26/06/2017 9:21 PM
RT @rethinkecon: 'Going Beyond Exchange' from @TheMinskys @HeskevanDoornen
23/06/2017 8:53 PM
RT @ChrisGiles_: Hard or soft Brexit? The six scenarios for Britain via @FT
23/06/2017 8:52 PM
This is worth a read:
20/06/2017 9:58 PM
RT @PositiveMoneyUK: ...and it’s almost impossible to reduce our debts without causing a recession - Welcome to the debt trap!…
20/06/2017 9:49 PM
@Parker_Banking The pirates are in the accendency - on the pirate scale there is no difference between Trump and Pu…
17/06/2017 1:11 PM
RT @PositiveMoneyUK: Why are House Prices So High?
16/06/2017 3:57 PM
@Omearanz Tax incentives point away from productive investments - asset price inflation is not productive of itself…
15/06/2017 5:00 PM
@Parker_Banking People without income and assets cannot be consumers - superfluous to economy - superfluous to soci…
15/06/2017 12:18 PM
@Parker_Banking Full of rah rah platitudes: happened before no worries.Then machines replaced muscle/debt low, now…
15/06/2017 12:15 PM
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SEP 11

Election year must deliver policy change, not handouts

This years’ election can deliver a change in our economic framework and address an already significant debt problem. Elections over the past couple of decades have tended to be contests of who can give the largest handouts rather than a legitimate policy contest. This one must be different.

There has been no significant action to address our debt problem. Politically difficult issues such as the entitlement age for national superannuation, and any meaningful monetary, fiscal or welfare reform have been conspicuous by their absence.

Simply increasing debt is unsustainable and hoping for growth to save us is very risky. The optimistic debt path built into the last budget depends on significant growth in the face of a long run contraction in the real economy. A more conservative debt path is needed to accommodate the likely setbacks as the global crisis plays out.

In spite of a changing world, and some helpful advice from working groups, we have seen little policy response from Government.

When looking at policy change it is useful to think about what sort of activity in the real economy New Zealand needs.

This table shows there are differences in the impact of different activities. It also shows the resource dependence, and obvious expansion limitations of primary production – jobs and growth beyond that constraint depend on the ability of our economy to add value to what we have be it primary production or a good idea.

Draw your own conclusions but jobs flow mostly from the ‘added value’ sector – to get more of that activity requires more investment. The contraction of this sector of the economy since 2004 demonstrates a long run disinvestment. To reverse this run down in the real economy policy should be targeted at a realistic and stable exchange rate (one we earn not borrow).

The solution is not one single thing, but monetary policy reform targeted at controlling inflation in the domestic economy and lower borrowing is the start of the reform process.

We have already seen some movement from political parties with Labour proposing changes to the tax system and making a commitment to rewriting the Reserve Bank Act. We look forward to further announcements and as always we will be pushing for better deal for the tradable sector.

tags: election 2011, superannuation, added value, exchange rate
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