Polity: Labour’s manufacturing plan

• notices and features
• 10 years ago
• Categories: david cunliffe, Economy, election 2014, employment, labour, manufacturing, Politics
• Tags: polity

David Cunliffe has launched Labour’s policy to get more manufacturing jobs back in New Zealand:

Labour leader David Cunliffe launched the policy to an Auckland business audience this morning, adding the depreciation and procurement policies to the known suite of Labour’s approach for manufacturing, including research and development tax credits, lower power prices, a more active monetary policy to create “a more stable exchange rate” and a suite of sector-specific “Economic Upgrade” packages.

“Our aim is to influence investment policy overall,” said Cunliffe. “To change the culture of investment in New Zealand so that firms, entrepreneurs, and investors feel confident in developing world-beating ideas here.”

This is very good stuff. Having a tax break for R&D work has always been a no-brainer, and it is great to see it reconfirmed. Adding an accelerated depreciation scheme for new plant is a helpful addition. And partnering with more local firms for more locally-sourced government procurement makes perfect sense, too. Consider a toy example:

• The government needs a $100 million widget
• Giving a foreign firm $100 million for the widget costs the government $100 million, and gets us exactly one widget
• But giving a New Zealand firm $100 million for the widget only costs the government around $70-75 million, once you factor in the income tax, profit tax, etc that the government receives as a result of the deal. And, even better, the government receives not only the widget, but also all the economic benefits that the the injection of $70-75 million into the economy brings. More consumer spending leads to more employment for retails workers, more disposable income leads to greater demand for trades. And so on.

Another no brainer for parties – like Labour – that actually care about local employment.