Ross Wilson: Discord shrouds economic gains

Last year was a great year for New Zealand. The strongest economic growth in the OECD, the lowest unemployment in decades, superb sporting achievements, unprecedented success in film and music and a Hui Taumata signalling a Maori economic renaissance to match the cultural one.

We are a great country with a great future; but only if we continue to take up the challenges positively. This means the constant negative refrain from business is unhelpful and damaging to our national morale and economy.

Despite the World Bank saying for the second year in a row that New Zealand is the best place in the OECD for "ease of doing business", firms complain about compliance costs.

Despite the Bank of New Zealand acknowledging that "New Zealand's corporate sector has been on an incredible roll in recent years", business lobbyists complain about profit margins being squeezed.

If the past five years of economic growth, low unemployment, strong fiscal surpluses, sharply reducing Government debt and robust company profits had been under a National Government, business leaders would be hailing a golden era.

It is worrying that, at the first hint of a slowing economy to perhaps an annual rate of slightly above 2 per cent, rather than the 3 per cent or 4 per cent, we get such pessimism from business leaders. They could be taken more seriously if they had not been so pessimistic over the past five years.

Sure, things are going to get harder and there are real issues such as the high dollar hurting sectors of the business sector. Profit levels are likely to drop and Treasury advocacy for another dose of Rogernomics hasn't helped sentiment.

But it is rarely acknowledged that workers are also investors - they invest their time, their energy, their skills, their effort and application.

They take risks also. They face transaction costs. They have career plans and ideas on how they can develop as individuals.

So we are all in this together and we need greater acceptance from business that developing a nation involves more than just addressing the narrow priorities of business.

The successful country models such as Ireland and Finland show that the systematic involvement of business and unions at national, industry and enterprise level can yield the best results in terms of long-term economic and social reforms, balancing flexibility with security, enhancing competitiveness and the quality of employment, and promoting economic and social security.

Recent New Zealand Institute analysis shows the alarming evidence that, unlike those fast-growing small countries, our share of world trade and foreign direct investment is falling.

It appears that while we are achieving success globally as a sporting nation, our business performance in global markets has really fallen off.

Exports account for only 29 per cent of GDP compared with an OECD average of 54 per cent and countries like Ireland, with a similar population, closer to 80 per cent.

New Zealand exports grew at an average annual rate of 7.8 per cent between 1971 and 2000 compared with world trade at 9.5 per cent. If our exports had grown as fast as world trade they would be 66 per cent bigger today, according to the institute's calculations.

Similarly, our foreign direct investment as a percentage of GDP has dropped during the past 15 years, while all other developed countries have increased.

It should be of real concern that we are the only OECD country on these measures to have gone backwards over the past two decades.

The evidence from the institute report is once again saying clearly that we need to urgently review what products and services we are producing, and how we are doing it. We need to reorient our small country to exporting higher value and more sophisticated goods and services to global markets.

There is no doubt we can do that. In fact, many companies already are and Government policies and strategies are directed at how we do that more effectively. But we need to ensure that this becomes a national debate.

A national strategy like this can't be achieved unless we take everybody along with us. And the positive point is that we all have something to gain out of a strategy that moves our economy up the value chain. We are never going to win on cheap labour costs. But like our national sporting achievers, we can win on high-skill, high-performance and a high-value strategy.

So my New Year wish is that we stop moaning about the perceived problems and barriers to success and get down to talking about a national strategy which will restore our place, alongside those other successful small countries such as Ireland and Finland, as a modern, high-performing egalitarian economy.

Government, business and union leaders all have a responsibility to make sure that this happens in 2006.

* Ross Wilson is chief executive of the Council of Trade Unions.