Editorial: A welcome focus on growth, not slogans

OPINION: For John Key the warm glow of new home ownership has worn off.

He's admired the view, splashed in the spa pool and slapped a fresh coat of paint on the house. Now he's got to crawl under the house to do the repiling.

New Zealand has weathered the financial crisis better than most of its neighbours, but unemployment and debt are growing and so is the income gap between this country and Australia. Unless the prime minister engineers the "step change" he has promised, future generations will find themselves working to pay off billions of dollars borrowed to insulate their parents and grandparents from the worst effects of the Great Recession, and talent and capital will continue to be sucked across the Tasman.

Yesterday the prime minister showed his fellow householders (the public) an artist's impression of the design he has chosen for the renovations. Gone are the most radical proposals to fund dramatic cuts in personal and company tax rates (and deter speculative property investment) by introducing new taxes on land or residential property.

Instead Mr Key has opted to leave the house on its present site and level the floors. It appears smaller tax cuts will be funded by stopping property owners from claiming depreciation on investments that increase in value and ring-fencing losses. That will generate less revenue but upset fewer of the neighbours.

The prime minister has also pencilled in a "modest" increase in GST from 12.5 per cent to 15 per cent. The tax working group estimated such a change would generate an extra $1.9 billion in revenue but a significant portion of it will be soaked up by compensatory increases to those on fixed and low incomes. Mr Key's hope is that a GST increase will persuade homeowners to pay off their mortgages rather than fill their kitchens with Italian ovens and German cookware.

The prime minister's statement is still only a sketch. The detail will not be filled in until the Budget in May, but there is already one thing for which the public should be grateful. His statement, unlike those of his predecessor, is refreshingly free of slogans. There is no talk of growth and innovation frameworks or closing the gaps.

There is also a single-minded focus on economic growth that has not been seen before. Health, welfare, the environment, education and science spending are all viewed through the prism of growth. The Key Government knows that, in the long run, the wellbeing of the poorest New Zealanders is best served by growing the cake rather than agonising over the fairest way to slice it. The only way to guarantee decent health, education and welfare services is for New Zealanders to collectively earn enough to pay for them.

Mr Key's first big speech of the year answers some questions, but leaves others unanswered. He knows what needs to be done but it has still to be seen whether he has the courage of his convictions.

The next few months will tell whether he is serious about home renovation or just pottering.

- © Fairfax NZ News

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samc   #2   07:02 pm Feb 10 2010

Disagree and interested to know how you reached this conclusion:

"Mr Key's hope is that a GST increase will persuade homeowners to pay off their mortgages rather than fill their kitchens with Italian ovens and German cookware."

Raising gst certainly won't encourage me to pay off my mortgage but a pay rise might (get the drift). By the way, I got my pots from Briscoes - on sale too!

And here we have a grand sentiment:

"The Key Government knows that, in the long run, the wellbeing of the poorest New Zealanders is best served by growing the cake rather than agonising over the fairest way to slice it. The only way to guarantee decent health, education and welfare services is for New Zealanders to collectively earn enough to pay for them."

Good on the Key Govt for working this out all by themselves. I think this is not new, the problem is there will be no major changes unless you want to call the "national standards in education debacle" an improvement. The reason there will be no major changes is because somehow, someway, the money will be syphoned off elsewhere, like to build $50m cycleways which, by the way, is a masterstroke in growing the economy - I can just see the tourists boarding those planes.

So I sound very negative and cynical, been around too long I think. However, I have been reading the Dominion Post for many years and have built up a very healthy respect over those years for the comment in it. Lately though and in my opinion, I am starting to think it has turned into the "propaganda arm" of the National party.

sasha   #1   04:27 pm Feb 10 2010

Agree the cake needs to get bigger. But seriously, persuasion to lay off the Italian ovens? Get real.

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