Kiwi Stimulus Smarts – II

Here's a novel idea: Why not grow one's way out of recession?

From today's Wall Street Journal Asia.

While the U.S., Australia and Japan spray cash in every direction to "stimulate" their economies, New Zealand has a novel idea: Why not grow one's way out of recession?

Prime Minister John Key declared yesterday that "during this global downturn, we can work to improve the performance of our economy relative to other countries, and we can emerge better off." He then announced a package of regulatory reform and tax initiatives aimed at making it easier for companies to do business -- and keep Kiwis employed. While the total benefit, at NZ$480 million ($246 million) is small, the positive message it sends to business is much greater.

Mr. Key's tax measures include provisions to allow companies to retain their taxable income for longer periods, reduce penalties on underpayments (which helps companies with volatile revenue cycles, such as farming), and ease filing burdens. Wellington also simplified tax-deduction rules for business-related legal expenses and made it harder for small companies to be sued in certain courts. As with his last stimulus package, Mr. Key threw in a few populist sops such as setting up a government hotline for companies that want financial advice.

Still, the bulk of what Mr. Key is doing makes good sense. Since taking office in November he has already enacted a series of income-tax cuts and eased unfair dismissal laws. On Monday, his government announced plans to streamline the Resource Management Act, an environmental protection statue that has blocked or slowed business developments across the country.

Mr. Key said yesterday that he rejects "alarmist suggestions" on the economy and favors "making decisions in a disciplined way" that doesn't burden future generations of taxpayers. He added: "We need to be sure that the decisions we make now really hit the mark." He's off to a good start.