If National wins ...

[elZorro]

You probably should do that FP, you might be losing this argument..

Left to their own devices and with no incentives from govt, manufacturing business owners will shed as many staff as they can, pay minimum wages, import cheap manufactured goods from China and put on an easy margin, and that'll be about it. Service and retail industries and the property sector will go into atrophy as cashflow dries up. The public sector will similarly have to be downscaled, not just because of policy, but a lack of tax/levy income. More unemployed, adding to govt costs. It's already happening.

Watched "The Nation" this morning, Steven Joyce, I'm unconvinced he's looking at the problem in the right way. Capital and effort will flow in to a profitable and IP protected idea. How do we get projects to that point, that's the only issue. FP has forgotten another caveat on these subsidies and grants, should a business obtain any (very hard to do). The understanding is that you'll be exporting NZ made product or services down the track.

Background of Mr Joyce. It's in media, not manufacturing.

http://www.stuff.co.nz/national/poli...e-power-broker

Steven Joyce:
But "frankly there's half a dozen things that we need to do to really help us be more competitive . . . The real opportunities are how do we assist firms in areas like innovation and provision of a skilled workforce? How do we assist them get and maintain access to export markets? That's crucial. How do we assist in the provision of capital?"

Answer: then why didn't you leave R&D Tax credits in place, and see how it went for a few years?

Rod Oram, admittedly not known for right-wing views, wrote an article in the SST today, about the govt's third economic development strategy in its first four years in office.

The title was "Talking the Talk", - first clue.

Rod Oram: The language of the report reveals the Government's simplistic thinking. Competitive advantage and science are mentioned once each, research three times and value chains four. Yet brand is cited 21 times and story 25 times.

Sometimes the talking cure works in psychoanalysis, but never in economic analysis. With this strategy, we will not lift our exports to 40 per cent of GDP by 2025.

[elZorro]

$12million paid out in redundancies around MOBIE, about $50k per person average. Around $19mill p.a. is now being spent on contractors and consultants, which could have permanently employed about 190 staff just as easily, and maybe with better results.

http://www.stuff.co.nz/dominion-post...dancy-packages

Labour state services spokesman Chris Hipkins said the figures showed"the unnecessary cost of ad-hoc restructuring".

"The National Government have no coherent plan for improving public services. They're constantly rearranging the deck chairs no matter how much it costs in the long run."

He highlighted the redundancies at the Science and Innovation Ministry,which was formed as the result of a merger last year, only to be again merged into Mobie 18 months later. Hundreds of thousands of dollars was spent on rebranding for MSI, which included 180 punnets of "promotional putty".

Business Innovation and Employment Minister Steven Joyce said "perhaps in hindsight" the mergers could have happened at once.

Colin James's column for the Otago Daily Times for 21 August 2012

Voodoo or orthodox -- take your pick

There is nothing like an idea for which the time has come -- or come again. Take voodoo economics.

Steven Joyce on The Nation at the weekend used the term to scoff at Labour party ideas to constrain the exchange rate. The irony was that the originator of the phrase, George Bush senior, applied it to some of the very policies Joyce defends as orthodox.

Joyce thereby in effect made the point that economic orthodoxy is once again unsettled. There are received wisdoms, ideologies, prejudices, learned algorithms and equations, the perfect theory that markets always tend to equilibrium and another that wealth trickles down. Contesting those are prejudices and musings, revivals of Karl Marx and Maynard Keynes, exploratory hypotheses, including about "hyperglobalisation" and the nature of work, and new or revived theories about debt and its enabling and destabilising roles.

And that is only the half of it, the "western" half. There is also the "China model" -- or not. A Wellington conference involving academics from China and the United States last week could not agree whether there is such a model to emulate as distinct from what just happens to be going on there. Remember the west's 1980s worry about or adulation of Japan's "model" before its asset markets crashed and it stalled for two decades.

Asia does have the Singapore model. It used to appeal to Joyce's chair, John Key, but Key is not Lee Kuan Yew and our democracy is much messier than Lee's tidy top-down version.

Into this buzz Joyce last week tossed a pamphlet -- oops, "strategy" -- for exports. Four more are to come on related topics. These follow "New Zealand Inc" "strategies" for China and India.

Strategies do lurk in the government's undergrowth. Ministry for Business, Innovation and Employment officials have been expanding and deepening the sectoral studies they started last term. There is also strategic thinking outside the government: the Centre for Strategic Studies will on Wednesday issue a paper on our future relationship with China which goes deeper and broader than Key's characterisation of it as "commercial".

