Growth key to turning slide into a ladder, says CHH chief

* In the second of a series of Business Herald interviews, Carter Holt Harvey chief executive Chris Liddell gives his ideas on reversing New Zealand's drop in the international economic rankings.

What will it take for New Zealand to climb back up the OECD wealth ladder? A lot, says Carter Holt Harvey chief executive Chris Liddell.

We'll have to change "pretty much everything".

But Liddell has no doubt it will have to happen if New Zealanders want to preserve their quality of life.

"Growth pays for all the other things we want," he says.

"Growth is what will allow us to have first-class education systems, first-class hospital systems, first-class living standards, good environmental standards. So it's absolutely fundamental to what we want this country to be."

The crucial first step to achieving that, as far as he is concerned, is to make everyone aware of that need for growth.

"I think we've come a reasonable way in the last couple of years in terms of raising awareness. But it's not broad-based.



"Too many New Zealanders still don't recognise that strong growth is fundamental to our future."

Unless that happens then, in Liddell's view, New Zealand is condemned to slide further down the OECD rankings.

"In my view we need to aim for more than 4 per cent growth sustainably, and to do that we have to have approaches that are significantly more ambitious."

Liddell likes to work through his plan for the economy in much the same way as he has gone about reshaping Carter Holt Harvey, starting with revenue, moving on to costs, and then working through to innovation and differentiation.

On the revenue side, he says, New Zealand's growth will have to come from increasing export sales.



"So free-trade agreements with key economies like the US, China and Asia are essential."

The Government is moving in the right direction in the trade area, he says, "but we need to do it faster, more aggressively and with more resources".

On the cost side - the cost of doing business in New Zealand - Liddell sees the potential for huge advances.

"We've still got an electricity market that's dysfunctional from an industry point of view.

"We get price spikes, we get gaming of prices, we get all sorts of distorted behaviour which make life for producers such as CHH a nightmare and distort investment away from New Zealand. That's got to be fixed."

Then there's the transport problems, particularly in the light of the wall of wood about to come out of the country's forests.

"The privatisation of NZ Rail has not been a particularly great success from an industrial customer's point of view," says Liddell.

"We've also got a massive roading problem because councils have not invested the money taken out in rates, road-user charges and petrol taxes, in roads.

A huge amount of timber is about to harvested, he says, and New Zealand has no efficient way to get it to processing plants or ports.

The labour market is another area Liddell wants to see sorted out.

"The nature of work is changing fast. We should be deregulating the labour market, improving flexibility and opening up options for everyone, not regulating even further and trying to cling to the past."

Then there is the business catchcry of compliance costs.

"Regardless of the rhetoric, they're too high and very little is being done about it. That's not just an issue for big business, it's even more of a problem for small business.

"I appreciate that the Government only has enough resource and time to do certain things.

"But if they prioritised getting down compliance costs, instead of committing huge time and effort to the ... Kyoto Protocol, we would achieve real change."

Like many in business Liddell singles out the Resource Management Act as a particular problem.

"There's been a lot of rhetoric about making RMA more workable, but not really much happening. Yet it's a huge impediment to growth, and a huge impediment to foreign direct investment."

But he is less excited about taxes.

"It's part of the package. It's a cost, just as electricity is a cost, but it is only a part."

Overall, Liddell says, the Government should "attack everything of a wasteful nature that's costly to business. Individually some of these compliance costs may not look like much, but together they make doing business in New Zealand - including attracting foreign investment in our forest processing industry - very hard and potentially too hard."

Having sorted out the cost base, Liddell says, New Zealand must add value.

"That means accelerating action on the concepts of innovation and differentiation and getting past the talking stage.

"Innovation needs to prosper at every level, not just in new products and services, but with new approaches to capital markets, new ways of creating businesses, new forms of capital funding, new forms of organisational design and new ways of attracting highly talented people to our country.

"The Budget talked a lot about innovation and it sounded good, but when you saw the numbers beside it, they're minuscule.

"We're heading in the right direction - things like R&D, skills training, the education system, setting up entrepreneurial programmes, supporting the new business school in Auckland are all the right things to do. We just need to put some significant policy effort and resource into them."

Similarly, Liddell believes the Government is on the right track on foreign direct investment but once again the money allocated is not enough.

"If we want to get serious about it, we have to invest serious resources. But once again, we've got the decimal point in the wrong place."



Liddell acknowledges that some of his ideas would require extra spending, but says the key issue is the quality of what we are already spending.

" I'm not convinced we've got the balance right between spending for the present and spending for the future.

"If we have sound policies and reallocate resources in areas which will boost the economy, there will be more jobs, more wealth and less need for welfare, more people paying taxes, and we get into a virtuous circle.

"If we can break free of our self-imposed restraints there is no reason why we can't build the best country in the world."

* Tomorrow: The Warehouse chief executive Greg Muir says New Zealanders have lost the drive to be the best in the world ... in rugby as well as in business.

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