Productive Investment Incentives – no says Chamber of Commerce
Below is a link to an article from The Press that highlights the difference between a business group that accepts any membership and one that represents a particular sector.
To quote a response to a call from Coca Cola for accelerated depreciation:
“an incentive like accelerated depreciation was something that could be looked at to encourage investment in manufacturing, but it was more important for there to be an environment that encouraged business in New Zealand generally, rather than artificial incentives."
http://www.realeconomy.co.nz/files/coca cola article 19 1 12.pdf
This is the key difference; broad membership organisations are held hostage by their diverse membership. They must try to keep everyone, or at least the majority, happy. So policy positions are represented in broad terms.
Here accelerated depreciation, available in most countries that compete with New Zealand, is subordinated to a general call for settings that help all businesses. Sadly there are no such settings; the traded (or real economy) competes with the world, but the domestic (or non-traded) economy only competes locally. So the New Zealand lawyer, for now, competes only with lawyers in New Zealand; but the manufacturing company competes with manufacturers, and their helpful policy frameworks, anywhere in the world.
One set of policies do not, will not and cannot suit all segments of the economy. This clearly manifests in the exchange rate - the domestic economy wants ever higher exchange rates that lower the cost of imports and offshore travel, whereas the real economy wants lower exchange rates that support international trading competitiveness. The former represent the majority in the economy, so naturally policy is biased to favour domestic activity, not real economy competitiveness. Unfortunately our national current account trade deficit has to be balanced by either selling local assets and / or borrowing from offshore. Unless the trade deficit is corrected this process of sell and borrow ends in a Grecian scenario, with not much left to sell and no one lending at any price.
The New Zealand Manufacturers and Exporters Association advocates policy settings and instruments that support the real economy: such as accelerated depreciation for productive plant as outlined in the Press article (here is an article from the NZMEA on tax - have a look at the 'References from Other Jurisdictions' section, and a submission from some years ago). We go further in other policy areas that deal with competitiveness issues related to lower and broader tax base and monetary policy that target our exchange rate’s value and volatility.
