With the New Zealand dollar at a record high and the high costs of borrowing, New Zealand’s industry is suffering. Rather than support local industry, the current Government has made life even harder by pursuing policies that have seen jobs exported. The Government is willing to invest taxpayer dollars in the Rugby World Cup and re-write legislation to support the Wellington movie industry and yet it only makes things harder for our domestic manufacturers and exporters. The decision to tender a $500 million contract to an overseas company to build railway carriages for Auckland’s light railway network lacked common sense. The Bureau of Economic Research made a strong economic case for keeping the jobs, tax dollars and industrial capacity in New Zealand and yet the government opted instead for the short-term gain to the bottom line. Common sense procurement policy is not about protecting industry but investing in industry.

The Productive Economy Council supports a procurement policy that would balance the costs of providing large infrastructure projects with the wider benefits of procuring a contract to local industry and the flow-on effects on jobs, wages, income tax and GST, and the long-term effects of building New Zealand industry. The KiwiRail contract was expected to add 770 – 1270 full-time equivalent jobs over the construction period; $232 - $250 million in added gross domestic product; Crown net revenue increase of $50 - $70 million and an improvement in the trade balance to the value of $122 million. BERL concluded that it made economic sense to pay up to 25% more for an infrastructure project if it was delivered by a New Zealand business.

Labour’s Government Procurement Policy, announced last night, takes a step in the right direction by directing government agencies to apply a whole-of-life cost analysis to tendered contracts rather than the narrow focus on cost and quality. Many New Zealand businesses understand the importance of securing a single, large contract to help build their business, ramp up their capacity and hire New Zealanders. These contracts give the leg-up these companies need to compete in the global marketplace.

The Productive Economy Council believes that understanding the wider benefits of procuring a contract to local industry and applying this to the tendering process is necessary at a time where New Zealand companies struggle, incomes stagnate and our overseas borrowing grows. Furthermore, it is important that the Government develop relationships with local industry members to discuss how firms can be better involved in Government projects and help local industry deliver benefits to wider society.

We need government policy that matches the ambitions of New Zealand industry to compete on the global stage and secure economic benefits for New Zealanders. We support government policy that ensures taxpayers get greater value for their money for large infrastructure projects by balancing the costs and quality of projects with the benefits of keeping New Zealand jobs, businesses and tax dollars on our shores.

This is the kind of policy we need. Labour is not advocating protectionism here, merely the adoption of a sensible approach to using the procurement process to help maintain and build industrial capacity in the country. If we are to grow jobs and expertise within the country and use them to develop export business opportunities then Government needs to start thinking strategically, not tactically.

That is why, on balance, the Productive Economy Council supports Labour’s Kiwi jobs, Kiwi skills, Kiwi industries initiative.

ENDS

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