OCED's dose of cold, harsh truths should not be ignored

Apart from having a ladder which New Zealand has been sliding down for the last quarter century or so, what do we know about the OECD?

Who are they? What do they do? And why do they think we're doomed unless we sign up to a raft of economic reforms that only Act would touch with a barge pole?

The Organisation for Economic Co-operation and Development was established in Paris in 1961 as a kind of independent international research agency and think tank.

It is funded by its 30 member countries, including New Zealand, which joined in 1973.

Officially it doesn't have a political bias other than that its members have all signed up to principles of democracy and a free market. So its members are not just the richest nations.

China, Russia and the Arab states aren't in there. But countries like Poland and Slovakia are.

Just as well too, or our slide down the "GDP per Capita" ladder would look even worse. We were eighth in 1973 and 23rd in 2007 (the last time a full set of GDP figures was published).

The OECD's economics unit produces a comprehensive survey of each member country every two years.

The information the OECD crunches to reach its conclusions is no different from the data used by other economists and bureaucrats.

But what they do have is access to detailed understanding of how one country is shaping up against its peers.

Thus we get the 150 pages of doom and gloom they whacked us with on Thursday afternoon.

Should we care what they think? Well, yes. Whatever you make of their forecasts and hard-nosed remedies, their report reminds us of some cold hard truths:

"New Zealand has one of the OECD's highest levels of foreign debt, the result of sustained and sometimes large current account deficits that reflect a long period of unbalanced growth and structural deficiencies, notably a small pool of household savings and a low rate of productivity growth."

It's bad enough that this is what international bankers - who control our lines of credit - will be reading.

What's worse is that it is true.

It is a real problem that we are all going to have to deal with - despite it being politically unpalatable to both Labour and National.

In 2005 New Zealand got a pretty good write-up from the OECD. It was noted that we were back on an upward path of GDP growth and the "country's prospects are bright".

By 2007 the tone was starting to darken. The report noted that little progress had been made towards lifting living standards and warned that we were in the grip of a housing bubble.

Now we've been told we are in really lousy shape.

We can't afford to spend our way out of recession so we will need to radically reform our economy or face a long, slow and uncertain road to recovery.

The OECD is prescribing asset sales and tax reform for New Zealand - good old-fashioned new- right solutions.

This is stuff that the National Government is still shy of talking about publicly. Not selling off infrastructure is something that seems to have become enshrined in the national consciousness - like being nuclear-free. But if we can't do something to resolve our current account deficit soon, then we may leave our children with no choices.

New Zealand is headed for the dangerous territory of the 1980s when we suddenly realised that there were state assets we could no longer afford to publicly own. Surely it would make more sense to look again at ideas like partial privatisation of SOEs while we still have the option of retaining control.

We need to at least start talking about big picture solutions that can transform an economy.

Otherwise, if we are still serious about getting to the top half of the OECD ladder, we'd better start lobbying for some new members.

Including the likes of Bulgaria, Albania, Uzbekistan and Bolivia could do wonders for our ranking.

Liam Dann