10:00 AM, 25 October 2017

Welcome to the driver's seat Jacinda - but are you still driving the same car?

Now we have a new government – we have a left of center mix of policies. Which on first principle should be building innovative, high value local manufacturing with the aim of increased prosperity and our ability to pay our way in the world.

And for me, I congratulate the team around ‘Prime Minister-elect’ Jacinda Ardern for being in the driver seat and look forward to seeing her make true on her promise “let’s do it”. 

You may recall some of our advocacy clearly advised that our local SME’s should gain from these policies. And, although still lacking details - we need to make sure that the promised R&D tax credits and business innovation, government procurement rules applying for subcontractors and pushing low emission technologies are indeed implemented.

But for this to happen, we all need to continue formulating policy to our new coalition partners and make sure our voices are heard by them.

The original election policies got it right

While keenly awaiting the announcement of the agreed policy framework for our new government, I stumbled across the pre-election policies. It’s a worth-while read that reminds us what we requested and what was promised to us in respect to key policies affecting our businesses.

We advocated that for our economy to grow sustainably we needed to “get off the grass” and invest in niche market industries with higher paying wages and export potential. A move that would increase the number of companies with sound R&D innovation strategies in New Zealand.

We also said it couldn’t just be start-ups such as the IT industry, but had to include transforming our existing companies - as without them, we miss the critical mass. But for this to happen, accessible incentives for those willing to invest in R&D through R&D tax credits was imperative. 

As a reminder, Labour’s policy document cited extensively from our advocacy work when it came to procurement. Including the sad example of Christchurch’s Hospital Acute Services steel work going overseas. And in contrast, NZTA giving steelwork to a local Napier company which resulted in $8 million tax revenue gain for New Zealand, a $1.3m boost to the Napier economy, and improved New Zealand’s trade balance by $2.8m in one job alone.

But will they still love us tomorrow?

Thankfully, all our new collation partners support the principle of tax incentives for R&D, and we hope this means Labours R&D tax credit of 12.5% of eligible expenses is re-introduced.

We also embrace incentive based policies targeting the growth of local industry - provided they’re effective and well tested before being introduced. The challenge will be ensuring all opportunities are rated fairly and equal. We certainly believe metals-based local manufacture is just as valuable as those in the timber industry, and this should be reflected accordingly.  

So, with niggling thoughts of ‘picking industry winners’ rearing their head in some targeted policies like the proposed development of a forest-based manufacturing sector – it’s clear, some of us pine for National’s ‘hands-off, the free market will sort it out’ policy.

But, what will no doubt be less disputed, work well and have immediate effect is the increased enforcement of the Government Procurement Rules. The application of the balanced decision making criteria the most obvious.

That’s because there’s great overlap by the coalition parties with our policy position and we hope Labour’s policy is realised where:

1. Government Procurement Rules will be amended to make job creation and the overall benefit to New Zealand key criteria for decision making.

2. To improve transparency, government organisations must report in a standard template to Treasury on the number of jobs and the wider economic benefits they have achieved from their contracting.

3. The Rules would apply to tenderers and their subcontractors.

What we must keep in mind is that most policies take years before they show their true effect. This is especially true for R&D tax credits flowing through in actual Business Expenditure on R&D (BERD) to the set target of 2% of GDP over 10 years.

That’s why we think this policy deserves a trial period beyond the next election cycle and needs to be given priority and support by a Callaghan Innovation R&D Grants Scheme reform.

Influencing positive change

The implementation of policies we’ve advocated for with our industry partners will clearly demonstrate we can influence incoming governments.

Not only will that have immediate effects in changing tax rates, applied government procurement rules winning more local jobs, but also increase our industry research R&D spend by the R&D tax credit.

Being German, I’ve grown up in an MMP environment and always felt the ‘compromise’ coalition policies are more thoroughly thought through and hence more effective and longer lasting than first past the post decision making.

With the policies pursued by the left of centre coalition parties I’m hopeful that our local manufacturing will be a winner and remain a main contributor to the future prosperity of New Zealand.

To cite loosely from a German Green Party comment to business during their first time in government: “Don’t worry about your ability to write black (profit) figures – as long as you pursue green industry policies.” I’d like to rephrase it to: “Don’t worry about your business future in New Zealand manufacturing – as long as you invest in R&D and sustainable technologies”.

Be encouraged for local manufacturing

Because even if you’re one of those who felt the party with the largest vote should be in charge – we still have much to do. We must make the new government accountable.

And of course with an R&D tax credit scheme set to come back - we also have to be willing to put our money where our mouth is, and indeed invest more in R&D.

If you'd like to discuss this further, contact our Director Dr Wolfgang Scholz on wolfgang.scholz@hera.org.nz or by phone on +64 9 262 4848.