The outcome of the officials' work and ministers' "strategies" is an economic development theme which is becoming more focused and coherent. Ministers and officials will use the new documents to jawbone businesses and to coordinate regulation and government actions, for example skilling young people and help with innovation, to facilitate development and expansion, particularly of exports.

This approach to development draws a line between National-ACT-United Future and Labour-Greens-New Zealand First. On the other side Labour is inquiring into alternatives being explored abroad.

David Cunliffe has recently been to Denmark and Finland. Those two small countries have changed the structure of their economies and, consequently, lifted their pay scales much more than New Zealand over the past 20 years. Cunliffe has come back with ideas on how the public service can flexibly work with business in a rapidly changing global environment to boost innovation and up-tech the economy, especially in clean technology.

David Parker is now off hunting ideas.

In Paris he will meet the authors of a recent OECD paper that finds the impact of a volatile exchange rate on exports and imports is greater in small economies (New Zealand and Chile) than in large economies (China, the Euro area and the United States). In small economies exporters have smaller internal markets to cushion them from currency rises than those in large economies. Small economies are less diversified so there is less scope to switch to exports which can set their own prices and ride out ups and downs -- or, as recently, ups and ups.

Parker last year proposed widening the Reserve Bank's brief to ease exchange rate problems. Joyce says that cannot work and is voodoo economics. (But note that in the Keynesian orthodoxy exchange rates were fixed for a quarter-century.)

Parker will talk to Ambrose Evans-Pritchard of London's Telegraph, the economic commentator he respects most, Jeffrey Frankel, a Harvard academic specialising in "capital formation and growth", Joseph Stiglitz, revisionist former World Bank chief economist, and Olivier Blanchard, revisionist chief economist at the International Monetary Fund. Another target, Dani Rodrik, who wrote The Globalisation Paradox, a revisionist tract on hyperglobalisation, is away when Parker is at Harvard.

His mission is to hunt down new ideas (though, tellingly, in institutions astride the "old" North Atlantic, not in "new" Asia) and see how they fit in the mix here.

Joyce might say to that: bubble, bubble, toil and trouble. But also there might conceivably be voodoo in orthodox economics in need of exorcism. What turns out to be voodoo and what the next orthodoxy we will not know for a decade or more.

Whoever is right, there is a debate now. It will build through to the next election. It beats listening to focus groups.

-- Colin James, Synapsis Ltd, P O Box 9494, Wellington 6141
Ph (64)-4-384 7030, Mobile (64)-21-438 434, Fax (64)-4-384 9175
Webpage http://www.ColinJames.co.nz

[elZorro]

Well, that might not be quite right, but if the rest of this article is to be believed, IRD has paid out $31mill to 539 staff made redundant since 2008, an average of $57,000 each, and has also paid out a whopping $125 million on contractors and consultants. All the while offering a very poor service on the 0800 number. 260,000 callers hung up after waiting too long, in one year.

http://www.stuff.co.nz/dominion-post...ll-on-services

Maybe the number of staff dropped has been 950, since they have/had 6000 staff. You'd need a few staff, they sometimes get 25000 calls in a day.

About 15 years ago, IRD in Hamilton set up a huge waiting room so people could provide their walk-in query at a main desk, where it was relayed to staff in each section as appropriate, using screens. The tax client would be collected from the waiting room by a tax expert, and ushered to a private small room to discuss the issue. There were about 20 rooms, and other desks. Within 2-3 years this great system was replaced with a smaller version (change of govt?), then you had to phone in before visiting, and now they don't (or can't) even answer the phone. The smaller waiting room now has about 4 chairs in it. You can't even get tax forms there.

[elZorro]

Steven Joyce was on TV1 this morning and asked directly, why the govt was asking for more R&D spend by business, when they were the ones who scrapped the R&D tax credits, and reduced R&D funding.

Mr Joyce skilfully implied that businesses would have been reallocating ordinary work to fit the tax credit prescription, and adding this credit on top of TechNZ 50% funding. He thought most NZers wouldn't like this idea. He also implied it was John Walley from MEA banging the drum again.

That is just so much bull, because R&D tax credits were only a 15% credit at best, and they're audited. There are very strict rules about when it is appropriate spend, and when it is not. One of the rules is that you can't double-claim if the work has been part funded by TechNZ or other agencies.

