Graeme Harrison: Clever use of natural resources key to our future

Opinion

The latest productivity statistics should come as a timely reminder of why New Zealand needs to do better in terms of growing the economy.

While many New Zealanders are working harder than ever, the statistics tell a shocking story, showing a 0.5 per cent drop in labour productivity and an even worse 3.1 per cent drop in capital productivity over the 2006-09 period.

That means the value produced per hour worked fell.

We need to run faster just to stay where we are now, much less catch up with Australia.

But there is a brighter side.

With the worst of the recession behind us, now is the time for some bold initiatives.

The Prime Minister's recent statement to Parliament contained important new ideas which received fairly short shrift even from the serious commentators.

I'm not talking about the proposed tax changes - we need those mostly to improve the climate for investment but they do not of themselves create value. I'm talking about those sectors which have been identified for expansion, particularly sustainable agriculture, forestry, aquaculture, energy and, yes, mining.

Whereas for much of my lifetime, New Zealand's productive sectors have experienced poor terms of trade, things are changing. Within one generation (25 years) world GDP is expected to increase by as much again as it did in the past 200 generations.

The world's population is set to grow by one third. Many in the developing world aspire to attain within their lifetimes the standard of living we in the developed world enjoy today. This cannot occur if the global supply of most resources, especially food, does not increase sharply.

Almost all global natural resources are becoming increasingly scarce.

New Zealand's natural resources are among the world's richest and the dominant component of those resources - agriculture - is perpetually renewable. We are sitting on a unique opportunity to achieve a huge and permanent economic step change through a major increase in exports.

Unfortunately there are few signs our political and business leaders, much less New Zealanders in general, are ready to seize this challenge. The Prime Minister has signalled some promising new areas for further work but no sooner did he do so than a range of groups sought to stifle debate before it even began.

The room for much-needed political bipartisanship also seems strictly limited. It is ironic indeed that at a time when New Zealanders are leaving in droves for greener pastures in Australia and when the Government is forced to address welfare dependency and reduce some entitlements, there have been voices raised in protest about activities which could, if sensibly managed, contribute dramatically the funds needed to improve social outcomes.

Somehow the link between growing the economy and funding a world-class health and education system never gets made. Preserving snails becomes more important than hip replacements.

But the problem is not just a lack of vision. Change will not occur simply by balancing the books. We need fewer lawyers and accountants and more entrepreneurs.

Our challenge is not just to make New Zealand a better place to invest. We need to build the commercial partnerships and structures that can turn opportunities into value and profit. The Government has a big role to play as a motivator and co-investor but these new ventures need to be driven by business.

There are a range of specific opportunities. Irrigating more land, particularly in Canterbury but also other regions, would have a dramatic input on farm productivity, enough to measurably improve our national standard of living - and permanently. The Government is right to be pursuing this as a high priority.

At a time when New Zealand faces a big climate change bill, taking steps to increase forest planting on marginal land is a no-brainer.

New Zealand's coastline may be suitable in places for aquaculture development.

We need to focus on what can be done to make this happen.

And lastly minerals and energy. Can we not have a rational debate about the need to balance the environmental and economic goals? And can we look at how much our living standards would be improved by using those natural resources that can be more easily accessed with minimal environmental impact?

The future is up to us. No one owes New Zealand a living - not even the readers of the Economist that recently took issue with the Government's tentative announcements on mining.

New Zealand is unique. No other country has our level of development and our society's aspirations with such a small population and so far from major markets.

As the productivity statistics show, we have to run faster just to stay where we are now. But the opportunities open to us are also unique. For once, history is on our side. We can achieve a huge and permanent economic step change by acting boldly on a set of substantial opportunities if we have the collective will to do so.

* Graeme Harrison is chairman of the New Zealand International Business Forum.