Internationalisation success will drive New Zealand’s prosperity
The New Zealand Institute has released a discussion paper titled A goal is not a strategy: Focusing efforts to improve New Zealand’s prosperity. The paper concludes that efforts to improve economic prosperity should focus on improving the drivers of labour productivity, growing exports of differentiated goods and services, and helping firms overcome the barriers to internationalisation. Economic prosperity is a worthwhile goal for New Zealand and Government has set a goal of matching Australia’s GDP per capita by 2025. The main driver of GDP per capita is labour productivity and New Zealand’s private economy labour productivity is 57% of Australia’s. Labour productivity is not the only important measure of economic performance though. For a small trading nation exports are very important too. New Zealand’s exports have grown much more slowly than the OECD average partly because global trade in commodities (where New Zealand exports are concentrated) has grown more slowly than trade in differentiated goods and services. In recent years weakening trade performance has combined with imported private debt to erode the current account balance. Now New Zealand needs to improve labour productivity and grow exports enough to reduce the debt load and increase prosperity. Lifting labour productivity depends on improving the drivers of labour productivity; entrepreneurship, innovation, skills and talent, investment, and natural resources. For some drivers New Zealand has made choices that differ from those made in other advanced economies and there is good reason to believe that those choices have eroded relative economic performance. New Zealand is fortunate that there is great potential for improving performance on the labour productivity drivers. New Zealand’s most important sectors for exports are tourism, agriculture, and manufacturing. All three sectors have average or lower than average productivity so simply growing these activities without also substantially lifting productivity would not lift GDP […]