Steven Joyce: NZ must keep moving forward to become 'Pacific Tiger'

The Christchurch rebuild is providing us only with a long-awaited upside after the earthquakes held back our economy in 2011 and 2012. Photo / Geoff Sloan

Opinion

The economic omens for New Zealand this year are good. We start the year with business confidence at levels not seen for 15 years, while consumer confidence is at its most positive in seven years.

We have already spent most of last year in the unaccustomed position of growing at a faster rate than most developed countries, including Australia. The top independent world economic brains in the OECD and IMF expect us to continue to outstrip most developed countries in the next couple of years.

At last, we have the potential to make a serious move up that fabled OECD ladder. Net migration to Australia has also dropped sharply. At around 1000 a month, it's about a quarter of what it was, and close to its lowest point over the past decade.

There are risks - the world remains in economically uncharted waters. However, if we remain cautious and conservative in our approach, we should do better than most.

And, of course, one or two good years do not change the fortunes of a country. We need many years of higher growth to provide better opportunities for Kiwis and their families.

Many people offer only two reasons for our change in fortune: the dairy trade, particularly with China; and the Christchurch rebuild. Both are contributing factors, but they are nothing like the whole story.

The Christchurch rebuild is providing us only with a long-awaited upside after the earthquakes held back our economy in 2011 and 2012, with particularly damaging impacts in tourism and international education.

Our trade with China is growing rapidly and that's a big positive. New Zealand would have been a much quieter place without China's demand for our goods and services over the past few years. But it's worth noting our dairy trade with the world is only around 20 per cent of our total exports of goods and services and only a quarter of that goes to China.

What's most encouraging is that a range of our companies across a number of industries are successfully selling their goods and services around the world, despite tough economic times.

In industries like ICT, high-tech and medium high-tech manufacturing, engineering services, tourism, international education, wine and other food and beverages, New Zealand firms have got leaner and more savvy in the past few years and all that work is starting to pay off.

The big thing driving the success of our entrepreneurs is their commitment to innovation; to developing products that allow them to demand a premium price in world markets. It's that which determines their long-term success.

But that's not the whole story of New Zealand's economic revival. We have been steadily removing the roadblocks that discourage investment in New Zealand by new companies. A lot of work has been done and laws have been changed to ensure New Zealand is more welcoming of new investment while protecting against the risks. You need constant new investment to replace some of the old industries that become obsolete as a result of revolutionary technologies such as the internet.

So how do we keep growth happening? How do we lift New Zealand's longer term growth rate so that we add more jobs, reach our potential, and become a true "Pacific Tiger" rather than just a short-term success story? I think there are several key things:

1. Keep opening our markets and building strong people to people relationships. The lesson of the China FTA is obvious. If we can get a good TPP deal, then we should grab it - along with other FTA and trade opportunities.

2. Innovate, innovate and innovate. The National-led Government is putting a lot of taxpayers' money into assisting firms and their ideas. As a country we are starting to see the power of innovation in our industries but we need to keep lifting private sector investment in research and development to international norms.

3. Keep building the skills of a successful and innovative trading nation. Encourage more of our young people into the careers that breed innovation, like engineering, ICT, and science.

4. Encourage more capital to invest in New Zealand. The mixed ownership programme has helped set up a stellar year for our stock exchange. We need to build on that. Capital investment in competitive industries creates sustainable jobs.

5. We need to keep removing red tape and provide certainty to investors, especially in resource industries. That means making decisions quickly and effectively, while also working to improve environmental outcomes.

6. We need to keep building infrastructure to support a growth-oriented country. Great progress has been made in electricity transmission and ultra-fast broadband. Those projects need to be finished. And we need to keep investing in our transport systems for safety and efficiency. That means high-quality four-lane roads in and out of our main centres, resilient highways elsewhere, and quality public transport that people want to use.

Finally - and above all - we need to make responsible fiscal and economic decisions that keep the tax burden low and pay off debt. We need to keep rewarding New Zealanders with efficient public services and lower income taxes than elsewhere. It's talented, hard-working Kiwis who get out of bed every day that make all this happen. Kiwis strive and succeed because they see the benefits of their hard work. If politicians keep remembering that then New Zealand will truly become a Pacific Tiger.

Steven Joyce is Economic Development Minister.

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