Success culture key to growth says Fonterra chief

By JIM EAGLES

New Zealand must develop a success-oriented society where bright, innovative people want to go into business, are willing to take calculated risks and are encouraged to make money, argues Fonterra chief executive Craig Norgate.

Otherwise, says the head of New Zealand's largest company, our standard of living will slip further behind countries such as Australia.

A powerfully built man who speaks with a quiet intensity, Norgate is passionate about making commercial success desirable.

"What do the brightest university students in California want to do when they leave? Start a business. What do our brightest graduates want to do? Go overseas.

"There's a lot of work to be done to achieve the attitudinal change that is necessary."

The first step in that process, Norgate says, is to create greater awareness of the implications of our relatively slow economic growth in recent years.

"We are fairly isolated here, and life is still comfortable, so we don't notice what is happening, what is creeping up on us as a country.

"But you only have to look across the Tasman to see that the difference in incomes between Australia and New Zealand has widened dramatically in the past decade.

"Ultimately, unless we start growing faster than Australia, we are going to fall further behind and that will affect not just incomes but our ability to afford the same social services and environmental standards."

Norgate says the present strife in the education system provides a perfect illustration of the problem.

"The teachers point out they are paid less than their counterparts overseas - and they are - but then that is true of almost every other occupation.

"Sure they deserve more - and so do people in the health sector - but at the end of the day somebody's got to produce the wealth to pay for that.

"Unless the productive sector is growing faster than other nations, there's no way we can afford to pay the people who provide these really important services.

"We simply can't expect to enjoy a first-world education system on a third-world income." If New Zealanders were more aware of the extent to which the country was slipping backwards, the way countries we previously thought were underdeveloped were passing us in terms of per capita income, Norgate believes they would be more willing to embrace the necessary changes.

"I can understand that people may have a fear of change, given the way some of the changes were handled 15 years ago, but the reality is that unless we change faster we are going to fall further behind, and a few years down the track we will have a crisis when people wake up and realise that we can't afford the sort of services that other nations have."

One attitude that needs to change immediately, he says, is the tall-poppy syndrome.

"We should plan for success and invest in it and celebrate it."

As part of that process, he says, we also have to accept that success in business sometimes requires taking risks and sometimes risks end in failure.

"At present if somebody takes a risk in business and makes an honest failure the consequences are very draconian both in terms of what happens to them in the legal system and what happens to them publicly as well."

New Zealand has also got to be more prepared to reward success, says Norgate, and that inevitably means looking at the tax system.

"I know some people deny that tax rates make a difference ... but of course they make a difference," he says.

"The problem you have when you stand up and say we've got to make tax conditions easier is that it introduces the rich-getting-richer connotation. It's seen as taking money off the health system or the education system. It's not seen as an investment.

"It's not an issue I waste much time on because it's never going to be a popular policy until we've first got people understanding that growth is absolutely necessary for all those things they want - and that making it impossible for people to get started, or unattractive to take risks, or unrewarding to succeed is actually counter-productive."

Other areas he wants to see tackled include:

* Compliance costs - "We're perhaps not bad by international standards, but we're not the best either and it is a big issue particularly for small businesses."

* Reserve Bank - "In my view the Reserve Bank has got it absolutely wrong, they're not reading the fact that we're likely to be in recession in the second half of next year, just on the strength of the decline in commodity prices and rise in the dollar. Their increases in interest rates are choking off any growth that might be around and further increasing the value of the currency in the process."

* Public sector - "If our economy is going to grow faster, the public sector will have to play its part. I'd like to see targets in place for productivity improvement or reducing the total spend."

* Labour market - "I probably sit in the middle ground on labour issues, because I think a good stable employment climate is an essential ingredient. But I also think we need more flexibility round the edges to ensure people have room to manoeuvre especially when they are getting started."

Ultimately, Norgate says, it's up to leadership from the top.

"Unfortunately our political system doesn't make it easy for people to have long-term views because the three-year cycle goes very quickly and they've always got to win the next election.

"But this Government clearly has a mandate to lead and it really should start grappling with how we bring New Zealanders together behind a shared vision of a more prosperous future.

"I'd love to see them develop that vision and stand up and explain it and take people with them, because I believe ... people respond to leadership.

"If they can paint a picture of the future, and identify what needs to change to achieve that vision, then people are far more likely to embrace the changes that are necessary."

* Tomorrow: Carter Holt Harvey chief executive Chris Liddell says New Zealand will have to change the way it does a lot of things if the country is to climb back up the OECD wealth ratings.

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