Tuesday, December 4, 2012

NZIER - Lifting Export Performance

Apparently, "in New Zealand, the quality of the business environment has deteriorated through some big steps on the part of government to increase its activity in the business sector through, for example, buying assets and engaging in businesses in sectors such as rail or banking." p16

Or so say the New Zealand Institute of Economic Research (NZIER), our largest and most influential economic think tank, in their report on Lifting Export Performance published last month.

And apparently, "Growth in social spending also has the unintended consequence of biasing production in favour of domestic-focussed industries. An additional dollar of social welfare spending typically ends up in increased consumption of locally-based non-tradable products and services. This is precisely what social welfare programmes are designed to do - to support costs of living which are mostly local in nature. Nonetheless, it means that an additional dollar of spending goes to consumption, rather than investment, and then to industries which do not export." p18

Hmm, a fair bit of social spending assists families to buy forms of agricultural produce (that is food), and that's New Zealand's number one export, so the argument is at least partially, if not substantially, flawed.

Problem is, NZIER then go on to to make further claims based upon it, including the following:

"These biases in favour of consumption (rather than saving) and domestically focussed enterprise go on to put upward pressure on the exchange rate, downward pressure on the prices that exporters receive on international markets and thus there is less incentive to export. This is essentially a tax on exports." p18

Wow, so social spending is a "tax on exports".

I always knew NZIER focussed only on economics rather than on a more holistic view of life and living standards, but I also thought it was somewhat objective. Now I realise it's become a campaigning arm for the right wing economic viewpoint that spouts ever lower taxes on corporates, less regulation and less income sharing.

These NZIER methods aren't going to grow anything other than harm and inequality. If we want growth, we should encourage sharing, because if everyone benefits from growth, then everyone will contribute to it. And what the Hell is wrong with Government investment in "rail or banking"? If the government hadn't invested we wouldn't have a rail network, airline or highly successful New Zealand bank.


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