Contributor Bryan Gould says the Key Government's direction will see New Zealand "become an economic satellite or colony of China ... or be first absorbed into a greater Australia on the way".
Yes, Australia's success is largely tied to China's demand for its minerals; Helen Clark's Government wisely took us into the first Free Trade Agreement with China and our trade with that country since has quadrupled. Yes, at the current rate of immigration from China, New Zealand will have a large Chinese population; but New Zealand, a colony of China?
Gould conveniently ignores the fact the world suffered recession from the collapse of many big banks and over-indebtedness permeating all levels of society and government.
New Zealand has actually done well. Our "bumping along the bottom of a recession" has been at a higher level of growth than most developed economies. Interestingly, New Zealand's natural capital is higher than most countries' but Gould's Labour Party and the Greens won't let us near it, even if every conceivable environmental protective action was taken.
Gould bemoans there being too much credit for housing and not enough for productive business. But even if more credit was available, it does not mean business will have the courage to borrow it. And some would not be bankable.
Gould talks of the Auckland housing bubble. Due to Reserve Bank rules, it's twice as profitable to lend for housing than for riskier business. This may be addressed by the bank through macro-prudential instruments (MPI), such as:
Increasing and decreasing the risk weighting given to different lending classes (business, farming, residential).
Capital and Reserves ratio to lending, whereby an increase in Capital and Reserves required for each dollar lent decreases the amount of new money credit creation multiplier a bank can undertake but also increases quite a lot the associated funding costs.
Implementing loan to value ratios.
The real issue in Auckland is the lack of affordable building space (up or on the ground), hence a shortage of homes to meet the demand of the people who have moved from Christchurch or from Asia.
Gould blames lack of business confidence on the high currency. He also sees our relatively high interest rates as the cause of the high dollar. He thinks our interest rates will go higher to squash the Auckland housing boom, pushing the dollar even higher. That would be a silly thing for the Reserve Bank to do with inflation at just 0.9 per cent and the dollar so high. Instead, the RB could use one of its MPIs.
Gould gives no credit to our high dollar being the consequence of, say, high export prices in dairy, low government debt (proportionately about a third of most other developed countries) or high confidence in New Zealand. Neither does he talk about the benefits of a high dollar: our imports costing less; keeping inflation low; foreigners' investments in New Zealand costing them more yen, US dollars and so on; or, that the debts we owe to foreigners are then less in New Zealand dollars.
Like Gould, I'd rather we kept ownership of productive New Zealand assets (such as Mighty River Power) and KiwiSaver, the National Super Fund, and ACC investments are helping Kiwis to own more income-producing shares. Part privatisation of some SOEs will also boost the average saver's investment in financial assets. However, foreign investment that increases overall investment in new productive assets is good. Usually about 85 per cent of revenue remains here.
Gould seems stuck on interest rates, the value of our floating dollar and what he sees as a need to expand government investment, funded by borrowing, to boost the economy.
Why not instead focus on making business investment in New Zealand really attractive? Abolish all company tax, but fully tax the dividends they pay. Lower all personal income tax too, and, if necessary, bring in an annual tax on assets that have a determinable value; property and financial investments.
Bryan Gould was long on criticising John Key but short on advice.
Alasdair Thompson is the former chief executive of the Employers & Manufacturers Association and a former mayor of the Thames-Coromandel District.