Boost exports to get economy going, Labour urges

Labour says a "bold" increase in exports is needed to lift New Zealand's poor economic performance. 

In his pre-Budget "response" speech to a business audience in Auckland yesterday, finance spokesman David Parker says the government's aim to return to surplus in three years won't cure the economy's fundamental problems.

He posits a capital gains tax, compulsory superannuation and tax breaks for research and development - all planks presented in the lead-up to last year's election - will deliver economic growth and reverse what he calls "our long-term decline".

Mr Parker told NBR ONLINE those tools might not be enough to grow exports on their own.

"One of the things we proposed going into the last election was incentives for certain classes of capital investment, so you need sectoral initiatives as well but we haven't spelled them out."

However, he says the changes outlined will push investment into productive parts of the economy, like exports, rather than speculative areas.

"Too many people in New Zealand and too many investors invest in the wrong parts of the economy in terms of our current account balance because of the current economic signals that we have."

NBR ONLINE put to Mr Parker that a vote had already been taken on its policies at the last election. How are they meant to resonate with the public now?

He says Labour's policies are more popular than the party at the last election, and put its poor standing in the polls down to "a cycle in politics, partly".

"We certainly believe that our policy platform is needed by the country economically and we stand by it." 

University of Otago political lecturer Dr Bryce Edwards says Labour is taking advantage of the government's pre-Budget message of fiscal responsiblity.

"My personal view is Labour has not really got any strong alternative vision to the government at the moment, and it really has to pick up on any perceived weaknesses of the government.

"And that is quite a good strategy [because] the government is very vulnerable on the fact that growth has averaged about 1.5% over the last few years and unemployment's been, what, 6.5%.

"It does seem to be the obvious failing of this government to actually achieve what governments are supposed to do, which is foster growth.

"And there doesn't seem to be any obvious plan on the part of government to do that - [although] the Steven Joyce super ministry is the best example ... but apart from that, I think Labour have a strong point to make."

Mr Parker's speech comes as Prime Minister John Key signalled this week the government's goal to be in surplus by 2014-15 might have to be set aside because of a financial meltdown in Europe.

NZ's financial settings 'out of whack'

Mr Parker said in his speech Labour's pre-Budget focus will be on economic growth.

Figures from Statistics New Zealand shows GDP growth was 0.6% in the last three years.

In volume terms, GDP was $136.9 billion for the year ended December 2008, compared with $137.7 billion for the year ended December 2011.

"New Zealand must increase our exports to reverse our long-term decline," Mr Parker says.

"This is utterly essential to our wealth and incomes. Small, incremental and fiddly change won't be enough. We're going to have to be bold."

Rising unemployment, little jobs growth and wages failing to keep pace with inflation shows the country's financial settings are "out of whack".

He accused the government of failed economic management with stagnant gross domestic product, the country's credit downgrade at the end of last year and a widening current account deficit.

"Every year that current account deficit is funded by extra borrowing from overseas and the sale of yet more New Zealand assets to overseas owners."

A lively audience of about 60 people tackled Mr Parker on the government's second zero budget (Parker: "A psalm of economic underperformance."), mining on conservation land (Parker: "I don't think conservation policy is holding back development of our minerals.") and the gap with Australia (Parker suggests legislative changes to make the Reserve Bank responsible for the health of the economy and jobs, like in Australia).

He was grilled from the floor about whether Labour's plans will make much difference in the short term - and even if they went far enough. 

The breakfast meeting was paid for by Auckland-based energy and communications company Vector.

Vector chairman Michael Stiassny, a partner in insolvency firm KordaMentha, sat at the top table.