John Roughan: Change the record, we've heard that tune before

David Skilling worries me. He is the young think tank with Harvard pedigree, McKinsey polish and Treasury-cred who calls himself the New Zealand Institute.

He has been pumping out attractive publications about the limitations of our little economy for a few years now and some of his suggestions sing like a siren to business consultants and commentators forever chasing that holy grail of the talking industry: the Next Big Idea.

The last big idea has been around for more than 20 years now. It, too, was promoted by a former Treasury boffin, Roger Kerr, calling himself the Business Roundtable.

After 10 years of market theory the economy had been thoroughly tuned to true price signals and Kerr was left with not much more than one big blues ballad to sing: the burden of Government spending.

He is still singing it but the audience has drifted away since Helen Clark and Michael Cullen came to power nearly seven years ago. They never liked the whole free market album very much but they had nothing to replace it.

They couldn't change much but they could lower the noise level and they certainly wouldn't be seen singing those songs. They have governed like prim aunts at a good party, keeping a strict line on tax or spending but otherwise content to watch the economy rock on.

To everyone's surprise, especially theirs, the party actually improved under their control. The place became friendlier and no longer feared sudden disruptive change.

Amazingly, the good times have continued with hardly a slump for all of those seven years. Things have flagged a bit over the past year, though not as much as they would have if the Reserve Bank had kept control of inflation.

We're still feeling fine, carefree even - nobody seems worried about the returning inflation - and in danger of forgetting how we got here.

We are feeling so good we are tempted to listen to some of that old-time music again, revived in a bright new format by the New Zealand Institute.

Here's their latest: The Flight of the Kiwi - going global from the end of the world, written by David Skilling and Danielle Boven:

"The New Zealand economy has performed well over the past 15 years. The challenge now is to build on this performance so that our income levels converge to those of other developed countries.

"New Zealand cannot achieve and sustain high rates of productivity growth without making much greater use of larger markets through international activity.

"However, only a small number of New Zealand companies are substantially engaged in international markets in terms of either exporting or investing.

"Of course, New Zealand firms face particular difficulties moving into international markets because of the small size and remoteness of New Zealand ... "

That last line was the signature theme of their earlier releases, No Country is an Island and Dancing With the Stars.

Their substantial contribution to the national economic debate so far is the reminder that scale and distance still matter. Despite jet transport, despite the internet, our population and position make it tough for companies to make the leap to foreign markets.

Like the best tunes it is simple and obvious. So what are they getting at?

Those old songs never mentioned sex even when they meant it.

Skilling has skated around the point in three well promoted, beautifully illustrated publications written in stylish consultancy prose where the words sound impressive and the sentences seem to be leading somewhere but after a while you realise you are reading the same loop under 19 cute headings.

But you get the drift. He believes New Zealand business needs serious state encouragements to venture into larger markets and more sophisticated products.

He mentions the old standards, tax concessions for export, research development allowances and the like, which have never gone away and never made much difference. He must have bigger things in mind.

He has suggested one: state-owned enterprises, which should be allowed to expand overseas since they are among the precious few big companies in this country that are not now foreign owned.

It is hard to know how keenly the Government is listening to him. Not long ago it announced SOEs would be allowed to expand, not overseas exactly and not too far beyond their knitting, but into related activities - if they asked first and it did not cost the Government any money.

The hedging, no doubt at the Treasury's behest, shows the state is still wary of distorting economic investment but in principle it is a worrying move.

Clark and Cullen have always rejected the idea that the state should not pick winners but in practice they have been as reluctant as any market liberal to use their power and public finance in a way that influence patterns of private investment.

And Cullen has become refreshingly sceptical of the age-old view that this country could not continue to prosper as a primary commodity producer. He has kept that view quiet since Clark half-heartedly adopted the mission of all previous governments to upgrade the country's exports, but he will not have changed it.

Many imagined the exposure of almost all sectors of the economy to real markets would cause private investment to move from preciously protected import substitutes into more highly developed food, woollen and wood products.

Yet after 20 years it has not happened. We continue to survive quite well on a range of fairly raw commodities.

What about this for the next big idea: The market is telling us this is our best place in world trade. We cannot change our global position and do not appear to want to add to our population very much.

We are a small remote farm in the world and, so long as we remain nimble, watch our costs and be ever alert to opportunities, the farm can prosper.