Roger Douglas: I’m no bogeyman

Act MP Sir Roger Douglas is enjoying his reputation as a parliamentary pariah ahead of his speech to Orewa Rotary Club, chuckling at his portrayal by opponents as an outdated laissez-faire radical and looking to make some changes to New Zealand’s tax policy – if anyone will listen.

Most famous for New Zealand’s free-market reforms ( under Labour) in the 1980s, Sir Roger's re-entry to Parliament as a member of the party he founded, Act, was greeted with a virtual input blacklisting by both National and Labour.

He tells NBR that he still hasn’t had any kind of meaningful discussion with members of Act’s coalition partner, National, adding that with Winston Peters out the door, both Labour and National need a new fear figure to unite supporters.

But as finance minister during New Zealand’s last true economic realignment, and as the world watches the rise of economic nationalism and the return of protectionism looming (most recently the EU’s reinstatement of dairy export buybacks), Sir Roger is happy to spell out his advice – whether or not anyone’s listening.

2009 is pushing the limits of the worst case scenarios presented in any economic models, he says, putting to the sword to any of the “daft” projections that picked the recession to be “relatively shallow.”

Late last year he picked unemployment to hit 7% l but now concedes this may be too low, and is picking mid to late 2010 before any signs of economic recovery appear.

He blames the short sighted, interest group-focused policies of the departed Labour government that simply don’t stand up to any kind of cost benefit analysis – leaving the current account deficit at 8.5% of GDP and the country in recession well before the Bear Stearns collapse.

With international financing tight, and a fall in the New Zealand dollar matched by commodity price falls, the chances of reducing this deficit are all but impossible without tax reform and an improvement in productivity. Productivity is now at just 0.7%, a quarter of what it was pre-99.

Further behaviour, such as Dr Michael Cullen’s hazy definition of “strategic assets” to deter foreign investment in Auckland Airport takeover, creates a perception of an uncertain market, he says.

“It’s quite simple – in volatile times you try to create as much certainty as possible.”

Not that National has been terribly much better, fiddling with small details and refusing to cull the inefficient public sector.

His new proposal, which he admits is a long-term plan, is to introduce a tax-free threshold up to $30,000 for the individual, and up to $50,000 for couples with a dependent. Below that, there will be a guaranteed minimum income for families with a tax credit to boost income to safe levels.

Above that, there will be a flat tax rate, which over the course of a 15-year transition will be reduced to 15%.

The payoff is that individuals will be required to take responsibility for their own retirement, healthcare and insurance.

Healthcare and insurance coverage focused on a restoration of competition to the sector and removal of monopolies such as ACC.

The under $30,000 earner currently loses $6150 in taxes, more than enough for an individual to cover all these facets, after cost reductions in a market competitive environment.

A private superannuation account for each individual, topped up by private and employer contributions, will see retirees bank $1.8 million after a lifetime in the workforce, adjusted to $850,000 after inflation.

All of these options will operate under an "opt-in" system, and anyone who doesn’t want to be involved can continue under the current arrangements.

The idea, he says, is to give the individual choice in arranging their own affairs, personalising levels of coverage and cost, and breeding competition in these previously monopolised sectors.

The culture of handouts and prop-ups has had its time, he says, and wants the working culture to move back toward incentivisation.

Rethinking of the way the country earns and does business is the only way to catch Australia and climb OECD rankings.

“We’ve had too many years of politicians looking at short term goals, of appealing to constituencies,” he says.

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What a tragedy they won't give him the time of day

That is the sort of thinking NZ has long missed and what an opportunity to really strike out with some radical options

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Lest we forget, the majority of us back then voted Douglas' back in for his results. How some of those same people conveniently turn on him is unbelievable. But that's us.

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Um, his speech is already on youtube:

http://www.youtube.com/watch?v=2gH0uzCIeV8

and it's not really very impressive.

