John Walley, chief of the Manufacturers and Exporters Assn, has cause to wail about short-term spending and bank bailout plans dominating the election campaign, and how this has shifted attention from the local problems underpinning our economy. Decisions on where to locate or whether to start an economic activity still rely on long-term prospects as much as short-term credit availability, he pointed out. Hence, “the most important issues” (in his book) are tax incentives for innovation, incentives to save and a stable framework for tradeable activity.

Focus On Output. Federated Farmers President Don Nicolson similarly wants a greater focus on “the productive sector.” His prompt was the agreement among party leaders during a TV One debate the international financial crisis requires more Govt spending on infrastructure to stimulate the economy. This is fine with the Feds, so long as it’s spent “on building dams rather than cycle lanes.” Nicolson’s reasoning: dams store water, which grows grass, which produces food we can sell to the world to pay the nation’s bills. All political parties therefore must think seriously about water storage when they consider “emergency” infrastructure spending plans.

Capital Works. There’s general acceptance public investment in capital projects helps rejuvenate faltering economies. Except when it comes to projects in the capital, where transport development ambitions include a new Basin Reserve flyover ($33m) and more tunnels. Wellington City Councillor Iona Pannett, heavily tingeing her gripes with green, insists it’s ludicrous to commit to a “roading spending spree” when the world faces an economic crisis and the Council should be reducing greenhouse gas emissions. The local chamber of commerce, more sensibly, says the economic crisis provides more reason to push ahead because big infrastructure projects stimulate the economy and improve its efficiency and productivity.

How To Do It? The major parties would agree, but are at odds on how to encourage innovation. The Clark Govt has introduced a 15% tax credit for private-sector R&D expenditures. National is pledged to scrap it. The OECD could guide them: its latest review of trends and developments in science, technology and industry calls for boosts to science and innovation to drive long-term growth. It also approves a clear shift in recent years from direct public funding for business R&D towards indirect funding, saying the appeal of R&D tax credits stems from their non-discriminatory nature in terms of research and technology fields or industrial sectors. This sounds like a vote for Labour.

 Copyright © Trans Tasman Media Ltd