PEC Calls for a National Vision from John Key

Productive Economy Council Calls for a National Vision from John Key

The Tax Working Group is the latest initiative from the government that is setting out to find answers to questions we haven’t yet asked, says the Productive Economy Council.

“Like Don Brash’s productivity taskforce, the Tax Working Group will inevitably make recommendations to “fix” a broken system. Which is fine, as far as it goes. The problem is that that if New Zealand is viewed as a train, with the economy as the engine, and our society as the carriages being pulled behind, these fixes might help keep the whole train moving, but they do nothing to define its destination.”

“In short, what’s lacking in all of this is any articulation of a vision for our economy, our society and our country,” says PEC spokesman Selwyn Pellett.

“The applicability of any of the policies from the Tax Working Group can only be measured against such a vision,” he says.

“Without an articulated vision, how do we as a country decide which is better; a lift in GST (Goods and Services Tax), to tax income derived from capital appreciation (Capital Gains Tax) , or a land user tax? All have very different outcomes and biases and considered in isolation they all have merits.”

However if you put them into the context of creating a fair and equitable tax system and sustaining a society that can regain Economic Sovereignty through greater productivity and increased export revenues, then clear winners emerge. The 2025 task force was a predictable waste of time given Dr Brash’s lack of real world understanding but the Tax Working Group is much more considered. Even so, the TWG is still working in a vacuum without having an agenda set by a national vision.

“This is building policy without structure, something New Zealand politicians have become adept at doing. It is economic management by spreadsheet, not by strategic vision. All business owners know the value of the spreadsheet, but they also know it is just a tool to help measure your progress against strategic goals. Structure follows strategy, as all good business owners know, not the other way around,” says Pellett.

“If the Tax Working Group and its conclusions are to have relevancy we must have a coherent vision. You cannot debate tax, productivity, monetary policy or economic sovereignty in isolation as they are all interconnected” he says.

“If the exchange rate is low it’s effectively a tax on the average New Zealander that is felt at the pump, in the TV store or on holiday. If it’s high it’s an unsustainable tax on our exporters and we start selling bits of New Zealand to balance the books. If it’s simply unstable it’s a tax of uncertainty, resulting in lack of investment and declining productivity and jobs.”

In business, says Pellett, you have a vision, supported by the strategic imperatives that will deliver the vision, the strategies that will deliver the strategic imperatives and the tactics that will deliver the strategy. In this way there is logical and aligned decision making from the lowest level to the highest with the delivery of the vision being the only goal that really matters. Stakeholders can review progress against tactics, strategy, strategic imperatives and ultimately the vision.

“The ‘closing the productivity gap with Australia’ agenda of the 2025 taskforce is just one example of how we have strategies, and even tactics masquerading as a vision. Productivity should be used to measure success, not be treated as success in itself. I am sure Taiwan and Korea have even higher levels of productivity than Australia but surely we do not aspire to be either. The tactics that the taskforce proposed were clearly aimed at achieving that “success” at all costs without reference to the kind of society and country we will have at the end of it,” says Pellett.

“If you view New Zealand as a company, then right now the company is frantically juggling P&L and balance sheet issues, trying anything and everything to eliminate the red ink, while paying limited consideration to the $250 million a week erosion of the balance sheet. Should we not stop for a moment and ask where we want this company to be in a few years time, and what the long term consequences of some of the measures we are currently proposing or enacting will be,” he says.

“We should be looking to build a society that we are proud of and that represents our independence and heritage and captures the character of our people, not simply to play catch up with Australia on productivity. We need National to put its vision for the country on the table before we waste time debating which tax policies are appropriate for our future. We need leadership now more than almost any time in our history as we have truly lost our way. We were founded on trading and independence yet we have allowed ourselves to become enslaved by foreign debt for non productive assets (housing) which has killed our ability to trade internationally.”

It’s time to stop the paralysis by analysis and set some lofty goals. John Key needs to take this quote to heart: “Set no small goals, for they lack the power to stir our soul”. Failure to stir our souls will see New Zealand as Easter Island (asset rich and income poor) or The East Island of Australia.

About PEC

The Productive Economy Council represents a growing community of people that wish to see New Zealand return to the upper end of the OECD in terms of GDP per capita. It was founded by four of the former Trustees of the Hi Growth Project including current President of the Hi Tech Association Wayne Norrie, former executive of the Hi Growth Project, Garth Biggs, Former Chairman of the Hi Tech Association and entrepreneur Selwyn Pellett.

ENDS

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