Economics: Measuring our well-being

When our global competitiveness ranking puts us among the also-rans, we can turn for solace to other measures of our economic and social well-being. But not the happiness index – we are among the also-rans on that one too.
In one of his first public speeches as governor of the Reserve Bank, Graeme Wheeler ticked off some economic measures that show us in comparatively good light. Since 1990 we had outperformed many OECD countries on inflation and unemployment, for example. Our inflation rate had been 1.25 percent below the OECD median and our unemployment rate 0.5 percent lower.
But our per capita income was among the laggards (our 1.25 percent real per capita GDP growth was about 0.5 percent below the median) and our current account deficit – which is the cause of our mounting overseas debt – has averaged five percent of GDP, about the sixth largest relative to GDP in the OECD region. We aren’t too flash on the labour productivity front, either: since 1990, our labour productivity has grown at an annual rate of one percent, about 1.75 percent below the seven largest OECD economies and one of the reasons why our real per capita GDP is so far below the OECD median. Our distance from world markets and small economic size are dragging us back, too.
Wheeler then brought the latest World Economic Forum’s Global Competitiveness Report into the picture: it ranked New Zealand’s overall competitiveness at 25th out of 142 countries. Regulatory and performance-related factors were among factors constraining our growth potential.
On the brighter side, our education system ranks us seventh among 65 countries in the OECD’s Programme for International Student Assessment (PISA) that tests high-schoolers’ performance across reading, mathematics, and science. Less encouraging, we have the greatest difference in reading performance between students from different socio-economic backgrounds among all OECD countries and the PISA scores for Maori and Pacific Island students are much lower than the average for students of European descent. That flows through into unemployment rates for Maori and Pacific Islanders – three times greater than for the European population over the past 15 years.
Let’s try another measure: happiness. We have trumped Australia (in 76th place) on the New Economics Foundation’s Happy Planet Index but we finished up no better than the world’s 28th-happiest country. Costa Rica was the happiest.
Much more triumphantly, we can hold our heads high for being friendly. The Travel & Tourism Competitiveness Report 2013, released by the World Economic Forum, ranked 140 nations on how they “felt” about foreign visitors. New Zealand and Iceland emerged the friendliest countries in the world for tourists.
Then there’s economic freedom. The Wall Street Journal and The Heritage Foundation, major think tank in Washington, have tracked the march of economic freedom around the world with the Index of Economic Freedom since 1995. Its promoters say the index has brought Adam Smith’s theories about liberty, prosperity and economic freedom to life by creating 10 benchmarks that gauge the economic success of 185 countries. “With its user-friendly format, readers can see how 18th century theories on prosperity and economic freedom are realities in the 21st century.”
The index has 10 indicators grouped in four broad categories: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business, labour, and monetary freedom); and Open Markets (trade, investment, and financial freedom). On the most recent measure, we finished up fourth behind Hong Kong, Singapore and Australia.
So we score well for being friendly and free. How come, therefore, we are comparatively unhappy? Perhaps it’s because we are struggling to be competitive and are seriously indebted. M

Bob Edlin is leading economic commentator and NZ Management’s regular economics columnist.

Visited 11 times, 1 visit(s) today
Close Search Window