By Yoke Har Lee
The Government plans to use the Budget on May 20 to address some of the shortcomings in its industry policy.
It has also conceded that a rethink might be needed for the $600 million now spent on research through the Public Good Science Fund.
The Minister for Enterprise and Commerce, Max Bradford, told an export conference in Auckland yesterday that the Government was working on a new business policy.
Elements to support that would be found in the Budget, he said.
The Government was also reviewing how it spent $2.2 billion a year on tertiary education.
Mr Bradford said the Government spent $600 million a year on research and development "but are we spending it in the right strategic area?"
"The strategic direction of our overall public research spending is being tested through the Foresight Project," Mr Bradford told the conference, organised by the Manufacturers Federation and the Business Herald.
The Foresight Project seeks input from firms and industry leaders on the direction New Zealand should head in business.
The Government's reforms were insufficient to cope with the changes in the economy, said Mr Bradford, pointing to the worrying fact that too much of the economy was built around traditional products which were commodity-based and low-tech in nature.
For decades, New Zealand had worked on providing a soft landing for the fall in the price of its commodity exports.
"We cannot stay on this path alone. Efficiency gains are limited, at least until technology finds new production functions. What we need to do is to grow the size of the cake rather than cut the ingredients."
The private sector also came under scrutiny from Mr Bradford, who pointed to a lack of business commitment to funding research.
He challenged the federation to re-examine its role. He suggested it should perhaps focus on building partnerships between research institutions and companies, build clusters of related businesses and champion a knowledge-based economy.
Labour's industrial policy spokesman, Pete Hodgson, said the Government's non-intervention policy in economic development was dysfunctional and outdated.
Every country in the Western world had some form of government involvement in industrial development, he said.
"We are the only nation in the Western world not doing that. We are the freaks of the Western world."
The role envisioned by a Labour government was not the heavy interventionist one of the 1970s.
"Labour asserts that there is a role for government in industrial development in being a facilitator, a broker, a procurer and occasionally a funder," Mr Hodgson said.
But a proper industrial development policy would be coherent only if it integrated other policies such as science and technology, immigration, tertiary education and research and development.
He also criticised the Government for failing to check what he called a misdirection of the Public Good Science Fund, which had not caught up with the fact that New Zealand's future was no longer vested solely in the primary production sectors.
But he was against making dramatic changes to the science policy, saying that would ruin intellectual capital. "You must change it [the science policy] but at the moment, the rate of change is too slow."
Govt hints at rethink on research spending
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