COMMENT: Key bolts door on most big ideas in Brash report

Monday 30th November 2009

Unless there's a great idea just waiting to shine, it seems the biggest ideas in Don Brash's 2025 Productivity Taskforce report are already out in the public domain and already virtually still-born.

We'll know at 1.30 p.m. today exactly what the report says, but at this stage, the only policy bogey not to be ruled out is privatisation, an area where it appears the Government is already thinking carefully about how to carve off and sell parts of its SOEs without scaring the horses, some time in its second term.

However, the predictability with which Brash and Co are reportedly recommending and Key immediately poo-poo'ing a flat tax rate has an almost ritualistic quality about it, and reinforces the unfortunate fact that not only are most of New Zealand's economic problems already well-known, but the range of possible ways to fix them is pretty well understood too. The trouble is that the answers are like the answers to climate change: expensive, scary and not guaranteed to work, so who will ever take the plunge?

That's why Key continues to grasp for new ways to dress up old ideas, or to backtrack on the combination of fiscal purity and perpetually shallow pockets that mean New Zealand businesses get relatively little direct help from their Government, even in areas where targeted intervention could be justified strategically, albeit rarely by a commercial business plan.

In that respect, perhaps the role of the Brash report will be to bolster a climate for less radical, but hopefully meaningful efforts to lift New Zealand's demonstrably poor productivity. It is being released, after all, in a frenzy of other heavyweight pre-Christmas reports.

We already have Energy and Resources Minister Gerry Brownlee's four reports on "unlocking our petroleum resources", which at the very least reinforce an increasingly benign environment for exploration, even if more radical proposals are ignored.

And tomorrow, we will have the one day public conference held by the Tax Working Group, which will bring a practical factual backdrop for Brash's tax recommendations, i.e., the unsustainable nature of New Zealand's current tax-gathering, given projected levels of economic growth, government spending, and growth in public debt. Their final report will be out by Christmas.

Then next week, it will be the turn of the Capital Markets Development Taskforce to report on what it would do to inject life and depth into New Zealand's desperately thin capital markets.

All of this work is feeding into the 2010 Budget and a process that BureaucratWorld is calling "the EGA", or Economic Growth Agenda.

A few months ago, it might have seemed reasonable to assume some big ideas might come of this work, which is also covering infrastructure investment and business assistance for innovation, along with the energy and minerals push.

Key's natural caution, however, is more and more evident as he steps on ideas that are not even out of the bag yet.

He is right to observe that the Australians took it slower in the 1980's and 1990's and avoided the political speed wobbles that occurred when both Labour and National Governments hurtled into reforms with, at times, lemming-like enthusiasm.

However, in implying that New Zealand can take it slowly and also catch Australia any time soon, Key creates false hope and undermines his own goal. Our trans-Tasman neighbours were never in as much trouble as we were to start with, and they've continued to pull away dramatically from our standards of living for the last 25 years.

As always, there is no silver bullet. However, hopefully what Key says could be "a few nuggets" in the Brash report to prevent it from becoming yet another government-ordered door-stop.

Businesswire.co.nz

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