David Shearer is the MP for Mt Albert and leader of the Labour Party
In 1881, a group of South Island farmers and businessmen established Summit Wool Spinners in Oamaru. For more than a century it forged a proud heritage of local skills and expertise in blending, spinning, yarn-making and exporting.
It grew into a high-tech international business; one of North Otago’s biggest employers. But in June this year, 50 jobs were lost at Summit Wool Spinners’ Oamaru plant.
That’s 50 households down an income.
This is happening too often. Seventy jobs were lost at Onehunga’s Norman Ellison Carpets in June. Seventy-one at Wiri engineering firm Flotech the same month. Fifty-five were lost at Wellington’s Gould’s Fine Foods in July. Some of those staff had been loyal employees for more than 20 years.
There are lots of reasons why businesses falter or fail. But these weren’t fragile startups, or badly run. They were once very productive businesses.
The Government blames it on Europe. But our major trading partners, Australia and China, haven’t been in recession at all. In the last three years New Zealand’s GDP has grown just 0.4 percent a year. The other non-European OECD countries have grown twice as fast as that. And in the same period Australia’s GDP grew 2.8 percent per year. We’re falling behind.
The Government also blames it on the earthquakes. They were devastating, but economically the rebuild of Canterbury now presents a source of growth.
We have tried to shield ourselves from declining living standards by borrowing money and selling assets. Consequently, our overseas liabilities from personal borrowing are among the highest in the world.
The IMF says our currency is persistently overvalued – currently by about 15 percent. Labour is totally committed to Reserve Bank independence, and to a low inflation target.
Meanwhile we’re losing 50,000 good people a year to Australia because our wages are so low.
I listened to a speech recently by Professor Göran Roos, a world leader in innovation and intellectual capital. His research shows that each job in manufacturing generates between two to five jobs in the rest of the economy.
Flip that on its head and – given the right conditions – a few clusters of vibrant startups could help turn the tide in New Zealand. That’s what Labour wants to facilitate, and we have a plan for how to achieve it.
Roos’ research also revealed the countries that have recovered best from the global financial crisis are all focused on high value-added export-oriented manufacturing. By manufacturing, I mean ultra-modern, clean, green, high-tech, precise: biotech, nanotech, cognitive science and ICT.
What this all adds up to is the need for change. We need to modernise our economy and get some dynamism back into our productive business and export sectors. We need more of our own capital: this means a universal savings scheme.
We need to fix the tax system so we promote growth in exports instead of penalising it: this means a capital gains tax, and investing in science and innovation R&D. Our private sector spend on R&D is one third of the OECD average. Growing this will mean new products and ideas to take to the rest of the world.
We need to take the hard decisions and steadily raise the retirement age to 67. It’s essential that we provide for older New Zealanders and are fair to younger New Zealanders.
Labour is thrifty. We ran budget surpluses for nine years, leaving the incoming National government with among the lowest government debt in the world.
A modern economy like this will put a higher value on innovation, talent, skills, education and training, because these will enable New Zealanders to take advantage of the job opportunities of a 21st century economy. So we’ll invest in skills and education all the way through from early childhood to post-doctoral.
Then we’ll see innovative exporters like Summit Wool Spinners hiring, not firing.