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OECD Statistics Confirm Post-Reform Turnaround


29 October 2003

OECD Statistics Confirm Post-Reform Turnaround

"New data from the OECD show that criticisms of New Zealand 's economic performance in the 1990s are wildly astray", Roger Kerr , executive director of the New Zealand Business Roundtable, said today.

Mr Kerr recalled that prime minister Helen Clark famously told a London School of Economics audience last year that, "In the 1990s the economy marked time".

The latest OECD in Figures , just released, shows that New Zealand recorded real economic growth of 3.7 percent a year on average in the decade 1992-2002.

This was only marginally below Australia 's annual average growth of 3.9 percent, and was the 7th fastest in the OECD.

"This economic turnaround meant the New Zealand economy was 44 percent larger by the end of the decade. Marking time?!

"Even more importantly, New Zealand achieved growth in real per capita gross domestic product (GDP) - a measure of material living standards - of 2.5 percent a year in the same period. In other words, average real incomes were 28 percent higher than a decade earlier, and the better economic performance underpinned major increases in spending on health and education - the so-called social wage.

"This is a far better performance than in the 1970s and 1980s", Mr Kerr said. " New Zealand has been holding its relative position among OECD countries. In fact the latest OECD report shows that New Zealand has moved up one notch in the rankings, having overtaken Spain . It is now in 20th position. Those who talk about ' New Zealand 's continuing economic decline' - as though the turnaround following the earlier policy reforms never happened - are simply deluding themselves."

Mr Kerr said that when account is taken of the major improvements in employment growth, unemployment, productivity, inflation, public debt and New Zealand 's credit rating, it is clear that the litany about "failed policies of the past" still emanating from trade union and other quarters is fatuous nonsense.

"The true "failed policies" were those of the pre-1984 period which included high government spending, higher tax rates, government ownership of commercial enterprises and infrastructure, restrictive labour laws, a state monopoly ACC scheme and economically damaging business regulations.

"Regrettably, despite the government's claim that it wants to move the economy to a higher growth plane (to regain a position in the top half of the OECD) it has been moving back towards failed policies on all these fronts. Recent economic buoyancy has been largely due to past reform efforts and favourable economic circumstances, not to any positive government initiatives.

"New Zealand 's economic reform programme was far from perfectly executed, and suffered from a loss of momentum and direction after 1993. Moreover, the effects of policy changes take time to be realised. The benefits of the 1984-88 and 1991-92 reforms only showed up from 1993 onward. Equally, the costs of recent mistaken policy changes will only show up over time.

However, they are already showing up in future economic projections. All medium-term forecasts, including those of the government itself, show the economy's performance falling away - to well below the average 2.5 percent per capita GDP growth of the decade to 2002. The New Zealand Institute of Economic Research projects per capita income growth of only 1.4 percent a year for the five years to 2008.

"Finance minister Michael Cullen has put his credibility on the line by saying that it will be apparent by mid-2004 whether the government is achieving its growth objectives. [1] <> Time is running out. The business community has consistently argued that government measures have been predominantly anti-business and anti-growth and that major changes in direction are needed. The evidence for this view is accumulating. There must now be a far more vigorous debate about New Zealand 's economic directions", Mr Kerr concluded.

[1] <> ' "There's a great deal more to be done", he said and only the next couple of years would show if New Zealand was on the right track', Dr Michael Cullen, The Daily Post , May 25 2002 .

ENDS

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