Peter Davis: Sun's up, but what's over the horizon?

New Zealand is predicted to be in for a good year economically. Photo / Brett Phibbs

Today we present two views on how New Zealand can reach its economic and social potential.

Economic commentators are saying 2014 is going to be a "good year". Yet, this should not disguise the fact that in the half century since New Zealand last experienced such a peak year, the country has steadily slid down the OECD rankings to the bottom half, unlike Denmark - also an agricultural country - that has held its position.

Here are 10 steps to bringing New Zealand back to where it belongs.

1. A high New Zealand dollar rewards importers and punishes exporters. It also undermines our economic sovereignty since we sell assets to make up the difference. We need to set a target range - a dollar value that balances imports and exports in an average year - and adopt a policy of selling the dollar, talking it down, and applying a transaction tax or capital charge to purchases of the dollar.

2. We cannot support world-class hospitals and universities and a first-world standard of living by just increasing volumes of commodity exports rather than adding value. There are also social and environmental costs (for example, deaths in logging, Pike River, dirty rivers). Emblematic of this is the "Telecom problem" we have with Fonterra. A justifiable monopoly supporting the farmer producer infrastructure - the "fixed lines" (Chorus) - is blighting the responsiveness and international competitiveness of the consumer arm. We need a "Telecom solution" - a separation - freeing other New Zealand companies to compete on a more level field with Fonterra to add value to our milk production.

3. The Australian banks are finding the housing market very attractive, but are neglecting the needs of small businesses. We should empower Kiwibank to fill this role.

4. We have neglected our vocational education sector and are needlessly either going without or resorting to importing technically skilled people. Also, there is an under-served group of young people who would respond well in this area. On innovation, we could empower NZTE to partner with the universities and the research council or councils with shared equity in bankable enterprises.

5. As the Kaipara debacle shows, we have a local government infrastructure that is trying to do essential jobs for which it does not have the proper funding or skills base. A royal commission should consider our government infrastructure such that: our major cities follow the Auckland model; the country is divided into about a dozen hubbed local government entities (including health) with embedded local boards; and central government structures are reformed so that we have fewer ad hoc mergers and more strategic ones.

6. The child poverty debate highlights the danger of the crystallisation of a severely disadvantaged underclass in New Zealand. The Nordic countries have addressed this issue well beyond the usual trappings of the welfare state such as adequate housing and income support. The package includes, among other things, comprehensive early childcare and education, active labour mobilisation and skills strategies, and higher minimum wages.

7. Public services need to be made more responsive and accountable. I would advocate adapting the successful patient rights charter and commissioner from the health sector for all other public services (this could be done by extending the ombudsman role). Also, all such services need to report on performance, including the education sector.

8. Citizens find it hard to see the connection between their tax contributions and the survival of key services, which makes short-term tax-cutting easier. Where we can we should reaffirm the contributory principle, including superannuation and community health care (see below). The earthquake levy should be extended to all "acts of God" (flooding, slips) and be compulsory, as should be a parallel emergency services levy (fire, ambulance, police), and both could be part of the annual local government rates demand.

9. One of the big major future demands with an ageing society is superannuation. Only one other country in the OECD does NOT have a contributory superannuation scheme (Ireland). Besides compulsory KiwiSaver, we could consider giving people notional contributory accounts in the Super (Cullen) fund and designating the years 65-70 as a transition period where people are guaranteed a minimum income equal to National Super, whether they are in work or not, using in-work tax credits. A public default KiwiSaver fund would ensure that people have an option with low fees and high performance.

10. Aside from the US, we are one of the few advanced countries that does not provide comprehensive cover for family doctor and community health care. We should adopt the Australian Medicare approach - KiwiCare? - and provide free cover for most family doctor visits. We could do this by adapting the ACC levy system, splitting out the health component and adding in DHB contributions for the 10-15 per cent of hospital admissions that are preventable by good community care. The other aspect of ACC - income support - should be set up as a properly structured, free-standing public disability insurance scheme. Pharmac could also take on establishing competitive contracts in elective surgery. Finally, we need to return to a health promoting agenda, and industries such as alcohol should start contributing more towards the social costs they cause.

In the wake of a summer break it is tempting to bank our future on the "good year" that may well be coming our way, and forget the long-term trajectory for our country. This we cannot afford to do, unless we want to be just a quaint tourist attraction in the South Pacific.

This is a revised version of a talk given to the Auckland branch of the New Zealand Fabian Society. Peter Davis is a long-time member of the Fabian Society.