KEY POINTS:
NZX chief executive Mark Weldon is so focused on pulling New Zealand out of the mire that he suggests making competition an "organising idea" around which all future Government policy decisions are made.
After nine years of Labour-led Government sloganeering on "growth and innovation" frameworks, "economic transformation" and, latterly, "sustainability" (while New Zealand's position on the prime OECD indicators remains stalled), the notion that politicians might actually get serious and filter policies through a competitive lens is refreshing.
Not before time is the stance of chief executives responding to the Mood of the Boardroom survey - fully 90 per cent are concerned about New Zealand's international competitiveness.
It is an issue which is demanding increasing attention from the "big end of town" and also small-to-medium sized enterprises which have suffered through a severe skills shortage.
"Wages and salaries have become uncompetitive with other countries and fuelled migration," says ASB Bank managing director Hugh Burrett. Burrett wants a comprehensive approach that tackles competitive issues across a wide front with productivity increases foremost.
ABN Amro chief executive Simon Allen, who has observed acute pressure going on New Zealand firms as the international financial crisis deepened, maintains tax is a "competitive tool we should be using more".
Allen has seen how transnational firms shift investment around the globe as they respond to tax incentives and highly skilled people move to where they will "earn more and pay less".
There is huge appetite among the chief executives for New Zealand to adopt a visible "New Zealand first policy", and, aggressively seek to attract and retain capital and labour. Seventy-three per cent of chief executives believed New Zealand should examine the successful models adopted by other small nations like Singapore and Ireland to competitively position themselves against much bigger countries.
This approach is anathema to Labour's leadership.
But while National leader John Key has stipulated his ambition is for corporate and personal taxes to be lowered over time, he no longer promulgates - publicly - a desire to attract major greenfields investment to New Zealand through offering foreign investors preferential company rates.
"This is critical. We have to be more aggressive and not get caught up in being too philosophically nice," said Vector boss Simon Mackenzie.
"Playing fairly is a blindingly stupid idea. No successful country plays fairly. Seek out your advantages and leverage it strongly ," stressed a major distributor.
The critical message from the chief executives is to get cracking.
"We need a new mindset and to start aggressively competing with all the tools we have, instead of our nice and harmless 'Shetland Pony' approach," said Weldon.
NZ Institute chief executive David Skilling - who together with Weldon has jointly issued a suite of growth-oriented proposals under the heading "Swan Dive or Belly Flop" - is enthusiastic about the pragmatic ideas it has provoked.
"New Zealand can't simply rely on a level playing field," says Skilling.
Among proposals the pair want the next Government to consider is using the NZ Super Fund as a source of capital to drive domestic investment. National has said it wants 40 per cent of the fund invested locally. But Labour does not want to put future retirement savings at risk by diversifying too much investment in New Zealand's direction. Irrespective of which party gets to form the next Government, the issue will inevitably be centre-stage if the credit crunch exacerbates to the point where accessing investment capital dramatically worsens.
Neither major political party is prepared to grapple head-on with the opportunities that privatisation would present to the fund and domestic oriented investors.
Deloitte chief executive Murray Jack urged a rethink of government asset ownership policy to match how it fits with other objectives like growing productivity, deepening New Zealand's capital markets and encouraging savings. "There are good alternate models and it's time we, as a country, started debating them instead of being labelled some form of pariah if you mention the `P' word."
One investment banker said: "Both major parties have taken the stance against further sales, at least in the short term. However, as a minimum, these assets should be pushed further away from Government. They form a very large component of the economy and there is too much potential for them to act as a drag on the economy."
Many chief executives supported partial privatisations of state companies like TVNZ, power generators, NZ Post and Kiwibank - a move that would provide relatively safe investments for private investors but still leave the Government in the control. But KiwiRail was seen in the too-hard basket because of its ongoing losses. And an oil firm boss decried the privatisation push: "They perform well. We don't have a balance sheet crisis. The capital gained would mean little."
But many felt that subjecting state-owned companies to greater performance monitoring would increase the international competitive drive.
At a counter-intuitive level, ANZ National bank director Don Brash suggested New Zealand could make a good start by "stopping taking measures which actively reduce competitiveness".
It is an approach that finds favour with a major exporter. "This is a serious issue. New Zealand officials are sometimes more interested in promoting world welfare than New Zealand welfare. We should aim to get the most benefit for New Zealand from multilateral agreements and promote New Zealand as a source of high quality food and world-class tourism experiences."
Underlying their concerns is a fear that if New Zealand does not "step up to the plate", it will drift further towards becoming a branch economy. "We need decisions about capital, labour and expansion to be determined where the impact is felt. "If New Zealand is a branch economy then business will be deemed to be a less important player in the political decision-making process," - creative firm.
If company headquarters go, so do intellectual property, decision-making, skills and support services.
Barfoot & Thompson director Peter Thompson has observed the increased number of corporate transfers as Kiwis sell up and move - particularly to Australia.
New Zealand not merely a training ground for Aussie
Simpson Grierson executive chairman Rob Fisher is concerned at the loss of skilled New Zealanders offshore. As a major law firm boss, Fisher is used to young lawyers departing to "do their OE". But the talent is not coming back so often when it's time to settle down and have families.
Australia is a clear winner - the first port of call for many departing New Zealanders.
But Fisher suggests that while better tax rates are part of Australia's attraction, it would be naive to believe that is the only factor. "We should do exit interviews to find out what are the real issues making New Zealanders leave - then try to find solutions."
He believes New Zealand can compete against Australia: "We used to. With greater specialisation, more value and less tax we will incentivise greater productivity."
Fisher's stance is supported by 64 per cent of CEOs surveyed. "Australia is even more bogged down in bureaucracy than New Zealand. The only thing going for it is minerals," says one food manufacturer.
"Realistically we have to focus on our niches such as agriculture. We have water as a resource. There is no way we can compete in an industry such as mining," says a power firm boss.
The drive towards a transtasman single economic market is generally supported.
But chief executives caution it is not an economic panacea, saying that in the scale of the world's opportunities it is a "red herring" ... "together we are only 25 million" ..." looks good on the surface but a strong anti-Australia sentiment stops it going further."
"Look at the size of our sharemarket and the number of New Zealand-owned companies, I think the answer is [to have] one economy like the European Union. It's called globalisation and may assist us in getting wages, salaries and immigration right," said a luxury car firm boss.
The chief executives do not believe New Zealand should look to Australia for economic assistance. "However, they have happily been mining New Zealand for talent for years and will continue to," said an investment banker.
In reality, if New Zealand doesn't get its act together Australia will to continue to mine this country for skilled labour. "They have certainly been actively recruiting here, especially for talented people who can be employed in their infrastructure investment at much higher pay rates. It's not too hard for them though," says EMA Northern's Alasdair Thompson. Others note Australia also faces a major talent drain.
"Would they become a state of New Zealand? No. Keep us as two countries but work closer together," says Peter Thompson.
"With a better integration of regulatory and tax markets New Zealand would effectively become a state for all purposes other than politically," said another business leader.
Despite New Zealand's deteriorated performance (ranking lower than Tasmania on many economic metrics) there is little appetite to join the Australian Federation.
