RT @bernardchickey: Real question for RBNZ is why isn't it cutting rates? Core inflation below 2% target for 6 years. Jobs growing strongly…
9/02/2018 8:34 AM
RT @MkBlyth: Thought for the day: Let's say rising wages cause inflation panic cause equity crash. So we have built a system where stabilit…
9/02/2018 8:23 AM
RT @MkBlyth: Oic of the day. HT to @DougHenwood for nailing this. Not only is a 2.4% annual growth in wages unlikely to start an inflationa…
9/02/2018 8:22 AM
RT @Adherium: CEO @arik_anderson featured in @beckershr - Rule No. 1 for medical technology: Stay out of the doctor’s way https://t.co/d5FP…
1/02/2018 5:10 PM
RT @MkBlyth: Picture of the day from Llewellyn Consulting. Gross World Product went from 18 to 77 trillion since 1980. Massive Growth. Wher…
1/02/2018 5:10 PM
RT @Adherium: In Australia, nearly 40 per cent of #asthma sufferers rely on reliever medications to tackle regular flare ups, instead of us…
1/02/2018 5:10 PM
RT @Adherium: In the latest @atscommunity report, #asthma costs the US economy more than $80bn annually in medical expenses, missed work an…
17/01/2018 8:06 PM
RT @MkBlyth: Interview on WBUR (Boston) with Chris Lydon @radioopensource last night. Chris is the guy that gave me my radio voice a decade…
7/01/2018 12:45 PM
RT @Valuetrap13: There is a simple reason corporations are not investing as much. It's the right hand scale. Macroprudential policy based…
7/01/2018 12:32 PM
RT @Adherium: Sharp rise in #mHealth app usage - health condition management apps now account for 40% of all health-related apps https://t…
7/01/2018 12:32 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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