Labour's 'economic upgrade'

22:20, Mar 16 2014
David Cunliffe
DAVID CUNLIFFE: "The problem is, while this is the best country in the world to live in, it's not the best place to make a living."

Labour is signalling a push on regional development and more investment in areas like forestry as part of an "economic upgrade" of the country.

Leader David Cunliffe told the Right-wing think tank The New Zealand Initiative this morning that the country was not making the most of its potential.

"The problem is, while this is the best country in the world to live in, it's not the best place to make a living," he said.

The issue was "a combination of poorly structured investment in infrastructure, macro settings geared towards the interests of a small number of speculators, a hands-off approach to innovation, and a deficit of government-industry partnerships".

As part of the economic upgrade from a country using "old software" there needed to a move away from a dependence on commodity price cycles, Cunliffe said.

It would be a major strategic priority for an incoming Labour-led government to support New Zealand business in the journey from volume to value.

Cunliffe said a "disproportionate and growing share of the value of the New Zealand economy is accruing to the top few per cent".

The shortage of investment cash would be helped by making Kiwisaver universal for all employees, which would help increase the investment pool open to local businesses, and he said Labour was committed to restarting contributions to the Super Fund.

Labour would also revamp foreign direct-investment measures "to attract quality investors with a credible business cases designed around creating jobs and providing new technology to New Zealand companies".

"Increasing investment and getting it into the right areas with the right payoffs will be a major part of the economic upgrade," he said.

"Primarily it will help fund the economic upgrade for innovation."

Cunliffe said there were opportunities for growth, investment and innovation in the regions, and in sectors such as forestry.

"So under Labour the regions will play a major role in the economic upgrade," he said.

Examples could include new infrastructure like a rail head to Northport, dredging the Opotiki Harbour bar to drive new aquaculture, or expanding research projects tailored to lead industry clusters like Scion's Rotorua forestry expertise, or the Marlborough Wine Research Centre.

In the near future he would start a series of industry announcements, giving concrete examples of how the "economic upgrade" would work.

Talking to media later, Cunliffe said he was confident the majority of business people in the audience would accept an increase in taxes for the highest tax bracket.

"Yes, because I think that these are very responsible far-sighted New Zealanders, patriotic New Zealanders, who at the end of the day want what's best for their country," he said.

"That's their shareholders and their broader stakeholders, who are the people of New Zealand."

He said Labour's economic and tax plan would be released after the budget and economic fiscal update.

But Cunliffe said devaluation of the New Zealand dollar would not be part of the plan.

"No, we're going to introduce a package of monetary reform that's being led by our finance spokesperson," he said.

"It's a very serious study, it's being peer-reviewed and it will build on announcements we've already made.

"We're not going to get into knee-jerk responses like one-off devaluation."

Prime Minister John Key said Cunliffe was "pandering to the left of his party and the Greens" through policies such as a capital gains tax and compulsory Kiwisaver.

"They are a prescription for lower levels of economic growth, more New Zealanders to lose their jobs and for wages to grow backwards."

A capital gains tax would affect every New Zealand business and would only stunt growth at a time when New Zealand's economy was growing at among the fastest rate in the world under current policy settings, he said.

Foreign investment was also important to New Zealand, bringing in important capital and jobs.
Cunliffe was making "hollow promises".

He said there was no evidence to support Cunliffe's claim the private sector would make better investment decisions than the private sector.