- Date published:
2:25 pm, August 25th, 2014 - 32 comments
Categories: bill english, capital gains, david parker, Economy, exports, labour, manufacturing, minimum wage, monetary policy, national, wages - Tags:
Labour has the policies to take New Zealand forward into the 21st century – National’s “same old same old” will see the Kiwi skiff swamped. That was the clear conclusion from the debate between David Parker and Bill English on National Radio this morning. Parker’s approach was to put a new engine in the boat and deal to the big issues – exchange rate, housing supply, wages and secure jobs. English preferred to tinker with the old diesel – things are pretty good and “you can’t solve poverty.”
Kathryn Ryan finished by saying “I don’t hear a focus that might shift the economy for the first time in thirty years” to which Parker responded by saying with a capital gains tax 60% is paid for by the top 1% so it is highly redistributive, the answer to housing crisis is to build more houses which every few decades is what Labour governments do and which fixes the problem, and wages have to rise as too many people end up with huge student loans which lead to insecure work and insecure incomes. Bill’s answer was to work on worthy issues one at a time.
Parker said our exports have gone from from 33% to 29% of the economy and are forecast to drop to 25% so that our external deficit will be 6% of GDP – this contrasts with National’s promise at the 2008 election to lift exports to 40% of GDP. He said that we need to fix the exchange rate, save more, push away from speculation and push up value chain so we lift wages.
Similar points were made by Rod Oram last week in the Sunday Star times. Some excerpts
We need a broader, more sophisticated range of exports to overcome our commodity constraints. But we’re going in the opposite direction. Manufactured goods have fallen from about 37 per cent of exports in 2003 to about 22 per cent today. This increasing simplification of our economy towards low value commodities has accelerated in recent years, according to data from a long-term study of countries’ economic complexity run by Harvard and the Massachusetts Institute of Technology. In 2008, we ranked 39th in the world in terms of economic complexity, in the company of countries such as Brazil, Russia and Greece. But by 2012 we had fallen to 52nd.
There is a common theme for English-speaking countries: monetary and government policies have favoured the domestic over the export economy, asset appreciation over productive investment, and simple low value activity over complex high value business. This is particularly true of our three countries dominated by our natural resources – NZ, Australia and Canada. We could shrug our shoulders and say we are an inherently low growth economy and we can’t do much about it. But anyway it doesn’t matter because our natural resources and commodities enjoy such strong demand.
If this is what we want, National is offering a perfect set of conservative policies to keep delivering it: 1980s monetary policy that controls inflation but to the detriment of the dollar and interest rates and thus export competitiveness; a superannuation time bomb; and tax policy that skews investment to property and away from production. Moreover National offers R&D grants to a few companies at the expense of wider innovation; incentives for more natural resource depletion and commodity production; and declining investment in science in real terms, as shown in the government’s draft 10-year science funding strategy.
Or, if we want a sophisticated, wealthy economy, Labour and Greens are offering progressive policies to trigger the shift: a modern monetary policy that targets inflation and our external competitiveness; and compulsory superannuation that deepens our capital base and adds another tool to monetary policy to help take the pressure off interest rates and the dollar. Moreover, they also offer a capital gains tax to help level the investment playing field; and science, education, skills, investment, R&D policies that help companies develop high value products and invest in new areas such as clean technology.
This is our starkest choice in economic policy in decades.
I’m for a sophisticated wealthy economy, I think Parker and Labour have the policies to deliver it.