Covisory Update - Time to press Ignition or 7 ideas to Ignite NZ's Economy

The focus now has clearly moved from uniting against COVID to saving jobs and the economy. We can waste time and debate whether the government is too late moving to Level 1 or not, but the real questions to answer are:

1. How do we create GDP and jobs? and
2. If we are going to spend bucket loads of money, do we address the real elephant in the economy of the need to increase GDP per person rather than in total?

The GDP per person debate is in my opinion what we should be focusing on, not total GDP. For too long we have focused on total GDP, a figure that is grown simply by increasing population in NZ through migration. Every new migrant needs housing, schooling for children, healthcare, and a range of other services.

While there is clearly a social and humanitarian need for a certain number of refugees to be allowed into NZ, have we been adding to the gene pool by getting the new skills etc that we need?

The example of Ireland comes to mind, where an impoverished and underperforming country and society improved the wellbeing of its people through investment and training. The question is can we do the same and how?

So, this got me thinking over a couple of quiet drinks and a few walks with the dog: If I was in charge what would I do? It is all well and good to throw rocks at the ideas and policies of those that are, but to do so you must at least offer up an alternative.

So here goes; here is my policy list to improve our GDP per person if I was the Minister of Finance (or everything for that matter):

1. Cut all this talk of working 4 days but being paid for 5. By all means, work from home a day or two a week, but the aim is to have people produce and achieve more when they do work. I do not get why I would pay someone for 5 days to do 4 days’ work. Perhaps wages should be cut 20% is the answer?

2. Make tertiary and trades education free for 4 years. Yes, the government has just done something for trades, and it has on its manifesto to make 3 years of university free. But do it NOW, do not wait. Forget student loans for study. The student loan argument works both ways. The government is investing now to collect higher taxes later.

3. Instead, have a loan scheme to enable mature students to in effect receive a wage while they choose to retrain. Reduce overseas student numbers so there is more room for those in NZ wanting to retrain.

4. Encourage employers and self-employed to upskill their workforces. Do this by making all training courses 200% or 300% tax-deductible.

5. We need to increase productive investment in machines and tools that help businesses produce both more and do it more efficiently. A 2-step process is suggested here:
a. Increase the immediate write off for fixed assets from $5,000 to $50,000 or even higher and keep it to 31/3/22. This matches what Australia has done;
b. Double the depreciation rates for assets acquired up to 31/3/22.

6. Rework and reinvent the government-guaranteed bank loan scheme so it is a 100% guaranteed scheme to buy fixed assets to improve a business. Instead of worrying about the bank loaning 20% of the money have the government take security over the assets directly. The funds could flow from the bank to the supplier of the assets to prevent rorts and to ensure security is put in place.

7. The National party's proposal to pay employers to create jobs is laudable but, let's create a better-skilled workforce. What if the government offered the same 2 x $5,000 grants to employers to upskill their staff?

This should get businesses out there buying assets to get their businesses going.

It is time to be smart and to use the current crisis in our economy to not only get back to where we were but to get well ahead again.

If you do not like my ideas, no problem. Just tell me what would you do differently? Let us get the discussion going!