- NZ’s Labour Party Finance Spokesman Grant Robertson sums up his vision of a successful economy as “shared prosperity”.
- NZ needs a step change in investment in R&D if technology is going improve New Zealand’s economic fortunes.
- If it wins the election, Labour will establish a Tax Working Group to examine the overall structure of the system.
by Adam Bennett
On the way to meet the New Zealand Labour Party Finance Spokesman Grant Robertson at his office at parliament, Acuity shared the old steel cage lift with author Max Harris.
The Rhodes Scholar was also visiting Labour – in his case, probably to discuss his recent book in which he outlines a vision for transforming politics and rolling back policies which are fuelling growing inequality.
Its spirit of reform chimes sympathetically with Robertson’s criticism of the economy under National, and his plan for how a Labour Government would do things differently.
“If you take a look at the rise of Donald Trump and Brexit”, Robertson says, “they are founded in people feeling that they are being left out of success in the economy, and democratic societies struggle if people don’t believe they have a fair shot at success.”
He boils his vision of a successful economy down to “shared prosperity”.
Robertson can’t deny the economy has been growing at a healthy rate in recent years, but he does argue too much of the benefit is going to too few New Zealanders.
It’s a point Labour constantly hammers and it featured in a report late last year on its Future of Work Commission, a two-year exercise to come up with policies with which New Zealand can “confidently face the changing world and ensure decent, secure and well-paid work”.
Without the changes sketched out in the report, New Zealand will continue to see the benefits of economic growth go disproportionately to the most well off, Labour warns. It warns emerging technologies will only make inequality worse.
Robertson says Labour doesn’t claim to have the answers to uncertainties posed by technological change. The purpose of The Future of Work was “not necessarily to anticipate exactly what jobs and industries will go, but identify what we need to do to prepare ourselves”.
Robertson led the Future of Work project, and reels off the vision it contains with practised ease.
He accepts there is still a lot of uncertainty around how profound the impact of new technologies will be on the economy and workforce.
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What is clear is that Labour has drawn on a 2013 Oxford University paper by Carl Frey and Michael Osborne titled The Future of Employment: How Susceptible are jobs to Computerisation?
Robertson says that when its assumptions are applied to the New Zealand economy, it suggests technological change will make almost half of all jobs disappear.
That scenario has been challenged “because it won’t necessarily be the whole job, it’ll be core elements of a job”, he says.
“In the end it’s an irrelevant debate because at least half of jobs are going to change beyond recognition.
“I have no doubt that there will be high levels of unemployment and certainly higher levels of job insecurity as a result of the changes we’re seeing. So people in that environment a) have to be flexible and adaptable, but b) we have to start rethinking what work is, what does full-time work look like, and how are people paid and rewarded for that so that they can live decent lives.”
New work styles
“In the report we’re not advocating a universal basic income but we are saying we’ve got to keep thinking about it. Because 20 to 25 years down the track I think what we’ve conceived of as full-time work and full-time jobs is going to look very different, maybe more like the life of a freelancer or whatever as periods of insecurity, periods of lower income are going to exist and we’re going to have think about what the state’s role is in supporting that.
“The other bit that’s hugely important is lifelong learning and retraining. We’ve got to grab a hold of this and say to people, ‘you will potentially need to change your skill set quite significantly as you go through your life’.”
Labour has already committed to three years free post-secondary school education and training.
“That is a clear signal to people that your educational journey does not end at the end of school. It’s not just about university, it’s about trades, apprenticeships also for people who haven’t studied before.”
Robertson says Labour is developing policy around training opportunities for people who lose their jobs as a result of technological change.
However, businesses also need to come to terms with the challenges and, perhaps more importantly, the opportunities the new technology will offer, he says.
Accountants are leading the way.
“The accountancy profession, all through the Future of Work project, was always interested because they always come up as the most at-risk profession in any study. One of the really encouraging things has been that, through CA ANZ, it’s starting to think about the role an accountant now plays.
“If Xero and MYOB etc are going to allow people to be their own bookkeepers, what does the accountancy profession do? It adds value. It’s a business analyst. It starts to think about different elements of how it draws together bits of information for businesses.
“That’s exactly the kind of thinking we need across the economy – it’s the combination of engineering and design.”
Research and development
If technology is going improve New Zealand’s economic fortunes, it’s going to take a step change in investment in research and development, Robertson says.
“The government will tell you the latest private sector R&D spend is well up – about 20%, which is great – but the government’s R&D spend is down. We still spend under half the OECD average on R&D… so we have to do better on that.”
Labour’s central policy to address that is with R&D tax credits, an approach he says was recently endorsed by the OECD.
“It creates certainty for companies. They know that they will get the return on the investment they want to put in.”
Labour would continue R&D grants such as those through Callaghan Innovation and would also work on stronger connection between government-funded research programmes and business.
It’s an area Robertson knows well, having worked in the field for Otago University before he entered politics.
“It’s just not happening, not to the extent it should. I really see gaps there that we can do better on.”
His outline of how Labour would help small- and medium-sized businesses grow leads on to tax reform.
While he says bigger businesses don’t appear to have many problems attracting the investment necessary to fund growth, it’s different further down the food chain.
“We're going in knowing the tax system is out of balance. It is not providing the right incentives to the productive sector versus the speculative side.”
“People are not putting their money there. That’s still because we’ve got the investment signals wrong – they still point people toward buying and selling property.”
A Labour government would begin to address that shortly after being elected by extending the current bright line test for taxing capital gains on property sales from two to five years, and also by cracking down on negative gearing.
But its reform would go further, with the establishment of a tax working group to examine the overall structure of the system.
Any bigger bolder changes would stem from that.
“We learned a lesson from the last election that making big structural changes to the tax system from opposition is quite difficult. It is actually genuinely very hard to model and develop something like that, particularly in isolation from other things.”
Big new taxes also have the potential to spook voters, although Robertson won’t admit that the working group is a politically convenient pre-election fig leaf for the kind of big changes Labour wants to make.
Instead, he will only say the tax working group “is necessary, it’s practical”.
Still, he is willing to sketch out where he believes structural changes are required.
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“We’re going in knowing the tax system is out of balance. It is not providing the right incentives to the productive sector versus the speculative side. We would expect that working group to come back to us with options – of course they will investigate a capital gains tax, they have to – but they’ll look at other ideas that are floating around.
“We also want them to look at the overall fairness in the system – multinational tax avoidance being an important one within that.”
He says the National Government’s plan to tackle big tax dodgers, which is now out for consultation, largely addresses the issues Labour is concerned about. “But my criticism is it leaves a number of solutions off the table and one of those is the diverted profit tax, the so called Google tax.”
With Britain and Australia enacting diverted profit taxes, Robertson’s wish to at least consider it is hardly radical.
But Labour’s economic prescription, including its unabashedly interventionist KiwiBuild policy to address the housing shortage, marks a big departure from the National Government’s business light-handed management.
It now has to persuade voters that stronger medicine is required and that it has the expertise to administer it effectively and safely.
New Zealand goes to the polls on 23 September.
Illustration by Paolo Lim