Five Takeaways from Grant Robertson’s Big Speech


 

Pessimism about the economy 

 

The Finance Minister confirmed that bank economists were warning of dark clouds approaching the New Zealand economy.

 

Business confidence has fallen to an 8-year low on the back of uncertainty over the new Government’s quixotic schemes.

 

Paying lip-service to fiscal discipline

 

In front of a business crowd, Robertson hit the right notes by talking about getting “value for money”.

 

ACT is deeply sceptical.

 

If Robertson is serious about cutting waste, he need look no further than the billions in corporate welfare which is handed out by MBIE and other departments to well-connected businesses.

 

R&D tax credits

 

Greater investment in research and development is important, but this isn’t the way to do it.

 

In 2008, the Treasury criticised the Clark government’s R&D tax credit, saying “given international experience, and anecdotal evidence” there was concern that “little additional expenditure will be generated as a result of the credit.”

 

The tax credit also incurred significant fiscal and compliance costs.

 

The Government would do far better to cut taxes across the board and let businesses make their own investment decisions.

 

Foreign investment

 

This Government, much like the last, speaks out of both sides of its mouth when it comes to foreign investment.

 

Robertson said he “welcomed” foreign investment while this week his Government slammed the door shut with a new directive to the Overseas Investment Office.

 

Study after study will tell you that foreign investment boosts productivity, wages, and jobs.

 

Politicians are ignoring the economic evidence and pandering to xenophobes.

 

Minimum wage

 

Robertson also confirmed the Government’s intention to raise the minimum to $16.50 next year and to $20 by 2021.

 

New Zealand already has a high minimum wage by international standards.

 

Last year, MBIE’s annual minimum wage review predicted a loss of about 7000 jobs if the minimum wage was increased to $16.50.

 

Given the passage of time, the new Government will get slightly different advice, but there is no doubt that young, unskilled workers will be locked out of the job market should this large wage hike go ahead.

 

Some businesses will simply not be able to absorb the cost. For others, it will mean greater automation – something the current Government says it’s concerned about.