John Whitehead Remarks on Lifting NZ’s Economic Growth
Lifting New Zealand’s Economic Growth
Thank you for that introduction. And thank you to Russell McVeagh for giving me the opportunity to talk about some of the ideas that the Treasury is working on to lift our rates of income growth.
It is always good to get in front of Auckland audiences and talk about critical economic issues. This city is, after all, by far New Zealand’s largest metropolitan area and New Zealand is not going to reach its potential unless Auckland is living up to its name as the super city.
I think we are all aware that these are fairly challenging economic times.
But we in New Zealand do have many things in our favour. We came through the global financial crisis in relatively good shape and that has again been underlined in recent days as we have read about the ongoing tribulations in the finances of some European governments.
I spoke at an Institute of Policy Studies seminar in Wellington last week, and the focus of my address was macroeconomic policy settings. In particular, I looked at why the Crown’s spending and revenue policy choices are, and will continue to be, such a critical part of any strategy that is aimed at permanently raising New Zealand’s per capita growth rate.
My conclusion last week, which I won’t dwell on too long today, was that we will need to ensure that fiscal policy settings are right to fully leverage the benefits available from adopting specific growth-enhancing policies.
Today I would like to spend some time talking not just about the challenges, but also the big opportunities that are in front of us right now.
Changes are obviously needed across a broad range of policy areas in order to allow the enterprise and innovation that will drive our growth, and to ensure that we emerge from these difficult times in a position for our economy to really thrive.
Because the list of possible policies is long, I want to confine myself today to four areas that I think are very important and require attention. I will summarise what they are before I examine them in greater detail.
The first is the need for New Zealand to have sound and stable macroeconomic policies. Without them it becomes very difficult to promote growth and employment, and to build the resilience we need for dealing with the next shock that will inevitably come along. We need to keep convincing markets that we’re serious on this stuff.
Second, I will talk about the importance of creating a business environment that attracts talent, and rewards enterprise, innovation and entrepreneurship. A competitive business environment requires policies and institutions that reward such behaviour.
The third area I will focus on is education and labour force participation. It should go without saying that a highly skilled labour force is critical for economic growth. Higher skills ensure that people have the opportunities to participate fully not just in the workforce, but in society, and that is a meaningful ambition for all of us.
And my fourth area of attention will be international connections. Our economy is small and distant, and our ability to grow depends on ensuring our firms are well connected with the rest of the world. Achieving this is about ensuring we open trade doors, have a prioritised strategy for engaging and integrating with countries in the Asia Pacific region, and that we have the sort of policy settings that enable us to attract, retain and enable the flow of the ideas, companies, people and capital that drive productivity.
Before I start to address these four areas, I do want to touch briefly on the position we are in now, and explain why faster growth really matters. The blunt truth is that our growth performance over a long period of time has been poor. In 1950 we had the third-highest GDP per capita ranking among OECD countries. Last year we were ranked 22. Tumbling down a league table tells us that our competitors are doing things smarter and better. Imagine the outcry if a sports team suffered such a decline? The figure here shows that, since 1950, our average rate of growth – at 1.3 per cent – has been the lowest in the OECD.
ENDS