogue with the business sector has been welcome, but there are still basic disagreements about economic policy directions. By the end of the parliamentary term, the acid test of whether the government's approach is sound or not will be whether medium-term growth projections for the economy are significantly improving", Mr Kerr said.

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