“The problem is that the existing RBNZ behaviour does not control inflation in the non-traded sector, it encourages debt expansion associated with asset inflation, and headline inflation remains within band only as a result of deflation in the tradeable sector. Our call for a “suite of changes” indicates that we think there is no one policy change that can cure this problem. A number of things need to be done.”

Read more over at John’s Blog

Labour’s spokesperson on Research, Science and Technology, David Shearer has branded National’s R&D voucher and grant scheme as “corporate welfare”.

Shearer says that: “Rather than the Government deciding who the winners and losers are under Dr Mapp’s new system, smart Kiwi companies – which represent New Zealand’s best chance of paying our way in the world – should be given access to the 15 per cent tax credit and allowed to get on with developing new ideas and business opportunities.

“They are the ones who know their business, who take the risks and work hard to succeed, creating jobs and investment, and ultimately economic growth. ”

“The Australian Government now has a 15 per cent tax credit almost identical to the one Labour developed, but since done away with by National. It is retrograde polices such as National’s R&D corporate welfare policy which risk seeing New Zealand fall further behind the Aussies.”

Check his full statements at Scoop

This month Bernard Hickey and Selwyn Pellett will lead free seminars in Wellington and Auckland on what is required to set the NZ economy on a path away from the precipice it faces. Find out more on the Fabian website here

Selwyn Pellett, business entrepreneur and member of the Productive Economy Council, tells Breakfast why the NZ dollar was the real reason behind whether the The Hobbit was going to be made in New Zealand. Watch the video here

In December 2007 when the Hobbit was announced we all celebrated quietly. We assumed it would be business as usual for Peter Jackson and New Zealand. Why wouldn’t Warners spend their US dollars here?

Perhaps we should have asked: why would they? There are only four reasons for large overseas corporates to invest in New Zealand.

1. Access to raw materials (land, water, minerals, food etc)
2. Access to low cost labour,
3. Access to unique intellectual property
4. Access to our tiny 4 million person market. read more »

“John Key has characterized Labour as having a “road-to-Stalin experience,” over its plan to restrict foreign ownership of assets. It’s another disappointing response from the Prime Minister, in what is becoming a track record of failure to enter debate on the economy. In cynically applying the ultimate in far-left labels to Labour’s shift in policy, Key is doing the country a disservice. This isn’t about ideologies of “left” and “right”, and it’s of greater significance than mere labels can convey. This is about finding policies that will allow our economy and thus our country to get back on track, and about accepting that the past two decades of policy have failed us dismally. Both Labour and National were compliant in creating the problem. It is important that both of them now become part of the solution,” says Productive Economy Council spokesman Selwyn Pellett. read more »

Robert Scheer comments on how Paul Volcker, head of President Barack Obama’s Economic Recovery Advisory Board, summarises the root cause of the global financial crisis:

“As Volcker observed, the investment banks stopped investing in truly productive ventures and turned into “trading machines instead of investment banks,” resulting in “encroachment on the territory of commercial banks, and commercial banks encroached on the territory of others in a way that couldn’t easily be managed by the old supervisory system.”

More at www.huffingtonpost.com

The Basel III Agreement hammered out over recent months and announced a week ago is aimed at protecting economies from the sort of meltdown over 2007-2009 that brought the global financial system to the brink.

Read Gareth’s piece over at the NZ Herald

Bernard Hickey takes a look at currency, foreign ownership of assets and a general overhaul of our economic policy.

“I think we need to rethink the way we run monetary policy, the way we allow foreign ownership of assets, the way we encourage savings, the way our financial institutions are regulated and change the things we are aiming for.”

Read Bernard’s piece over at Interest.co.nz

The Reserve Bank Governor has all but said there is zero reason to raise the OCR right now, but has gone and done it anyway. Perhaps in hindsight he believes that during the last inflation spiral we should have used the OCR lift earlier and gone hard. That soft approach inevitably killed our exports and now while many exporters are hanging on by their fingernails we start the process all over again. read more »