The government has spent in the vicinity of $54 billion dollars to keep New Zealand afloat, whether wisely or otherwise only time will tell.

In household budget terms we have spent our savings and maxed out the credit card. The time has now come to put in place policies that ensure New Zealand’s economic future is in New Zealanders hands rather than the international equivalent of the bailiff’s!

It is unfortunate that the major parties and bureaucrats are unable to think of anything other than tax and more tax. Their proposals likely reflect their experience and knowledge, as people that live off the taxpayer.

What they don’t seem to realise is that NZ’s producers are already taxed and regulated to the point where it is inhibiting growth. Figuratively flogging taxpayers is a disincentive to be a tax payer and therefore an impediment to growth.

What we need is fresh thinking and maybe some new directions for our economy.

The government is thinking of shovel ready projects to kickstart the economy post Covid 19. These are presumably great in the short term but must logically peter out as drivers of growth and employment if they are for a one off projects.

In relation to developing jobs and boosting the economy on a long term basis, the shovel ready projects that I have seen so far, are an abject failure!!!

New roads are only of long term value if there are people and goods willing and financially able to use them. Pumped hydro or any other additional electricity is only of benefit if people can afford the price of the goods made using it. Infrastructure is useful if there is a private sector economy and a lot of income-earning (and tax paying) citizens around to use it.

The worst thing about these shovel ready projects is that they are all in the category where; yes they produce extra work, but they may not produce any extra jobs at all as they may just be completed by the currently employed persons that are staring at redundancy due to the effects of Covid 19.

The other problem with the shovel ready projects is that they don’t produce any long term employment opportunities after they are completed. So yes whilst they do create a money go round for a short term lift in spending, which will flow on into the wider economy, they are all funded by the taxpayer and therefore also come with a detrimental effect of raising our borrowing levels even further.

The government gains income from only two sources:

1. Taxes
2. Income from assets
3. Sale of assets
4. Looking first at the sale of assets, this option is not feasible from a number of viewpoints;

The remaining assets owned by the government are in the main not going to generate enough money from a sale to completely payback our overseas debt.

1. Income from assets. If we were to sell the remaining assets that are saleable, we no longer gain any income from those assets but we still have part of the debt requiring payment but without any income to offset that requirement.
2. Taxes. There are three ways that the government can acquire money from taxes and they are by (a) either raising the tax levels, (b) introducing new types of taxes or (c) increasing the tax take overall.
3. In an election year it is almost suicide to raise taxes across the board, but this Labour government has at least raised the top tax rate to 39% for those earning over $180,000/year sending a signal to their voting supporters that they are happy to punish the people gaining the most.

While this may look good to their supporters and gain some superficial voter support, it doesn’t in any significant way address the debt levels we are under as a result of Covid 19. On its own this tax increase will bring in approximately $500Million per year and would take about 250 years to repay our borrowing.

1. The Prime Minister and her Minister of Finance have been at great pains to categorically state that they will not introduce any new taxes under their regime, so this option seems to be off the table.
2. That leaves us with the main option of raising the overall tax take and while this may sound stupid given the comments above, it is not.

If the government can get the economy flowing and growing jobs then we will have more taxpayers and less beneficiaries requiring support giving an overall increase in the tax income without having to raise the tax levels at all.

The problem being that as with their thinking around the shovel ready projects, in my opinion they do not have a workable plan, or in fact the ability to produce one, that will deliver a vibrant growing economy that will facilitate an increased level of taxes paid.

Yes we can sit around and cry about how this financial crisis is part of the global situation etc, etc.

But, whether this is fact or not the one unchangeable fact is that we as a country now owe around $54Billion more than we did last year, as a result of Covid 19 and the measures that the government has had to take to try to protect us from the worst effects of the pandemic.

It is a fact that like any borrower we have an obligation to pay back the money borrowed to the lenders, yet we have the government running around making decisions or suggestions that are going to penalise the very people that we should be relying on to lead us out of this financial situation – small & medium business owners.

We have just heard the Prime Minister announce that she thinks we need another public holiday to celebrate Matariki and that if re-elected that Labour will introduce one. This is on top of the decisions that have been already made which have a direct effect on business bottom lines and therefore jobs; such as the increase in the paid parental leave entitlement, the increase in the sick leave entitlement, the removal of the 90 day employment trial period, etc.

Show me a small business owner in NZ that thinks that is a great idea at this point in time when they don’t even know if they are going to survive this financial crisis. Just another case of this government writing cheques on someone else’s bank account.

What we need is fresh thinking and maybe some new directions for our economy.

To get the economy moving and employing more people, government departments, local government, and especially the RMA need to be reformed. At the moment about 50% of people are employed in the public sector. In 1900 that figure was only about 20%. What has happened since then that we need 30% more bureaucracy?

We need to have a plan that will remove unnecessary bureaucracy and its associated costs & provide the impetus for private industry to lift productivity and therefore lift the overall tax income for NZ.

We cannot expect to carry on as we are at present with approximately 40% of the population working and paying taxes to support the other 60% and staring at the possibility that we may see a lot more unemployment as a result of Covid 19 once the wage subsidies are finished.

The government must be seen as what it is just a business on a large scale, and therefore it must like any good business in tough times reduce its overheads, increase its productivity and hopefully increase its margins.

What this means for government is that they must put in place policies which will allow the private sector to lift its productivity whilst also developing more opportunities for employment. If the government can set in place policies that allow the private sector to grow and lift its productivity then the government will be a benefactor through the increase in taxes paid through higher rates of employment more trading activity and consequently lower levels of un-employment and therefore lesser numbers of beneficiaries and the associated savings in cost.

We should always remember the five P’s: Proper Planning Prevents Poor Performance.

There is the very old but true statement: If you fail to plan you plan to fail!!!

Andy Loader

Co-Chair P.L.U.G.

Primary Land Users Group

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