READER REPORT:

Can you fix the economy? Five problems and solutions

DAVID TAYLOR
Last updated 05:00 13/12/2012

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The following is my view on the things that are being managed wrong in our economy today:

1. The dollar: Our dollar is overvalued and it hurts our competitiveness in global markets. Speculators who play the money market are the main cause of this.

2. Job competition: We are competing for labour in a global market and people are going to sell their skills to the highest bidder. Workers coming in from overseas are used to working harder and for less money because of the level of competition they are used to in their own country. This drives down wages.

3. Taxes: The Government's tax take is low due to a difficult retail market and people in the know finding ways to avoid paying their share.

4. Overpriced houses: The shortage of houses especially in Auckland means that demand exceeds supply, and the dream of owning a home is fading for most people.

5. Benefits: A portion of the working population is essentially unproductive.

A good economy is basically a money-go-round. If wages are being earned and then spent or invested, everybody gets their share according to how hard they work.

My ideas to fix the problem are:

1. Regulate the dollar: Most other countries we trade with are doing this. Our currency value needs to benefit us, not foreign speculators. Our geographic location means exporters have high shipping costs. Right now we don't have a level playing field.

2. Adjust our expectations: I think workers are just going to have to get used to increased competition at the lower skill end, and adjust their expectations accordingly. Our wonderful relaxed New Zealand lifestyle has been trashed by opening this country to global competition, but it was necessary to avoid being left behind.

3. Tax changes: The tax system needs overhauling, specifically introducing a capital gains tax to attract more investment in to the business sector. Let's all pay our fare share of tax given that this helps support our health system and other public services, which while we may not ever use create a more healthy and happy community.

4. Build more houses: This is being done at the moment but only a few can afford them. Renting is not so bad when you consider that the average house costs double the sticker price after you factor in the interest charged by banks on your mortgage.

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5. Be productive: Everybody needs to be doing something productive - it's good for the soul and allows full participation in society. In tough economic times and with an increasing population there is never going to be full employment. I think a work for the dole scheme might be the answer here.

It's a delicate balancing act, managing economic factors. Change one thing and it affects something else. In my opinion it is definitely out of balance. The biggest mistake the western economies have made is allowing money to be a commodity when it was meant only as a easy way to exchange goods. This has allowed some to accumulate large amounts which when they get past a certain value are self perpetuating on an exponential scale, the net result is wealth and power are concentrated in the hands of a few. The rest have no extra and spending stops killing the money go round.


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