NZ’s Productivity Lagging
April 17th, 2009
The NZ Manufacturers and Exporters Association Figures has lashed latest official figures showing NZ’s Multifactor Productivity (MFP) has grown by an average of only 0.6% since 2000. The Association says this performance is pitiful, but not surprising given our economic framework.
The Association’s top man, John Walley, says “the lack of growth in productivity is a manifestation of a deeply distorted economy. With the removal of the Research and Development (R&D) tax credit there is now little incentive to develop innovative and productive new products. In fact, activity is overtaxed while investment in unproductive assets is incentivised instead through the lack of a Capital Gains Tax.”
Walley is calling for “an economy focused on adding maximum value to our activity.” This means transforming primary goods into ready to consume products and encouraging more innovation in everything we do. To recover the cost of innovation we must sell to the global market. Returns are just too small from the NZ domestic market.
He say the economy needs three things to encourage more investment and therefore growth - price stability, a balanced taxation system, and targeted tax support, equal to or better than those provided to their competitors in other jurisdictions.
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