Business group slams Brash Report

A business organisation has slammed the Don Brash led 2025 Taskforce Report as too extremist to be practical and that any suggestion to implement its recommendations would be detrimental to the average New Zealander.

The Independent Business Foundation, which represents small and medium enterprises (SMEs), said the Taskforce missed the key factor in New Zealand’s slide down the OECD’s economic performance ranks, namely the attitude of business owners and their staff.

Foundation Chairman Grant Halley said poor management and disengaged staff, not the tax system, should be blamed for New Zealand’s dismal economic performance.

Former Reserve Bank of New Zealand Governor and former National Party and Opposition Leader Dr Don Brash had said that New Zealand should implement a number of economic and tax reforms if it was serious about closing the gap with Australia by year 2025.

The Task Force, appointed by the National Government six months ago, was charged with the task of recommending policy changes that would enable New Zealand and New Zealanders to compete more effectively with Australians and become more competitive and productive.

Among the other members of the 2025 Task Force are Electricity Commission Chair and former Finance Minister David Caygill, Founder & Chief Executive of Icebreaker Jeremy Moon, Australian Fair Pay Commission Commissioner and Australian Productivity Commission (Part-Time Commissioner) Judith Sloan and Capital Economics Director Dr Bryce Wilkinson.

But as expected, the Task Force favoured ACT and its leader Rodney Hide, who subscribe to extreme right policy of total privatisation and promoting the wealthy.

Reforms for the rich

The Brash 2025 policy prescription included bringing back youth rates, dismantling employment rights, slashing taxes for the rich, cutting government spending on health, education and social welfare, more privatisation of publicly-owned assets, more free trade and foreign takeovers, more mining, less government regulation and climate change action, and, to top it off, an increase in the age of superannuation.

Prime Minister John Key distanced himself from the report saying, “It was too radical to be implemented.”

Opposition Leader Phil Goff wanted the report scrapped.

“The Task Force itself is utter waste of money,” he said.

Mr Halley said a widespread lack of management and leadership skills among SME owners was holding back New Zealand’s progress.

“This translates to disengaged workers and low productivity,” he said.

An IBF analysis said the 2025 Taskforce report neither addressed the fundamental problem of low productivity nor suggested the ways and means of closing the personal income gap with Australia.

“In contrast, (Investment Advisor) Gareth Morgan’s alternative proposal could help in solving the fundamental problem of poor capital investment decisions,” it said.

Mr Halley agreed that the taxation and regulatory environment had an effect on productivity but said New Zealand’s tax structure was not onerous compared with many other productive countries.

“We always rank highly in international studies of competitiveness and ease of doing business. Hence, these factors are not holding us back.

“Gareth Morgan’s alternative tax proposal of introducing a tax on capital would help to change the attitudes of small business owners who took all profits out to finance their lifestyle choices and then relied on cash flow to keep the company going.

“There is a tendency on the part of business owners with lifestyle priorities to invest it in expensive real estate as a status symbol.

“If that real estate was taxed at the same rate as productive business capital, there would be a greater incentive to invest capital in the business to grow productivity and income,” he said.

In its submission to the Taskforce, IBF said the predominance of SMEs should not preclude New Zealand from closing personal income gap with Australia.

“But unless we get to grips with staff engagement, we will continue to surrender our most needed human resource to better prospects overseas and productivity will suffer as a consequence,” it warned.

Our editorial, The Task Force creates a new gap, and an extract of the submission made by Independent Business Foundation appear on page 12.