National Library of New Zealand
Harvested by the National Library of New Zealand on: Aug 27 2009 at 8:30:34 GMT
Search boxes and external links may not function. Having trouble viewing this page? Click here
Close Minimize Help
Wayback Machine

Questions Must Be Asked Around New Package

Posted on 04 Feb 2009

Although it is encouraging to see that Prime Minister John Key and his National Government are taking steps to stimulate jobs and growth, there is a number of questions the New Zealand public should be asking itself, ACT New Zealand Finance Spokesman the Hon Sir Roger Douglas said today.

"It's time to look to the long-term - to stop fiddling with cents and start looking at dollars. New Zealanders must ask themselves whether the plan Mr Key outlined today does that," Sir Roger said.

"Other questions that need to be asked include: does this package define economic and social policy objectives efficiently and effectively in order to win maximum public approval? A strategy without objectives is useless - especially one without clear and defined government social and economic objectives.

"Does this package create a strong constituency for change, without which you get nowhere? Does it keep clearly in front of people what the changes are designed to achieve for them? Without a framework, actions will be inconsistent - does this package do that?

"Incremental policies are generally useless when you have a fundamental structural imbalance - does this package do enough? Does this package create a suitable framework to take the high ground?

"The problem with this package is that the Government is presenting what it is doing, rather than where it leads. Trying to get better outcomes will get lost. People will ask of this package: what in all this matters to me? Where do I fit? What is my place in society?

"The starting point of reform is the risk associated with NOT changing - ie: you end up the way Muldoon did," Sir Roger said.

ENDS

Summit Must Consider More Than Just Jobs

Posted on 15 Jan 2009

While it is good news to hear of the upcoming Prime Minister's Summit on Employment, the fact is that any such event needs to look at more issues than just that of jobs, ACT New Zealand Finance Spokesman Sir Roger Douglas said today.

"What the Summit should aim to do is focus on ways in which we can restore confidence," Sir Roger said.

"To do that, however, a framework is required - one that will set New Zealand up for 2010 and beyond. That framework must deal with underlying problems to an extent that we are able to move forward.

"The package must also allow us more time to deal with matters that require closer examination and deal - not only with jobs but - with debt, export profitability, investment, productivity and incentives to increase jobs.

"The only way to do that is through a quantum leap: it must be done positively, with measures that stimulate and motivate people to get the economy moving. The package must be positive to jobs, investment, incentives and fairness.

"Most of all, the package must capture the imagination of both New Zealanders and international investors. It must shift people's focus away from their short-term problems and give them a medium-term goal to work towards," Sir Roger said.

ENDS

Ministers Must Face Reality At Recession Summit

Posted on 13 Jan 2009

While the proposed recession summit of top Ministers and officials is a good idea in principle, nothing at all will be achieved - and a great deal of harm could be inflicted - if Ministers do not face reality, ACT New Zealand Finance Spokesman Sir Roger Douglas said today.

"The danger is that, like Obama, the Government will decide to start throwing money around on all sorts of projects - from roads to alternative energy - and expand the budget deficit beyond where it stands today," Sir Roger said.

"Given the contraction that has taken place in private credit - which will clearly be further reduced by the Government borrowing programme - the danger is that more and more activity will end up in Government hands rather than the private sector.

"What is required is a programme along the lines of what I outlined on November 26, when I stated that Treasury had under-estimated the credit crunch and the consequences thereof.

"I was right on that one, and I believe I was also right on the remedies - I hope the Government will listen this time," Sir Roger said.

ENDS

Infrastructure Spending Won't Solve Recession

Posted on 02 Dec 2008

Although New Zealand clearly has an infrastructure deficit that must be rectified, spending on infrastructure is not the solution to the recession that some people think it is - helping the real economy to come to terms with the current credit crisis is much more important, ACT New Zealand Finance Spokesman the Hon Sir Roger Douglas said today.

"The Government's planned infrastructure spend-up won't help jobs. Major infrastructure projects take time to implement, and this spending will have to be financed by either debt or taxes," Sir Roger said.

"Financing the expenditure through taxation will reduce consumer spending and private savings - destroying as many jobs as government spending will create. Meanwhile, borrowing will lead to higher interest rates and an ultimate decline in private sector investment and consumption expenditure.

"The Government's current focus on infrastructure is hard to understand. The number of extra jobs created by spending, say, $5-$6 billion on infrastructure projects will be zero once secondary effects are taken into account. But solving exporters' funding issues will create additional jobs and trigger the shift we need to export and import substitution industries.

"The dramatic drop in the New Zealand dollar's value compared to the US dollar has opened up exciting opportunities for Kiwi exporters - even allowing for the worldwide drop in demand. But cash-flow problems stand in the way of many exporters taking advantage of this.

"For example: the order-to-cash cycle - in channels like retail - is long. This type of business has become profitable as a result of the lower dollar, but cash is slow to materialise.

"As such, exporters use bank trade-financing facilities to access ‘bridge funding' for extended supply chains. Banks' reduced appetite for risk, however, makes them less inclined to supply the necessary funds - including low-risk working capital.

