Dialogue: Plan A for a wealthier New Zealand

In the final part of a series asking why we aren't richer, SIMON CARLAW offers a plan to boost New Zealanders' real income and living standards.

We all know the problem. It's apparent in every news story about rationing in our public health system, every debate about the affordability of superannuation.

Our standard of living is declining relative to other countries. That means radiologists, nurses and young graduates leave to live elsewhere. It means a superannuation system built on borrowed money, thinner wallets and fewer prospects.

Business New Zealand says a plan is necessary to improve economic growth. It may not be the only plan - many actions are possible - but if the Government and people of New Zealand achieved the following 20 points, we would go a long way towards better economic, social and environmental outcomes.

The Changing Gear challenge

1. Make a plan for sustainable growth. This is the important one. If you haven't got a plan, you won't be able to carry it out.

2. Cut tax rates, especially the corporate rate. Businesses can't grow if the corporate rate is too high or if consumers are taxed so heavily they can't spend.

3. Get Government spending into proportion with the economy as a whole - otherwise you can't cut taxes. You don't have to take a slash and burn approach to Government spending, but you do need to keep it within a certain proportion of GDP: countries with good growth rates tend to keep Government spending below 30 per cent of GDP.

4. Reduce Government debt. High Government debt leads to high interest rates as the Government competes with the private sector for available funds. Also, high borrowing from overseas credit agencies leads to a downgraded credit rating and higher risk premiums, again leading to high interest rates. Economies don't grow well with high interest rates; getting Government debt below 15 per cent of GDP would help keep them down.

5. Consider a common currency with Australia. That doesn't mean political union with Australia; it simply means making it easier for 23 million people to buy our products instead of just 3 million.

6. Cut compliance costs. A country with less red tape will always be more competitive in the global marketplace - that's why agencies that measure countries' competitiveness, such as the World Economic Forum, focus on compliance costs. Getting a good WEF ranking would mean we've got our red tape under control.

7. Cut local government spending - rates go up as local governments spend more, and fall more heavily on businesses because of differential rating. Also, many councils use their rating power to fund business activities in competition with the private sector, hitting private enterprise.

8. Improve roading, especially where problems are holding back development.

9. Improve broadband access to the internet. Using the internet to facilitate trade makes great sense for a remote country like New Zealand.

10. Get free-trade agreements with as many partners as possible, but especially the US. The US has consistently bought more of our products over the years as its own economy has grown. A free-trade agreement with the US would mean better access for our important agricultural products to this market.

11. Get more private sector-funded research and development to help make up for public institutions' difficulties in translating research into commercial results.

12. Make sure our laws don't hold back innovation or the use of new technology - fixing the Hazardous Substances and New Organisms Act would be a good start.

13. Increase workforce skills by getting more people into industry training.

14. Improve workplace literacy - studies show 20 per cent of the workforce cannot read well enough to hold down a job.

15. Get a good base of literacy and numeracy in the workforce by ensuring all school leavers achieve at least NCEA Level 1 (includes literacy and numeracy standards). At present, 20 per cent leave school with no formal qualification and poor reading and number skills.

16. Get more on-the-job learning - this is the most direct way to increase the skills relevant to business growth.

17. Get fewer strikes and stoppages. The statistic of 10,000 person days lost in the year ended June 2001 is too high. It's time to ask whether the Employment Relations Act is actually encouraging stoppages.

18. Get more young workers, to balance our aging population. Increasing the number of young adult skilled immigrants would help balance the greying workforce.

19. Give businesses benchmarks to help them be competitive with those in other countries, using best-practice indicators.

20. Help more New Zealanders become entrepreneurs by promoting positive attitudes towards wealth creation and business success.

* Simon Carlaw is chief executive of Business New Zealand.