Friday, April 27, 2007

Stop blaming the dollar and blame the govt

As NZ manufacturing takes another hit with F&P closing down one of its Auckland plants it's worth reflecting on not just the role of the high NZ dollar, but the role of government.

I pinched this from Murray McCully who pinched it from the NZ Institute;

Look at Ireland (where my handbag remains to this day having been filched from me at a pub near Lansdown Road)

Ireland is now one of the fastest growing countries in the developed world, posting a 6.0% real GDP growth in 2005 — outstripping its neighbor the U.K., as well as the U.S. and Japan.

And where has this dramatic growth come from? Not from within, but from without. Nearly a quarter of the country's GDP is from 1,000 overseas companies who now base their European operations there. This includes nine of the world's 10 largest pharmaceutical companies, and IT giants Intel, eBay, Google, and Microsoft. Over two-thirds of the economy is fuelled by the service sector.

The soft-spoken, easygoing charm of its people may attract outsiders, but what lures them more than anything is the pro-business climate, where corporate tax is set at only 12.5% — about a third of the amount levied by the U.S. and other European countries.

I could cry when I read this. NZ used to have around six or seven international pharmaceutical companies manufacturing here. But the government drove them out one by one, squeezing prices through their monopoly drugs buyer Pharmac. And what's our corporate tax rate? 33 percent. Today I heard Bill English praising Michael Cullen's plans to drop it to 30. Alisdair Thompson, CE Employers and Manufacturer's Association, who was also being interviewed, snorted. Rightly.

We are missing the boat in too many ways and will live to regret it. Have I mentioned it before that my children's most valuable possessions are their UK passports.

1 comment:

Zippy Gonzales said...

Massive EU subsidies to Ireland might have something to do with it as well. The European Regional Development Fund poured buckets of money into Ireland. In 1992 alone, Ireland received just under 300 million ECUs, the highest per capita spend in Europe, from the European Social Fund. Little wonder Ireland's GDP per capita went skyrocketing from the early 1990s.