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It should come as no surprise that our country is greatly dependent on innovation through research and development to improve the standard of living for Kiwi families. 

We need a business enabling environment so that our economy and the country can be in a position to reap the benefits that the constantly evolving world of technology and innovation has to offer.

But it becomes increasingly difficult to be in that position when the Government creates an environment of uncertainty for businesses. This gets in the way of New Zealand's innovators putting New Zealand on the leading edge of research and development (R&D), and Innovation.

In the last 20 months, the Government has announced it is getting rid of growth grants which help fund business spending on R&D, and it is reviewing the R&D tax loss credit policy which helps businesses in a tax loss situation spend on R&D.

In a desperate attempt to look like it is the fresh face of New Zealand, the Government has re-introduced its 12-year-old R&D tax credit policy. It claims this policy will help lift economy-wide R&D spending to 2 per cent of GDP in 10 years. 

But the Treasury has said that to reach this target, the Government should be investing about $150 million every year, depending on the private sector spending increases. Yet Budget 2019 has failed to deliver on this.

But as this target also relies on contributions from the private sector, the overall approach towards increasing R&D becomes even more disjointed with the current state of declining business confidence. 

Business confidence plays an important role in the decision to invest in R&D, particularly given investment in R&D is generally quite risky. 

Business confidence has plummeted to the lowest it has been in 10 years, the same as the depths of the global financial crisis. The New Zealand Institute of Economic Research suggests GDP growth could fall below 2 per cent by the end of the year, down from the 3 to 4 per cent growth under the previous National government.

Businesses are simply crippled with higher costs and more uncertainty due to this Government's poor policy decision making. We've seen more than 250 working groups, a capital gains tax on the table for 18 months, the oil and gas ban and uncertainty over immigration policy settings.

Why would any business be willing to put its neck on the line and invest in R&D when the Government is doing nothing to encourage it?

When the Labour Party campaigned on increasing spending on R&D to 2 per cent of GDP, they assumed they would be able to support GDP growth at the rate that was under the previous government.

But it's clear the Government can't sustain this GDP growth, which makes its promise to increase economy-wide spending on R&D ring hollow.

The Government doesn't seem to appreciate that wealth through productivity growth is created by businesses and that uncertainty is the enemy of investment.

The Government's overall approach of higher costs to businesses and more uncertainty over Government policy has caused a sharp drop in business confidence at a time when we need to be forging ahead. 

The R&D sector is critical to New Zealand, it has a major role in building the economic and social capital for our society. Putting these businesses in a disadvantaged position puts New Zealand in a disadvantaged position.

You can find the article online at Stuff here

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