PEC believe Key is just tinkering with the economy

PEC believes John Key is just tinkering with the economy

Bill English, Dr Bollard and Treasury are doing their best to paint an accurate picture of where we are as a country. Unfortunately the Prime Minister seems to be presenting a very different landscape to the public. If borrowing an extra $250 million a week doesn't make the Prime Minister and the average New Zealander think we have a problem with the way our economy is operating, what will asks Selwyn Pellett, the spokesperson for the Productive Economy Council.

"The fact is that we are living beyond our means and we need to restructure our economy. If we were talking about a business, the need for a restructure would be taken for granted. The shareholders would be demanding it and the CEO would see the need to make hard decisions or know they will be replaced by the board. Well, our economy is a business, and we are all shareholders. It's time we made that demand, and its time the Prime Minister realised that hard decisions must be made," says Pellett.

"Right now the Prime Minister is behaving like a CEO whose desire to be popular is overruling his duty to look after shareholders' interests. Perhaps it's because the government really doesn't understand the problems we are facing due to lack of education, skills, training, or first-hand knowledge but unfortunately the more likely scenario is that John Key knows there are no populist policies in his arsenal that will address the size of this particular problem," says Pellett.

"Populist policies have worked well for the government thus far; threatening to get tough on crime, crush boy-racers' cars, stop benefit abuse, reduce government spending, stop access to pseudoephedrine, have a job summit, build a cycleway and saying no to capital gains tax, have all helped the government's approval ratings. But they make little difference to the mountain of debt that John Key is personally authorizing on our behalf and the systematic destruction of our export sector" says Pellett.

If John Key wants to be respected as a Prime Minister rather than just being popular then we have a simple and coherent list of measures he needs to introduce:

• Stop giving PAYE deductions to property speculators (ring fence losses as Australia does)

• Bring in Capital Gains Tax (CGT) on everything other than the family home (as Australia does)

• At introduction of CGT exempt all current investment so that CGT is not retrospective (as Australia did)

• Capital Gains Tax only applies on the difference between inflation and the realised value (as Australia does)

• Progressively introduce compulsory superannuation (as Australia did)

• Increased contributions in times of pending inflation and reduced contributions during recessionary periods (as Singapore does)

• Adopt a managed dollar as part of our monetary policy, against a basket of our trading partners that ensures both price stability as well as protecting our tradable economy (as Singapore does)

• Recapitalise Kiwi Bank to take market share and hard wire its behaviour to the needs of the RBNZ thus reducing the negative impacts of the big four Australian Banks on our economy

• When we have addressed the current distortions then we should consider promoting 'winning behaviours' through the tax system (as Australia does)

These policies are not radical but they will have a radical effect in rebalancing our economy. We have Dr Brash looking at how New Zealand can get closer to Australian levels of productivity and prosperity and we suggest these policies are fundamental to achieving that aim. All these policies have been proven in other successful economies, so why wouldn't you take them seriously? Anything else is just tinkering and no business facing major challenges has ever transformed its performance by tinkering.

It is obvious to anyone who has worked in Australia the effects that things like compulsory super, a broader tax base (and therefore lower relative PAYE) and a strong local banking sector have had on the long term wealth generation of Australia.

"Let's focus on aligning our tax and savings policies and supporting our own local bank and then perhaps we will enjoy the Economic Sovereignty (freedom) that both Australia and Singapore have as countries and that we have lost by chasing the selfish, tax-funded, property speculation bubble of the last 20 years," Pellett says.

"It's time for John Key to step up and display the sort of leadership and skills we demand from our business leaders as they turn failure into success. The wait and see approach of successive governments while blaming the last administration has failed us for the last three decades. Populist policies won't make a scrap of difference to the country so let's get on with the pain of restructuring as there are no soft options left," says Pellett.

ENDS

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