"Further, trade financing generally requires customers to be insured - but insurance companies have made broad sweeping reductions in exposure and, in some cases, entire industries have virtually been black-listed.

"One South Auckland company with a five-year plus trading relationship with a major US chain - that has an annual turnover of $US7 billion - is now uninsurable, despite over five years with no payment problems. Companies like this are at risk.

"Unless things change, the only alternative for these companies is to forego such business and return to the uncertain - and less profitable - world of commodity trading. The new National Government must look at this situation - and other issues connected to credit risks - with unprecedented urgency," Sir Roger said.

ENDS

Facing The Financial Meltdown

Posted on 26 Nov 2008

The most challenging problem facing the Government is how it should respond to the worldwide financial meltdown that has already turned into a worldwide recession, ACT New Zealand Finance Spokesman Sir Roger Douglas said today.

"This crisis will likely be different from any that New Zealand has had to face since World War II - much worse, longer and deeper than even the 1974-75 recession," Sir Roger said.

"The facts are clear; the country requires a change of direction. My view is that, on the balance of probabilities, the severity of the current global slowdown will be deeper and longer than anything Treasury has predicted to date. My view is that:

* the recession is likely to continue until at least the middle of 2010
* unemployment will likely rise to almost seven percent
* house and share prices may still have some way to fall (e.g. PE multiples fall, as do profits)
* this is likely to be the worst consumer recession in decades
* an expanding fiscal deficit could reach nine billion dollars unless arrested
* the $700 billion in the TARP programme to be used to recapitalise US financial institutions will help, but it will not be enough. Will the USA have a TARP2? If not what will flow for New Zealand from that?
* the outlook for New Zealand’s current account deficit is mixed (the recession, a rise in private savings and lower investment, a weaker dollar will help it but a drop in global demand and weaker commodity prices won’t help)
* corporate treasurers will face difficulties obtaining their short-term financing needs
* cost of capital will increase substantially
* reduced cash flow and credit losses will impose problems
* protectionism could rise
* re-regulation is a real possibility
* more government intervention worldwide is a distinct possibility.

"If I’m right, this adds up to the fact that New Zealand is facing severe downside risks from further financial market fallouts. A reality check, not undue optimism, is what is required at this time. This is especially so when we remind ourselves that New Zealand was already in recession when the September financial meltdown occurred and, therefore, in relatively poor shape to cope with such an occurrence. Any further shocks would be particularly damaging unless we have put our own house in order.

"In these circumstances, it is vital to restore confidence - especially to existing and potential investors in New Zealand. Only quality economic and social policies will do that. The following analysis of what has gone wrong in New Zealand over the past 12 years, and what we need to do to restore confidence, might be of some help.

"Some issues include lack of productivity:

* Labour - Lowest since the early 1980s (past nine years)
* Capital - Past 12 years zero
* Multifactor - Past nine years one percent
* Balance of payments - eight percent plus deficit for past three years ($15 billion)
* New Zealand government outlays (includes local government) - 42 percent plus GDP (plus three percent GDP since 2000).
* Loss of New Zealanders to Australia - 2008-33,929 (a record).
* Competitiveness labour - New Zealand 2000-100 units-13th, 2007-160-24th (competitive loss 60).
* GDP - New Zealand now behind Greece, Spain.
* Incomes - New Zealand $40,047, Tasmania $46,851, NSW $53,296.

"None of this is good news. Nevertheless, it’s no use moaning about it. The answers are clear: all it takes is a government with the guts to do what’s required on behalf of the people of New Zealand. There are steps to restore confidence, and ACT’s 20-Point Plan and the 18 two-page policy papers that went with it laid out in some detail the main areas that need to be tackled.

"It may, however, be worthwhile to summarise what needs to be done to tackle New Zealand’s underlying problems:
* Put an end to wasteful government expenditure (priority number one as it will force other worthwhile changes).
* Return money saved to taxpayers by way of tax reductions; tax reductions designed to stimulate investment, savings, and incentives.
* Improve productivity by introducing competition to various government services (both internal and external competition).
* Eliminate as far as possible, the system of central planning that dominates so much of the government infrastructure business and the low productivity that goes with it.
* Have a close look to see if the current government income transfers system can be achieved without the adverse incentive effects it is having on the recipient and thereby the adverse effects it is having on economic growth.
* Quickly wind back the excessive man-made, government-promoted obstacles to progress in New Zealand (government and local body regulations, tariffs).
* Consider the possibility of putting in place constitutional rules to help ensure economic progress is achieved (e.g. restrict the size of fiscal deficits).

"I sat in a cabinet with Prime Minister Norman Kirk, who kept Labour’s 1972 manifesto beside him and would brook no review - despite the first world oil shock having made a nonsense of the policy. As a result, the 1973 oil shock did more lasting damage to the economy than was necessary. Circumstances have changed dramatically since September 2008, and we need to deal with them in an upfront manner," Sir Roger said.

ENDS

« first‹ previous | 1 | 2 | 3 | 4 | 5 | 6| 7