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Conflicting opinions halt economic policy reforms

A ‘same old, same old’ mentality isn't the key to fixing New Zealand’s economy any time soon.

Proper changes in the way economic policies will be reformed are to be considered if the country is to climb out the current debt-ridden economy says the New Zealand Manufacturers and Exporters Association (NZMEA).

With just one more day before the election results are collected and announced, NZMEA says it is clear that the country’s economic policy framework has instead encouraged consumption fuelled by debt rather than by savings and export investments.

Chief executive John Walley recognises that although most political parties are focused firmly on economic reform, there are mixed views on how these changes would be carried out.

“All political parties agree we have to grow the real (traded) economy, what differs is how that will be done – the right argues that more of the same will fix it, but under the policy ‘status quo’ the real economy has been in decline since 2003.

“It is clear that Labour have adopted some of these [changes] – new policy targets for the Reserve Bank and a Capital Gains Tax. However, National’s ‘don’t rock the boat’ strategy at least does not impose extra costs on businesses.”

Regardless of which party(s) form the next government, for the economy to begin its climb out of the red policy settings will have to be rebalanced, he said.

Keys to success would mean borrowing less through a variation of tax and spending cuts, and most importantly earning more by targeting monetary policy at non-traded inflation, balancing the tax mix to include capital gains, and introducing fiscal incentives to support traded sector investments.

“Sooner or later such changes will have to be implemented – our creditors will insist [this] if we continue to ignore the traded economy.”

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