More “insightful” analysis from the Job summit …

Excuse my cynicism – but I’m relatively unimpressed with the piles of rhetoric coming out of the summit.  In the latest update we hear:

Economic Development Minister Gerry Brownlee said there were two key messages coming out of the discussions he had been involved in at the summit today: the need to cut red-tape and the difficulty small and medium-sized businesses are facing in trying to raise capital in the current climate

Now if we asked businesses what is “restraining” their activity three years ago we would have gotten the same two responses – plus maybe a lack of skilled labour.

Businesses always want less constraints on their activities and cheaper, easier, capital.  However, if the capital markets are pricing the risk associated with the firms, and the red tape is constrained to areas where there is a clearly identifiable market failure, we should stop.  This isn’t a “stimulus/recession” issue – this is a structural issue.

Let’s hope that the politicians remember the other side of the debate here – it isn’t about trying to magically make credit cheaper, it is about trying to make sure that the cost of credit is appropriate to the risk businesses are taking on!!  I hope the government doesn’t use the spectre of a recession to push through policies that are not welfare maximising (something that insider has suggested is happening).

  • insider

    Just on Gerry, in his speech last week he said that he didn’t think the $120m saved on transmission projects by regulatory oversight was worth it because it was “only” 5.9%. In other words he is happy for us to be overcharged and for a monopoly to effectively be given blank cheque writing powers. Bizarre basis for policy change in an economic crisis when all around him are crying austerity.

    But back on topic. We’ve had these summits before – growth and innovation, knowledge wave -they all become a blur. I am certain they achieve nothing – may even be more costly than nothing. We are not a planned economy. Does anyone really think that can seriously and long term alter market fundamentals and their outcomes? If they could, we would have summits eery week and all be as rich as croesus.

  • http://www.tvhe.co.nz Matt Nolan

    “Bizarre basis for policy change in an economic crisis when all around him are crying austerity.”

    Agreed.

    “We are not a planned economy. Does anyone really think that can seriously and long term alter market fundamentals and their outcomes?”

    Agreed very much :)