KEY POINTS:
The Key Government's milestone of its first 100 days is fast approaching, with little sign it has the nous to develop creative policies that will truly boost confidence.
Right now Key's policy advisers seem so focused on the rear-view mirror that all they can come up with are big-spending government infrastructure programmes that mirror the remedies for the Great Depression, instead of providing direct incentives to keep the myriad businesses that make up a 21st century economy working.
The upshot is the construction industry got a $500 million boost this week to build roads and schools that are not even needed yet. But all the other competing sectors that are struggling to keep employees on the payroll right now as revenues turn down get none of the Government's largesse.
As for the wider populace, all that has been on offer so far is a tax cuts programme that takes so much money out of the Government's kitty that there is little left to spread to others desperately in need of a boost, such as pensioners, students and beneficiaries.
New Zealand businesses are also facing funding pressures, as Reserve Bank Governor Alan Bollard made clear yesterday as he urged the trading banks to once again tap international markets for funds.
Businesses have been loath to go public on this score, as they fear it will simply result in them being seen as poor risks by customers and competitors.
The problem is that bankers have become gun-shy. The years when they achieved huge bonuses by persuading their customers to treat their houses like ATMs - by accessing their equity through revolving credit facilities, or using physical property as security for business lending - have gone.
Bankers now fear they will be shown the door themselves if imprudent lending leads to subsequent write-offs. To get business moving again an injection of confidence is sorely needed.
That is where Key comes into play. It is surprising given his own background as foreign currency manager and his obviously creative nature, that he has let his Government be talked into adopting such a narrow approach.
What has happened to the Key of old who used to get enthused over programmes to leverage New Zealand's position in the Asian time zone and attract financial services businesses here? Or the Key who used to talk admiringly of the Singapore model that he experienced while working in the city-state as an investment banker?
Key's "rolling maul" of initiatives is now under attack in Parliament as Labour claims the Government has simply cut and pasted its predecessor's policies to bolster its $9 billion fiscal stimulus package figure.
If Key had opted for the big-bang model instead of a series of initiatives, Labour would have found it more difficult to spread confusion.
Contrast the Key Government's strategy with the multi-pronged approach that switched-on governments - such as Singapore - are using to make sure their fiscal stimulus packages are more broadly focused.
Singapore has already announced one of the most creative packages to date. It faces a huge economic contraction, but it has ample foreign currency reserves that it is now tapping to help its businesses keep their employees in work and other measures to boost consumption.
Singapore is spending S$5.1 billion helping its companies avoid layoffs by cutting corporate tax (down 1 per cent to 17 per cent), subsidising 12 per cent of the first S$2500 of each employee's monthly wages - a S$300 Government boost per worker per month which will go straight to companies. It is boosting training programmes, putting up cash handouts for low-income workers by 50 per cent and increasing public sector hiring.
It is also investing S$4.4 billion in infrastructure projects including a subway system, roads, public housing, parks and military facilities.
The point about Singapore's package is that the fairy dust is sprinkled widely around the business sector, not just to the construction sector the Key Government favours.
Singapore is also spreading its fiscal largesse widely to ensure further benefits for government pensioners, more aid for welfare beneficiaries and students, a 20 per cent income tax rebate of up to S$2000 a worker, and rent and wage subsidies.
The Singapore package is the third largest to be unveiled so far among developed economies. The US tops the list and China is second. But New Zealand rolls in at number six, slightly behind Russia and Australia on a percentage of GDP basis.
Finance Minister Bill English is now hinting at a potential expansion in government debt to some 50 to 60 per cent of GDP in a worst-case scenario. This will further constrain the Government's options.
Back here the organisers of Key's upcoming Jobs Summit worry that there will be no fairy dust left to fund any similar initiatives that might emerge during the one-day meeting.
There is still time to axe the tax cuts and put the cash to better use.
