sign up log in
Want to go ad-free? Find out how, here.

Labour's Cunliffe on a smaller MED, currency intervention, private involvement in SOEs

Labour's Cunliffe on a smaller MED, currency intervention, private involvement in SOEs

By Alex Tarrant

The Labour Party would create a “smaller, slimmer” Ministry of Economic Development (MED) that partnered up more with private sector advisors, Labour’s finance spokesman David Cunliffe said.

Cunliffe was answering questions after speaking at an Institute of Policy Studies seminar, where he attacked the National-led government’s handling of the economy. He said this was highlighted by the move by Standard and Poor’s to put New Zealand’s credit rating on negative outlook on Monday.

The role of the traditional economic development agencies would change under a Labour government, Cunliffe said.

“More MBAs, more PhDs, and [fewer] Bachelors graduates will do the work.”

“We’ll have a smaller, slimmer MED with more partnerships with outside advisors, we’ll have rigorous performance measures, we’ll measure rate of return on investments, we may take more equity stakes,” Cunliffe said.

“We will not have averagely qualified bureaucrats making private sector participants jump through hoops that they find irrelevant and then not measuring the results,” he said.

Earlier in the speech Cunliffe touched upon possible policy measures for Labour heading in to the 2011 election. More detailed policies would come in the new year, he said.

On the currency

Something needed to be done on how New Zealand handled its currency due to changes in the global financial environment, Cunliffe said. The majority of countries now had now moved away from clean floats of their currencies, he said.

“We are particularly small, and we are particularly exposed," he said.

“We are not advocating pegging the dollar and we do accept the need for caution in respect of our currency, but we also agree that the current status quo is killing a lot of manufacturing exporters. And just imagine if we were not sitting on a 30 year spike in agricultural commodity prices, what would Federated Farmers be saying about it then?”

The world was entering a new and difficult part of its history, in which there was essentially a long run relative decline of the [US] economy that housed the world’s reserve currency, Cunliffe said.

“We’ve got the rapid rise of competing economic power blocs in East Asia. The world’s transition to a much more multi-modal, multi-centric global financial system could either be moderately tricky or bloody awful. We hope it will only be moderately tricky, but that’s going to require give and take by both the Chinese administration and the American administration, who seem to be talking past each other in the G20 context.

“To hear it from the American side it’s all about the fact that China is artificially depressing the Yuan. To hear it from the Chinese side it’s all about monetary easing in the US.

“These guys have to get together and work something out or the whole planet will suffer.”

Monetary Policy

Labour would reform the Reserve Bank Act and the Policy Targets Agreement, Cunliffe said.

“We would retain the operational independence of the Reserve Bank and the current 1-3% inflation target, but broaden its objectives to include external balance and growth, including exchange rate conditions for Kiwi exporters,” he said.

“We would broaden the monetary tool set to explicitly include complementary monetary instruments like a counter-cyclical core assets ratio and consideration of an inbound transactions tax.”

'Unleash SOE’s'

Labour would look to better leverage the Crown’s balance sheet in “new and innovative ways,” Cunliffe said.

“We can expand public-private partnerships for new transport infrastructure. The project scale must be right and the PPP benefits must outweigh any increase in cost of capital, but that leaves plenty of scope for win-wins.

“We can unleash State Owned Enterprises to create and grow new subsidiaries with private partners and shareholders, without diluting the taxpayer’s equity, or wholly or partially privatizing the SOE.

“We’ve already seen a huge example of success in the government’s creation of Kiwibank: that investment has increased the value of NZ Post far beyond the value of the initial investment."

'Need bigger, diverse companies'

New Zealand needed more big, diverse companies like Gallagher, Icebreaker, Via Lactia and Fisher and Paykel Healthcare, Cunliffe said.

“We simply cannot expand bulk commodity production enough, or guarantee commodity prices high enough, to lift GDP per capita to the levels we aspire to,” he said.

“But neither should we presume that there is a false choice between our primary endowments and our innovation strengths.”

During the question session, Cunliffe was asked whether government should be picking winners in its quest for bigger companies.

“Clearly we need more large companies. Where do they come from, well we’re going to have to take some medium ones and grow them,” Cunliffe said.

“I’m personally pretty uncomfortable about the government picking company winners at the firm level,” he said.

