Is John Key preparing to inspire New Zealand to make the leap from a consumption-led economy to one driven by a smart investment ethos?

A bit like Singapore, perhaps, with its strong focus on using domestic savings to fuel growth via the Government-initiated investment and savings funds which have provided much of the cash that has propelled the development of its companies in the past couple of decades.

Or is the Government simply going to finally tackle wasteful state spending and get its own deficit down faster?

This step has been suggested by Don Brash's 2025 taskforce, and by Kerry McDonald, chairman of a Government working party on savings, as the surefire mechanism to get the national savings rate up.

McDonald has not been driving his group for long. It may result in some creative ideas - or simply end up with a restatement of the hands-off mentality which the 2025 taskforce favours. But there would be little point in running such an exercise simply to reinforce the status quo.

It is also doubtful how much appetite the Government will have for serious expenditure reduction with a general election pending.

But we should expect, and demand, that a clued-up businessman like Key - who digs the Singapore model and has worked in the city-state - should by now be driving his Government to concentrate on the key sectors which will drive New Zealand forward.

Key was slapped around the paddock when he increased Warner Bros' production grant to keep The Hobbit here. Inevitably, he was attacked as "picking winners".

This is a cardinal economic sin to those who detest the free market and would prefer to bask in their cloaks of ideological purity elsewhere while the rest of us pay the taxes which underpin this country's economic infrastructure.

But what Key in fact did was to "back a winner".

It's true that Sir Peter Jackson's Lord of the Rings trilogy would not have been made without the previous Labour Government's generous incentives.

I'm sure the purists would quibble about that. But the upshot was the development of a world-class film cluster in Wellington. What is so wrong in providing even more Government "backing" for the leaders of our film industry when they have already proved themselves winners? Particularly if it keeps more jobs here.

In fact, we already pick winners through the various trade negotiations New Zealand has with other nations.

Many of our free-trade deals are predicated on gaining greater access to overseas dairy and other agricultural markets. As a tradeoff, local manufacturers have found themselves exposed to the winds of competition.

Key is clearly not averse to tipping the level playing field.

He failed to get widespread buy-in to the Government's intention to consider expanding mining in national parks. But he is now busy talking to the Iwi Leadership Group over the potential for mining on Maori land.

Behind-scenes work is also being done on a number of sectors like aquaculture, which officials believe can be scaled up to the point where New Zealand producers can adequately compete in international markets.

There have also been plenty of Government working papers suggesting New Zealand ought to set up a wealth fund - perhaps on the Norwegian model - to harvest the petrodollars this country will earn if the projections of major oil and gas reserves bear fruit.

So far there is little questioning - at least in public - of why the country has to wait until the oilfields are proven before taking a leaf out of Norway's - or preferably Singapore's - book to increase sovereign wealth.

The purists will inevitably chime in that the Government should retire its own debt before setting up another investment vehicle.

This is the kind of thinking that led Finance Minister Bill English to slash transfers to the NZ Superannuation Fund which is supposed to help offset the bigger burden super will impose on Government accounts in future years.

Super Fund boss Adrian Orr has already earmarked some of the fund for what is arguably a nation-building purpose by investing in various New Zealand entities like Shell's downstream business and Auckland International Airport shares when each looked likely to be sold abroad.

Orr now wants to invest in New Zealand farms. The fund is also expected to co-invest with Fonterra in expanding its farms business overseas.

But the problem is that the fund is set up with an over-arching purpose of offsetting superannuation costs - not to help grow the economy by providing strategic investment capital.

Key yesterday dropped a rather strong hint that the Government would announce new policies to increase the savings rate in next year's Budget.

English made a start in that direction in his May 20 Budget when he unveiled a tax-go-round that put more money in the pockets of working New Zealanders and reduced the tax rates on various savings vehicles.

Many Kiwis are now retiring personal debt at a faster clip.

But the Government is in a classic Catch-22. Does it continue to inject a large fiscal impulse into the economy by borrowing up large to fund Government spending (including the major construction projects) and middle-class tax cuts?

Or does it begin cutting Government spending faster so it gets on top of its burgeoning deficit?

This is not an easy decision - particularly as there is now considerable evidence that not enough of the additional money the Government has borrowed to fuel the fiscal stimulus is being spat back into the economy via growth-fuelling consumption.

At some point the question will have to be asked: is there any point in borrowing more to fund tax cuts if taxpayers simply use the extra to retire personal debt?

Maybe we would be better off tipping some of those "cuts" into a Government investment vehicle to provide extra capital for our companies to help fund their growth and create jobs.