Don Brash's 2025 Taskforce made a range of recommendations about how our economy could catch up with Australia.
Its ideas, which included slashing Government spending met with widespread condemnation.
Rick Boven: director at New Zealand Institute, is one of a range of New Zealanders approached by nzherald.co.nz to share their thoughts on how we can shorten the gap.
Rick Boven: Director, New Zealand Institute:
The 2025 Taskforce recommendations emphasise removing impediments to economic growth and then relying on the market to produce growth. What New Zealand really needs is action to lift the productivity of existing businesses and grow new businesses with high value jobs.
Contrary to the Taskforce claim, other countries routinely tilt the playing field to assist their businesses, and New Zealand should do so too.
Innovation directly lifts competitiveness and productivity. It provides higher profits by increasing the value of goods and services so they command higher prices or larger volumes, and by lowering costs.
Contrary to the Taskforce's scepticism, the evidence that innovation drives the success of advanced economies has convinced the leaders of most advanced countries to introduce policies to promote innovation.
As a small trading nation, with a large current account deficit and low stocks of domestic capital, the economic development emphasis should be on growing exports and international businesses owned in New Zealand.
Governments can identify sectors of the economy that have worthwhile prospects and ensure the conditions are right for businesses in those sectors to succeed.
The most important opportunities to lift innovation and productivity are:
(1) New Zealand invests much less than Australia and the OECD average in plant equipment and technology. Lower productivity is an important consequence of this lower investment. Saving more and shifting tax incentives to encourage productive investment and individual effort should be priorities for lifting investment.
(2) International business success is difficult to achieve and New Zealand is handicapped by small size, distance from markets, and low capital availability. Our management capability and performance is not up to world-class standard yet. Intense effort to grow business leadership and international marketing skills is a precondition for establishing a strong export growth trajectory.
(3) A relatively large portion of our economy is made up of small, inefficient, domestically focussed service businesses. The owners of many of these businesses will retire soon and there are insufficient successors in the next generation. Many of these businesses should be aggregated and made more efficient, with the capital and talent freed up being redeployed into innovative businesses with export growth potential.
Closing these gaps will lift the performance of all sectors of the economy, not just the technology sector.
This strategy is different from the one proposed by the 2025 Taskforce. My proposal is that a more productive economy will have more investment, stronger business skills and a different industry mix. The main challenge is not how to remove impediments to growth but rather how to establish policies to accomplish the structural changes required.
To mobilise New Zealanders to work together to lift productivity our leaders must establish a much stronger sense of common purpose - a national consensus that binds together the interests of businesses with those of ordinary people, and reconciles trade-offs between economic growth and environmental costs.
Otherwise New Zealand will continue the ideologically-fuelled conflicts that make it so difficult for Government to get a mandate to act.
