As I mentioned earlier, the topic about “A Progressive Path to Prosperity”, which is being proposed as part of the work programme, is intended as an umbrella topic.
The approach I want Policy Progress to take with this area is to avoid either simply coming up with a wishlist or grab-bag of appealing ideas, or choosing a few favourite hobby-horses and then working back to argue how advancing them will benefit the New Zealand economy.
Instead, I think we should think carefully about New Zealand’s economic performance and what’s been holding it back, and then figure out – from a progressive perspective – the best way to tackle these problems.
Ideally, this would add up to a list of things that, if they were all tackled effectively, would lead us onto the sort of growth path we’re all looking for.
Obviously, there’s a limit to how systematic you can be with this sort of approach – inevitably there’s a lot of judgment involved – but that’s the basic “lens” I’m proposing.
I’ve given this issue a bit of thought already, and here are my ’starters for ten’ for what we need to focus on. But I’m very interested in hearing from you – what’s missing? What’s on my draft list but actually unimportant (or, just as importantly, which problems have been mis-specified)?
Continuing to encourage/facilitate New Zealanders to raise their savings level
This was a major theme of Michael Cullen’s, and Kiwisaver should over time make a difference here, but there is still more to do.
Lifting private sector rates of capital formation and R & D investment
The low rate of private sector R & D investment is a well-rehearsed theme, although there are some structural factors involved (firm size). The R & D tax credits aimed to shift this, as did Fast Forward, but both have been abolished. Alongside this, though, general capital investment levels by New Zealand firms are not high, yet this is a key factor in driving labour productivity. There is a likely connection to the previous issue, and to New Zealand’s high interest rates, but there will be other drivers as well.
Addressing the high proportion of New Zealand graduates working overseas
The crisis rhetoric around the ‘brain drain’ is overblown, and often gives the impression that the consequences are catastrophic (they aren’t) and that the phenomenon is new (it isn’t). New Zealand and Ireland have for many years had a far higher proportion of people born in their country living abroad than any other industrialised country, and there is a (disproportionate?) number of highly-educated people amongst that group. Can we turn that around, and should we make better use of our diaspora?
Improving management capability
It is, I think, fairly well-acknowledged that New Zealand’s management capability levels are fairly weak overall, and particularly in our small and medium-sized firms. This is what often prevents them from making the transition to become the larger, export-oriented enterprises that we need more of. It’s not an easy issue to tackle, but it’s an important one.
Better skill utilisation in the workplace
I’ve already mentioned that productivity at the workplace level is what really counts in the productivity debate. We have good levels of skill development within the existing workforce (through industry training), but where we often seem to fall down is on making sure the skills being developed are made effective use of.
Rebalancing the economy to a more carbon-neutral mix
The climate challenge is a massive issue for our generation, and is widely written about. Policy Progress won’t be trying to add anything to the scientific debate about cause and effects, and even the issues around getting a proper incentive structure (e.g. an emissions trading scheme) have been pretty exhaustively canvassed. But how we restructure our economy in response over the medium to long term, and what challenges and opportunities that will entail, seems a very appropriate thing to consider as part of the “Progressive Path to Prosperity”. Changing our patterns of energy generation and use will be an important component of that.
The role and evolution of iwi enterprises in the economy.
A path to prosperity that’s progressive should give explicit consideration to Maori economic development. As treaty settlements continue, the nature of the challenge changes, and becomes increasingly one about effective resource development – and how that is reinvested in the community. From a wider progressive perspective, iwi enterprises could during the 21st century prove to be an uniquely New Zealand form of major business actor that effectively mixes economic, social and sustainability objectives. Or they could become simply another group of corporates. Is there anything we can, or should, do to influence the likelihood of the former outcome?