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ECONOMIC PLAN
INTRODUCTION
New Zealand is at economic crossroads. We are witnessing what on the surface appears to be strong economic conditions and yet most of our people are seeing little or no real benefit from this. The current government has created a façade of statistics which hides an underbelly of struggle and pain for many New Zealanders.
There are three fundamental reasons why this situation occurs. First is the ongoing blind commitment to free market economics by many key decision-makers, which ignores the social and real life consequences experienced by average New Zealanders. The second is the ongoing effect of New Zealand having sold off so many key assets, which has resulted in increasing amounts of our productivity and growth being paid as dividends to overseas investors. The final reason for the limited returns for average New Zealanders is that despite being an open trading nation, New Zealand has for far too long lacked a coherent export plan which combines the efforts of government and business and is ambitious and innovative.
New Zealand First's economic plan is based on three key pillars: the need for a flexible monetary policy, the need to restore New Zealand ownership of key assets, and the need for an innovative and coherent export plan.
MONETARY POLICY
The more flexible monetary policy prescription promoted by New Zealand First in 1996 contributed to a substantial lowering of both exchange and interest rates. For far too long interest rates have been used as a blunt instrument to control inflation, with little consideration of their detrimental impact on other aspects of the economy.
New Zealand First will:
- promote a balanced and flexible monetary policy of lower exchange and interest rates conducive to real export and employment growth;
- amend the Reserve Bank Act and make export, growth, and employment objectives part of the policy targets agreement between the new government and the Governor of the Reserve Bank; and,
- create acceptable 'bands' for the New Zealand dollar, economic growth and unemployment which will operate in conjunction with inflation bands within the policy targets agreement.
TRADE POLICY
Exports
The export focus of New Zealand First's plans provide the base from which a re-orientation towards high technology and further processing industries will lead the way to an export performance that builds on the best of the present and provides growth for the future.
New Zealand First will:
- aim to treble exports, in real terms, by 2020 and will set goals to reach that target commencing with a major Campaign for Exports in 2006;
- refocus the role of Trade and Enterprise New Zealand to better harness exporting prospects where we have a competitive advantage;
- resource the Ministry of Foreign Affairs and Trade to ensure trade is a priority;
- implement a programme of thoroughly researching prospective markets, of facilitating ease of entry into these markets, and of ensuring that we have the best possible match between what we are producing and the demands of these markets;
- expand development banking and venture capital opportunities;
- develop, in conjunction with the export sector, an export credit guarantee scheme that works;
- implement tax abatement and concession policies to ensure that viable exporting opportunities and innovation are not lost (20% tax rate on 'new export' net income);
- further promote innovation by tax-incentivised research and development comparative to other first world nations, and by ensuring that technology transfer occurs within both the public and the private sectors;
- increase the international competitiveness of New Zealand business by reducing red-tape and compliance costs and working towards lower corporate taxation; and,
- conduct a full scale independent inquiry into all Government red tape and compliance costs requiring that their existence be justified, and further requiring that the Committee of Inquiry report to the Government within one year of the next election.
Imports
New Zealand First will:
- give priority to New Zealand industries and communities in setting any programme on tariffs. Future tariff removal will be consistent with the policies and progress of our trading partners. We aim to win the export and employment stakes, not some artificial tariff removal race.
Import Substitution
New Zealand First will:
- encourage businesses to engage in import substitution; and,
- place a 'buy New Zealand first' purchasing requirement on taxpayer and ratepayer owned businesses and State Owned Enterprises.
SAVINGS AND INVESTMENT
One of our fundamental economic failings as a nation has been allowing too much of our key infrastructure to fall into foreign ownership, which has effectively turned New Zealand workers into cheap labour for these investors to exploit.
Compounding the difficulties in offsetting this flow of funds overseas is the comparative lack of savings by New Zealanders when compared to other developed nations. Government, in an economy the size of New Zealand's, must accept that as one of the larger players in the economy and in the absence of other large players domestically, it has a crucial role to play in securing our key infrastructure.
Government must also play a far greater role in facilitating the building of a long term sustainable savings base.
INVESTMENT
Long-term secure investment is an essential element of achieving sustainable high economic growth. However, investment must be viewed as a means to an end rather than an end in and of itself and must always be viewed in the national interest, not just in the interests of profit-driven corporates.