Mr Joyce knows this of course, but the general public and the reporter, don't. I think the real reason the tax credits were pulled is that National was worried it wouldn't be able to easily fund tax breaks for the top echelon if the business sector really picked up the tax credits and ran with them. By now we'd be seeing some great results, because many small enterprises that will never get around to contacting TechNZ and going through that process, could have made a start on the R&D ladder. National should have simply left the top tax rate and R&D credits in place, as most of the 470,000 small businesses aren't that worried about what the top tax rate is, they'd just like a chance to get there.

http://www.nzherald.co.nz/business/n...ectid=10828408

[elZorro]

Today at work I was sent a link about $45mill of govt R&D funding, with a note that the criteria have been changed, and I should check it out. Full of optimism, I did just that.

http://www.msi.govt.nz/get-funded/bu...lopment-grant/

The technology development grant is only one of three or so in the arsenal, but by the time I'd read the criteria I was thinking that some bright spark had done a typo in the link's address. Change two letters in the msi.govt.nz/get-funded and you'll see what I mean.

$45mill over three years, lets see, that's $15mill per year for 470,000 businesses, or $32 each. It's a grant for just 20% of your R&D spend. So that's close to the 15% that the R&D tax credits supplied in 2008, (Labour will drop the amount to 12.5% when they get back in).

This current 20% grant is only open to businesses with a turnover of $3mill or more for each of the last three years, and only if they've spent 3% of t/o on R&D also. That's the criteria that changed, the R&D threshold. A business can apply for up to $2.4mill of grant a year, or in other words they'd need to spend $12mill on R&D. Some bigger outfits will be able to do that, no problem. This could mean that all the funding would be used by 6 or 7 big businesses each year. Even if the average grant claim is $100,000, only 150 businesses would be let through each year. This is very easy to run of course, you don't need as many staff. And some big players are going to be very happy with the MPs in charge of the portfolio.

But is this the step change that R&D tax credits would have offered? Of course it is not, it's not meant to be, but it allows National to say that they are doing something, when in fact they're only looking after their mates. Sure enough, in the press statement we have:

Up to now, 42 businesses have received a Technology Development Grant with a total worth of $148 million.

Note this is an average of $3.5mill per business refunded.

TechNZ has two other smaller funds which can suit small businesses, however you'd need to show your turnover for the last 3-4 years and give good details on what you're going to achieve. It's not for business as usual. The technology transfer scheme..this is IRL-now ATI, $120-$150 an hour for boffins.

[elZorro]

David Parker getting more mentions in despatches.

http://www.labour.org.nz/news/changi...fairer-society

[slimwin]

Er, I'm a wee bit too old to put any value on a self promotion article on somebodys employers own website. Have you any balanced articles that you can post or just ones that agree with you view?

Wait for it...

[elZorro]

Er, I'm a wee bit too old to put any value on a self promotion article on somebodys employers own website. Have you any balanced articles that you can post or just ones that agree with you view?

Wait for it...

Hi Slimwin, I'm just making the point that David Parker seems to be getting some extra airtime. And yes, in my opinion the policies are on the right track, so the first step is to see what they are. Been a bit too busy to debate both sides of a political argument just by myself..you're welcome to post something.

[Major von Tempsky]

"Been a bit too busy to debate both sides of a political argument just by myself".

But El Zorro - about three quarters of the many postings on this thread are by you!

All you have to do is to look at the other side's valid point of view as you post and go "On the other hand...".
That way we would have a balanced thread even if 75% is by El Zorro....

[elZorro]

"Been a bit too busy to debate both sides of a political argument just by myself".

But El Zorro - about three quarters of the many postings on this thread are by you!

All you have to do is to look at the other side's valid point of view as you post and go "On the other hand...".
That way we would have a balanced thread even if 75% is by El Zorro....

MVT, thanks for writing something. Maybe it's a bit too far out from the election to get too interested in politics. I find it surprising that yourself and Slimwin think I don't consider the other side of arguments, I do mention those when I post, and I'll point out if I think the other side is bogus or BS. I'm a political numbskull, but I can't believe how much pub-talk thinking just sticks around, completely unbacked by the facts.

I was reading this today in the Waikato Times.

http://www.stuff.co.nz/waikato-times...conomics-study

I would like to see this thread being largely pro-National - if anyone can bring forward shining examples of how well the National govt have steered the economy in the last four years, let's hear them.