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NOV 11

What happens when the (tea) party is over?

It is exasperating to watch gossip about what may or may not have been said distract from serious matters in an election process. Why is it that gossip and speculation warrants more media attention than pressing issues around policy and policy options? Once the distraction of the election has passed, whoever forms the new government must look to prudence and economic reform – prudence will be needed in the short-term to prevent a debt blowout and economic reform to stabilise the tradable sector and deliver the policy settings for export growth.

Problems in Greece and Italy have the potential to spread wider, so persistently weak international markets should be anticipated – it looks like we may have to wait until the second half of next year to see any real growth.

In New Zealand, the NZMEA survey has shown sales bouncing around the year on year zero mark for about a year now and with international markets remaining fragile any prediction on when we will see improvement is more based on wishful thinking than real data.

This makes a serious attempt to improve conditions for the tradable sector job number one for the incoming government. With market conditions already acting against exporters, further upwards pressure and volatility in the currency must be avoided.

Our position on this has not changed; we gave the same messages to the Clark / Cullen government and the Key / English government, and we will continue with whoever forms the next government:
• Monetary policy that deals with non-traded inflation without passing these costs on to exporters;
• Balanced tax including a capital gains or land tax;
• Research and development tax credits;
• Faster depreciation of plant and patents; and
• Investment incentives for skill development, productive investment and early stage firms.

These are policies that have worked elsewhere in the world and must be considered if large increases in export earnings are a serious goal.

The contributions on the www.changenz.co.nz site continue to reinforce the importance of these issues.

tags: election 2011, european crisis, r&d, monetary policy, capital gains tax
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