Wednesday, 5 March 2008

Allan on Clark

Writing in The Australian, University of Queensland professor of law, James Allan says that Clark needs new zeal and a lot of luck. On the economic front Allan points out
One of the big problems for the Clark Government has to do with comparative economic performance. Soon after coming into office it said one of its main goals was to lift NZ back into the top half of the Organisation for Economic Co-operation and Development league tables in terms of per capita gross domestic product. It hasn't. Indeed, NZ has dropped a place or two down to 20th or 21st. Little mention is made of this pledge by the Government these days.
Roger Kerr made a similar point in a recent Otago Daily Times article,
In response to business criticisms, the government put the emphasis in the 2001 Budget on economic growth: "We need to set ourselves a goal of being back in the top half of the developed world in terms of per capita GDP". Sustained growth of "4% a year or more" was needed to achieve that goal.

Yet the rate of growth is declining steadily and New Zealand has moved down the OECD ladder, not up. Last year journalist Colin James referred to "Clark's now discarded promise to get back into the top half of the OECD income rankings".
On taxes, Allan writes
And taxes are relatively high. The OECD estimates that NZ's general government receipts are running at 45 per cent of GDP. Australia's run at about 35 per cent. NZ is even above the OECD average, one that includes the high-taxing Europeans. So despite a lower top marginal tax rate there, it is a high-tax economy.
When it comes to all important economic growth, Allan notes,
That [tax] affects comparative economic growth rates. During the past decade, as a whole NZ has averaged a 3.3 per cent rate, only a tad behind Australia's 3.4 per cent rate. Not bad at first sight, although during that period Ireland averaged 6 per cent and Singapore 5.8 per cent. The problem is that NZ's economic and productivity growth rates have been declining in that period, with its Treasury now forecasting annual growth of only 2per cent during the next couple of years. That's about half of Australia's expected rate, and at least half what would be needed for a fair number of years to have any hope of getting the Kiwis into the top half of the OECD league tables.
And here is a real issue. Without growth we will not head back up the OECD league table. Without growth the incomes of ordinary New Zealanders will not improve, poverty will not be reduced. There are real costs to policies which do not deliver growth and without changes in policies New Zealand will not see an improvement in its rate of growth. The current government seem more intent on redistributing wealth than creating it. This may in the short term win them votes but the long term affects should not be ignored.

How bad is it when lawyers start making sense?!

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