Editorial: Clark's chance to defuse a timebomb

Whenever possible, governments, like people, tend to lapse into comfort zones. A government firmly on track for re-election may be particularly susceptible. It will make all the right noises but, in reality, wants nothing more than to ease itself into a new term in office. Unthreatened by its political opponents, it is content to put off hard decisions and urgently needed policies. Such is the danger as the Government contemplates the final year of its first term in power.

The Prime Minister, to her credit, has been making sounds that suggest she might be aware of the problem. Helen Clark, having put in place most of the Government's social programme, now talks of her ambition to "transform" the economy. If for no other reason than to cement in the social reform "we have to outperform our trading partners", she says.

In her eyes, the transformed economy will be based upon innovation. Sharing the focus will be information and communications industries, biotechnology, and creative endeavours that strongly emphasise design.

To fashion and further that ambition, Ms Clark has sought out the input of prominent private-sector figures. The fruits of that association will be unveiled today in the Prime Minister's annual statement to Parliament.

As well as the statement, the Government will release several reports on keys to economic growth, perhaps the most salient of which deals with attracting foreign investment. With such a concentration on the economy, and such a high level of business input, there are high expectations that a significant economic strategy, complete with nuts and bolts, will be detailed.

The task is no simple one. If, as Ms Clark recognises, foreign investment is crucial for improving economic performance, the Government must seize upon the best means of attracting it. Unsuccessful attempts to lure investment during prime ministerial trips to Japan and Korea must have sheeted home the fact that New Zealand does not stand out from the crowd. The level playing field is not, in itself, an irresistible magnet.

Propelling New Zealand towards the top of the class will require incentives, whether that takes, most sensibly, the form of a lower company tax rate or whether it mimics the tax holidays and the like employed by other countries.

Either way, it is not simply a matter of copying the formula used by Ireland or other countries to deliver prosperity. Attempts to reproduce Ireland's experience have fallen flat, and the Irish themselves are learning that companies that accept inducements, and ship in their whole operation, are apt to leave when a better offer comes along or when the inducements run out and hard times hit.

Thus, an economic strategy must be New Zealand-specific. It must incorporate an understanding of what drives growth here, especially of companies that have succeeded as exporters. Clearly, a more friendly climate for investment would also help. The Government is hardly fostering that when, for example, proposed changes to the Holidays Act raise business costs. Or when it will not re-examine obvious obstacles to development, such as the Resource Management Act.

A sweet-tempered business community is another part of the tapestry. The Prime Minister wants to avoid the Irish experience by focusing on the development of industries that already operate here. Thus, it is vital that local businessmen and women fully support the shape and substance of policies, including the welcome mat laid out to overseas investors.

Business and the Government have now reached an accommodation of sorts, if not agreement, on many of the issues that prompted hostility two years ago. The private sector input into today's annual statement is another step forward.

Business knows that not all its wishes will be adopted, but it wants decisiveness. It wants leadership. It will lose faith if the statement is all words and no progress. There should be a clear expression of economic strategy, complete with a prescription and timetable. If that is not delivered, the Government will have confirmed that complacency has taken root while the timebomb ticks away.