RT @AnnPettifor: Steve Keen on 'household fallacy' https://t.co/qvseAR1oqB
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RT @AnnPettifor: John Kay calls neoliberal definitions of how markets operate as "repulsive" https://t.co/NFcugpZGQr
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RT @PositiveMoneyUK: Unlike QE, Sovereign Money Creation works by injecting newly created money directly into the real economy... https://t…
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@Omearanz @rnz_news - nothing new about debt to income - DTI held 3x price to earnings ratio, without that link debt drives prices
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I liked a @YouTube video from @profstevekeen https://t.co/kghx2pSwtG Presentation at UDLAP Mexico City on why Trump happened, credit
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RT @martinwolf_: Martin Wolf: Simple-minded economics distorts the debate over education https://t.co/LFd9Fvo5Gi
24/02/2017 8:41 AM
RT @newscientist: What immigration really means for jobs, economies and cultures #1DayWithoutUs https://t.co/AWwNrA5SFS https://t.co/hATSd…
21/02/2017 11:10 AM
RT @newscientist: For every 1% increase in a country’s population caused by immigration, its GDP grew between 1.25-1.5% #1DayWithoutUs http…
21/02/2017 11:04 AM
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20
JAN 12

Accountability needed on poor economic performance




Over the past couple of years our apparent resilience to the financial crisis and optimistic forecasts of economic growth have been used to justify the Government’s status quo approach. Record high commodity prices have meant that primary industries have grown somewhat despite a high exchange rate decimating returns. In addition, consistently unrealistic economic forecasts from Treasury have presented the downturn as an aberration which is on the verge of turning around - in reality we have been ‘on the verge’ for a few years now and we are no closer to an actual rebound. It is worth noting in a recent article from the Bank of England the comment was that economic forecasts exist to make astrologers look good.

Essentially, the factors beyond our control have gone comparatively well while an indifferent approach to growth in the real economy from the Government and its officials has meant that New Zealand has missed out on growth opportunities.

For the traded sector to grow the Government needs to provide a stable trading environment and encourage innovation to a level at least on par with other jurisdictions.



A look at this Trade Weighted Index graph shows that there has not been a stable trading environment. The tradable economy’s interests have once again been ignored in the past year when setting monetary policy.

The Grant Thornton International Business Report conducted in December showed that four percent fewer firms intended to invest in research and development than in December 2010. With little confidence in future earnings and no incentive to invest the money is that really a surprise?

In fact investment in non-productive assets classes are still incentivised by the Government – where other Governments offer R&D tax credits, grants for international marketing and fast depreciation allowances, New Zealand instead promotes land and buildings.

2012 needs to see a change in focus. Reducing debt cannot be the only focus – we also need to find a way to earn more through exports. What needs to be done? Well for a start target non-tradeable inflation:
• Use Loan to Value Ratios to control credit volumes; and
• Specify the amount of savings (deposits) banks are required to raise in New Zealand to limit offshore exposure.

Had this been done 10 or 20 years ago debt levels and debt servicing costs would have been lower even if average interest had been higher: overall the New Zealand economy would now be better balanced, with higher wages, more jobs, more savings and better housing affordability.
 


tags: traded sector, twi, loan to value ratios, monetary policy, innovation
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