New Zealand First will:
- ensure that the government has first right of refusal on the resale of any former state assets, in particular infrastructure assets;
- direct the guardians of the New Zealand Superannuation Fund to prioritise the purchasing of shares in New Zealand infrastructure companies, particularly when they are being sold by overseas investors, with the aim of building a solid base of New Zealand ownership of these assets. This shall be conducted at arms length, with no ministerial interference, and at the discretion of the guardians so as not to distort the market;
- require the fund managers to invest in New Zealand infrastructure and growth industries including making funds available at competitive interest rates to Land Transport New Zealand, New Zealand Railways Corporation, and local government for capital projects;
- stop state asset sales. If considered appropriate, and only where necessary, public assets currently in the hands of the Government will be commercially managed in the public interest and ownership;
- limit foreign investment in strategic assets to 24.9%;
- ensure that any foreign investment must be in the interests of New Zealand;
- review the process of local government sales of infrastructure assets;
- strike a balance between preserving the nation's infrastructure in New Zealand hands and ensuring that New Zealand enterprises can enter partnerships with international agencies for their mutual benefit;
- promote the creation of an internal investment/savings base to provide a clear alternative to foreign credit for the development of New Zealand infrastructure and businesses;
- ensure that priorities for foreign investment in New Zealand will depend on whether this brings new technology and employment and export growth;
- build on the 1997 New Zealand First initiative to drastically reduce the sales of land to foreigners each year; and,
- establish a new organisation, the Investment Commission that is fully independent of the Reserve Bank, to take over the functions of the old Overseas Investment Commission (OIC) and some of the tasks of the current Commerce Commission.
SAVINGS
New Zealand First will:
- facilitate the transition from the pay-as-we-go scheme through the cost smoothing mechanisms of the New Zealand Superannuation Fund to a new save-as-we-go scheme, with the ultimate aim of achieving individualised accounts;
- add to the dedicated fund through tax-incentivised personal savings in the name of the saver and thus ensure that the national interest for enhanced domestic savings is maximised;
- require that the contributory scheme must contain portability provisions over time and between jobs;
- ensure the needs of retired New Zealanders are met through a sustainable superannuation scheme. In giving people certainty (and thus security) such a scheme also gives New Zealand an expanded savings base;
- introduce programmes which promote a savings culture throughout the community; and,
- encourage the development of good savings habits for our children.
TAXATION
To protect our nation's tax base New Zealand First will reform the taxation system by: simplifying tax processes; clarifying tax legislation; ensuring that the taxation laws of New Zealand are upheld; and that all, large or small, pay their taxes. Our long term objective is New Zealanders paying less tax.
New Zealand First will:
- implement tax abatement and concession policies including a 20% tax rate on 'new export' net income;
- introduce an accelerated depreciation regime for specified industries and selected approved investments so as to assist business development;
- provide tax incentives for research and development;
- develop, in partnership with strategic cluster groups, a range of tax incentives for business activities which add value, create employment, provide export growth and/or new technology development. Such measures will include tax abatement on value added and start-up tax concessions;
- investigate a range of incentives to facilitate the growth of domestic savings;
- actively oppose any increase in general taxation;
- upon achieving short term growth goals aim to reduce corporate taxation;
- following the achievement of intermediate growth goals and focused social expenditure, aim to reduce personal income tax levels;
- re-introduce the New Zealand First programme of applying an increasing proportion of petrol taxation to the development of New Zealand's transport infrastructure;
- ensure that the Inland Revenue Department's (IRD's) application of the compliance and penalties regimes is fair and equitable;
- reduce tax compliance costs by monitoring, evaluating (and amending as necessary) the measures introduced during our time in Government. Priorities remain streamlining of taxation analysis and preparation of returns processes; and making the tax system as neutral and equitable as possible. Our ultimate aim is to reduce red tape;
- require disclosure of tax schemes that affect the incidence of tax payable by more than $50,000, be mandatory;
- ensure that any failure to disclose (or the falsification of material facts) by a person experienced in taxation matters is treated as a serious criminal offence. If a sum of greater than $5 million revenue is involved, it will carry a maximum penalty of 10 years imprisonment;
- establish a tax ombudsman to investigate taxpayer complaints; and,
- amend requirements and implement practices to enable the IRD to more appropriately remit tax liabilities or enter into arrangements for deferred payments.
