1. Raise OCR to 8%+.
2. Slash corporate and personal taxes to 10%.
3. Allow 100% tax write-offs for new company investments.
Reducing taxes will offset the costs of borrowing from having a high OCR. A high OCR will flood the country with money allowing lending and investment. Let's face it, there is no money to be made in stocks, property or bonds right now so cash deposits is the only possibility. The loss to exporters from the resultant high dollar is offset by reducing taxes to 10%. The loss to mortgage holders is offset by reducing tax to 10%. The import imbalance as a result of a high dollar will be a problem to an extent but the cheap imports will encourage consumer spending saving the retailers. Petrol will be cheap enabling cost savings for businesses.
There will not be a drop in government revenue. Lower taxes and a high OCR will actually bring about an increase in revenue. At the rate we are going now, there won’t be any corporate profits to tax anyway. 10% corporate tax of some profit is a whole lot better than 30% of nothing (that is not even taking into account the increase in personal income tax receipts from all the new jobs that companies will create). In the long run, profitable and growing companies will produce a lot more total revenue to the government than today’s 30% corporate tax rate.
Taxes can be increased when the economy turns around - in about 7-10 years.
With the jobs created by this, including government infrastructure spending, there will be a reduction in the welfare bill.
Japan had interest rates at zero for 12 years + and it didn’t work to revive its economy. It won’t work to revive ours as long as there is no confidence.