“I would rather see us create the business environment and systems whereby more companies can do better. I’m not averse to identifying high potential sectors, or intervening to promote opportunities and regions.

“It is a very second best world to drop down from that, to say it’s got to be company X because there [are] all sorts of issues around private property rights and minority shareholders and so forth,” he said.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


Blah blah, kick the can down the road, swap a few deckchairs around, get elected on BS and do nothing for the next 9 years ! 

The first poli that says they will cut the public sector by 2/3rds, abolishes welfare, kicks out the Aussie banks, gives treasury the power to issue and control our money, backs our currency with  gold, restores our freedoms, (just for starters) gets my vote.....



nothing new here, move right :) along......


Averaged qualified if you have a PhD in some useless subject and have no real world view and are a complete air head but have a PhD you are well qualified to be a policy advisor under Labour....

How many successful business ppl for one have PhDs?

How many average ppl got their jobs while under Labour?

The guy is a moron.



Well I think you are completely missing the point...

What Slient T is saying is that he wants smarter and more intelligent people making decisions, not career dolts who rise to the top through tenure and nothing else...

However, this comment is THE money shot..

“We will not have averagely qualified bureaucrats making private sector participants jump through hoops that they find irrelevant and then not measuring the results,” he said.

Fix that problem and life becomes a lot easier for everyone!

BTW - the Ministry of Economic Development was a Jim Anderton/Labour inspired creation... good to see someone wanting to tear it apart.


all the MED do as far as i can ascertain is about every other year spend millions on reconfiguring the  website to do exactly what it did previously. 


brash had a phd. what did he achieve? his foray into the private sector lost millions for a number of large public companies. cullen was a massive wealth destroyer. another barking mad policy by cunliffe and labour.


brash had a phd. what did he achieve? his foray into the private sector lost millions for a number of large public companies. cullen was a massive wealth destroyer. another barking mad policy by cunliffe and labour.



My suggestion is a Financial Transaction Tax (“FTT”) on ALL Bank deposits in New Zealand not just "inbound transactions tax.” The definition of the word “Bank” must be very very wide to include every type of institution that acts like a Bank. 

While a tax of a quarter of a cent on every dollar deposited in a Bank in New Zealand does not sound a large amount, (2.5 cents on $10.00, 25 cents on $100.00 and $2.50 on $1000.00) over a year each dollar turns over many many times and the actual sum collected over all is much much larger. The charge must apply to all and MUST NOT be tax deductible.   It is NOT a Tobin Tax.

If it could be decided what reduction could be made to a particular income tax rate the actual percentage collected on each dollar to make up the difference, plus some, could then be determined.

Could somebody who knows how to work this out, tell us how and what the percentage amount would need to be.

Some people argue against an FFT on deposits saying that such a tax would be a disincentive to saving.  If that argument had any validity there would be no taxes.  All taxes are a disincentive to saving although they are probably more a disincentive to spending!!. 

I do not like the idea of a FTT on withdrawals because that would be very very messy when purchasing items.  An FTT on withdrawals would also be vulnerable to avoidance and evasion. 

Another suggestion has been to tax each Eftpos transaction.  The argument is that as people are willing to pay (except the old and those who are financially savvy) every time they use their Eftpos card they would be willing to pay a Government tax as well.  My argument against, is that an Eftpos transaction tax would tax the financially illiterate and would not collect much money anyway. 

An FTT on bank deposits is clear and transparent and affects everybody including companies, government departments, overseas owned companies and even the Reserve Bank.

The Banks can collect it as they do for Resident Withholding Tax so there is no administration costs for Government.

Imagine this picture.

Fletcher Building sells its goods and collects money in payment.  It deposits that money into the Bank and immediately the 0.25% tax is deducted.  Fletcher Building then pays its employees.  The minute that payment hits an employee’s account then the tax of 0.25% is deducted.  That person then goes to New World or wherever and buys their groceries.  New World banks their money and the tax of 0.25% is collected yet again.  New World then buys its produce from the wholesaler; that wholesaler banks New World’s payment and the tax of 0.25% is collected and so the dollar goes round and round with Government getting the benefit of that continuing 0.25% tax on every dollar. 

I would appreciate some constructive comments and criticism and ways to progress these ideas.