Productivity must improve, Key tells business

Photo/Mark Mitchell

Prime Minister John Key has set out the Government's main longer-term economic objectives and says reversing years of poor productivity growth is the most vital task ahead.

He told a business meeting in Wellington today New Zealand's productivity was growing much more slowly than most other countries and the tradeable sector - the main exporting industries - had effectively been in recession for five years.

"We like to think of ourselves as a trading nation, yet we export less as a percentage of GDP than many other small OECD countries," he said.

"That percentage has only grown slowly over the last 30 years. Over 90 per cent of our exports come from just under 5 per cent of exporters, and these exports are also very concentrated in a few sectors."

Key laid out six policy areas the Government was focused on: regulatory reform, investment in infrastructure, better public services, education and skills, innovation and business assistance, and a world-class tax system.

"The Government has a comprehensive plan, not just for managing through the current recession but also for improving the fundamentals of the New Zealand economy," he said.

"The six policy drivers I have outlined will help to create an environment that allows businesses to thrive."

Key said he was pushing his ministers to get as much done as they could, as quickly as they could, within those policy drivers.

He later told reporters the recession was "a temporary point in time" and outside of it there were structural and systemic economic issues to deal with.

"I'm going to focus on all the component parts that can make New Zealand more productive, a stronger exporting nation with higher wages," he said.

Key said Reserve Bank Governor Alan Bollard's comments yesterday about New Zealand coming out of the recession were in line with what he had been privately telling ministers.

"I think that tallies ... we're starting to come out of the recession which is good news," Key said.

Asked whether he thought the worst was over, Key replied: "It feels a bit like that from an international perspective but the Government has a huge task in front of it."

Business New Zealand chief executive Phil O'Reilly said the economic plan outlined by Key was "relevant and timely".

The business sector had wanted the Government to set out a framework that would provide certainty for those that wanted to get on with productive endeavours, he said.

"In particular, business wanted to see commitment to innovation and skills that are vital for lifting New Zealand's economic performance and it is positive to see that commitment made today," O'Reilly said."

- NZPA