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Today I talked to two succesful businessmen about Red Tape.
We all agreed that it is now much worse than what is was pre Rogernomics.
Douglas is just talking illogical nonsense about making NZ a complete clone of the USA.
What he has created is a selfish greedy society with lots of crime.
Douglas is a 70 year old wealthy person.
He doesn't understand that if you give the population low taxes they will just squander their increased take home pay on consumer goods.
They will not save for their retirement,education or health.
The free market gave the NZ population the chance to obtain five credit cards and run up $10,000 on each.
It meant someone on a benefit could buy two cars on no deposit.
It meant being able to buy real estate with no cash deposit.
All that has done is to encourage money to be squandered rather than saved.
We have inevitably now got a massive correction,with serious implications for many people.
Douglas is living in the perfect world rather than the real world.

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Red Dog and mates were either not around, or have forgotten:-
You could only buy a new car/Tractor etc if you owned offshore funds
You could not export a wide variety of products unless you had an Export Licence.
You needed an Import Licence to be able to import almost anything.
Owning either of these Licences was tantamount to your own licence to print money.So NZ customers had to pay a premium price because of those mini monopolies.
The flow of currency in and out of the country was strictly controlled.
The controls of today are certainly still a limitation. but one cannot blame the Douglas era Government for all those restrictions that subsequent Governments have imposed.
Are they anything like as limiting as those which I described above? I think not.

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Hugh obviously wasn't around during the pre Rogernomics era; my perents were farming, and had no trouble buying a new car and tractor, and they didn't have access to overseas funds; BUT they were part of teh Primary Industry that earned most of NZ's overseas funds.
The 'subsequent restrictions' thta HUgh refers ot were put in place to try and undo some of teh Douglas damage. Unfortunately, when bad legislation is put in place, people develope and expectation and see teh outcome of that legislation as a 'RIGHT'; making it very dificult ot restore teh country to a financially viable position.
Douglas knows this, but won't acknowledge teh fact.

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For your information Hugh the pre Rogernomics era was a marvellous idyllic one for New Zealand.
I recall the 60's and 70's as a wonderful era.
My parents never owned a new car but so what.
None of my friends' parents did either.
A new car would not have made any of us any happier.
I did get my first car until I was 26.
That kept me out of a lot of trouble.
I rode a bicycle,caught a bus,train,taxi or walked everywhere.
Farmers had access to new cars and tractors.
Deservedly so as they were and still are the backbone of New Zealand.
Who cared that we could not import much.
None of our friends could either.
It made it exciting to import what little we could,and we really enjoyed it.
Certainly there were a few who were privileged by virtue of controlling import licences.
Under post Rogernomics there are many more proportionately wealthy people than what there were pre Rogernomics.
Much of it is made at the misfortune of others.
Who cares if we had to pay premium prices.
We made things last and did not change models to keep up with others.
Do the excesses of today's materialistic image obssessed society make people any happier.
Not in my experience,and my life spend dealing with people of substantial means.
I observe squandering a sound material position by squandering money on "toys".
Pre Rogernomics,restictions on cross border transctions meant more funds were circulated internally.
After all,our country needs to tailor its internal spending to what we can export and the tourists we can attract.
Someone said to me recently that their memory of Rogernomics was the large group of redundant farm managers living in the camping ground at Hawarden.
Muldoon was the last Prime Minister to be a friend to the farmers.
Douglas is just another Economist.
They get it wrong 80% of the time.
We had Don Brash recently writing to the Herald and nominating Douglas for an award.
This is the same Don Brash who in 1998 in a booklet that was circulated to all NZ households,said "Too many New Zealanders have wrongly gone on assuming that by borrowing as much as possible,and investing in physical assets,they can keep making inflation-driven capital gains indefinitely."
So Don was stating that anyone who was to buy property in 1998 was a mug ?

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Surely this must be a wind up Red Dog? Are you really suggesting that being the 'polish shipyard' of the south pacific was an idyllic lifestyle!? Luckily the vast majority of the world does not agree with your senile-utopian view of state socialism. Regarding New Zealand's situation ask yourself this; why has an entire generation of politicians neglected to reverse a single one of Sir Roger's major reforms?

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I have already explained why past legislation is rarely changed, its about expectations and my rights, - see above, and then think deeply and pragmatically about it.

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Bob obviously wasn't around during the pre Rogernomics era; my parents were running a business (non farming) which depended on import licences. Since they had one, they could charge what they like for the goods. They made lots of money because of over charging (no competition). Thy could keep some of their funds overseas so they could also travel. Even my parents said no way do we want to go back to those days.

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