ENERGY AND INFRASTRUCTURE
New Zealand First will take steps to ensure that electricity is delivered to all New Zealanders at the lowest reasonable price that is consistent with the maintenance of a viable industry.
New Zealand First will:
- seek to re-establish New Zealand ownership of key infrastructure;
- seek to minimise the environmental costs of generating electricity whilst facilitating continuity of supply. There will be no privatisation of Meridian, Genesis, and Mighty River Power, Transpower, or Solid Energy;
- provide incentives for ongoing investment in electricity generation, with a particular focus on local generation where feasible;
- ensure that barriers to competition are identified and removed within both the electricity retail and wholesale sectors;
- consider a range of incentives for reducing demand in times of restricted low supply;
- evaluate the fixed line charging regime with a view to ensuring smaller domestic consumers are not disadvantaged;
- ensure that Energy Efficiency measures are encompassed by the wider energy policies of Government;
- phase down (to remove) the excise tax which goes into the Crown account and thus provide for more financial resources for roading and other transport infrastructure;
- ensure that the roading administration structure, Land Transport New Zealand (LTNZ), is flexible, caters for the input and concerns of local government, and has the ability to borrow against future roading income. We will ensure that in the short term borrowing is utilised to meet the shortfall in roading infrastructure funding, which has been run down over many years;
- upgrade highways and rail tracks, particularly those serving ports, to accommodate freight movement;
- where appropriate designate roads as state highways to ensure that they receive the requisite funding and prioritisation;
- specify a programme to improve rural roading; and,
- change the Resource Management Act (RMA) to provide for a more rapid consents process for infrastructure projects, while ensuring local input is preserved.
LABOUR MARKET
If the New Zealand economy is to grow sustainably over time, and thereby render the social and fiscal dividend we seek, employers need skilled, dedicated, and flexible staff, whilst employees require stability in employment and appropriate conditions and remuneration.
An ideal industrial relations environment is one based on fairness, flexibility, and neutrality between the parties. New Zealand First will make it a priority to review all industrial relations law to ensure it is consistent with the preceding statement. Employment of New Zealanders wishing to work is our first priority.
New Zealand First will:
- raise the minimum and youth wage;
- establish an Industrial Relations Advisory Group;
- amend industrial laws to ensure that casualisation employment practices are fair and just to all parties;
- review the practice of short term employment contracts;
- conduct research into the makeup of the labour market to ensure that labour market decisions are linked to an accurate reflection of the types of work being undertaken;
- allocate sufficient resources to enable the Labour Department to give greater emphasis to education (small employers/new entrants to workforce) and OSH inspections;
- require that salaries paid beyond accepted public service broadbands, particularly but not exclusively in broadcasting, be cleared with stakeholder ministers;
- review the Holidays Act to ensure fairness and flexibility (and to ensure four weeks annual leave is locked in); and,
- introduce a new system for establishing the pay and conditions of teachers.
RESEARCH AND DEVELOPMENT
With such a large proportion of the funding of research in New Zealand coming from the government (with over 80% going directly to Crown Research Institutes (CRIs), clearly the state must play a key role in leading Research and Development (R&D).
However we are unsure how much benefit is derived from this investment. "At the moment New Zealand is actually world best on a per capita basis at producing scientific papers. But we're low on the scale of creating saleable intellectual property and/or products and services from our R & D" [Peter Kerr, New Zealand Sheep Research Foundation].
The key to a successful research and development policy is the maintenance of balance between genuine blue sky research and research activity which will directly lead to economic advancement. New Zealand must focus its limited research funds where it has a competitive advantage, primarily in expanding export potential.
New Zealand First will:
- provide tax incentives for businesses to engage in research and development leading to export and employment growth;
- focus Public Good Research funding more tightly on job growth and increased export earnings;
- increase the proportion of tertiary tuition subsidies for specific courses to increase the number of appropriately qualified graduates (e.g. science and technology);
- introduce further scholarships (especially at post-graduate level) to ensure that we keep our best students and provide for research and development expertise;
- expand publicly-funded topo-culture research through rural New Zealand;
- assist New Zealand companies in developing new technology and facilitate technology transfer;
- provide improved lower cost intellectual property protection for innovators in New Zealand;
- provide and encourage venture capital sources for New Zealand innovations; and,
- provide assistance in the marketing of new or innovative products.
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