Three economic reports released recently glaringly highlighted the diverging differences in economic attitude, position and performance between Australia and New Zealand. The IMD World Competitiveness Survey – in which the New Zealand Institute of Management participated as IMD’s local partner for the first time this year’- and the respective New Zealand and Australian Government budgets all contained stark messages that we should not ignore.
As nation and an economy we are, in many areas, now being left horribly behind by our trans-Tasman cousins. The gulf between our respective living standards is widening. The implications of the economic trends are serious for business and management in New Zealand. Our young and talented business people won’t see much future in working for global corporation branch offices here when more career opportunities, lower taxes and higher standard of living beckon from Australia. In turn, it becomes more difficult for New Zealand companies to grow into international enterprises that increase economic growth and national wealth when the cream of our “intellectual capital” has skipped town.
IMD World Competitiveness Survey
Australia ranked second in overall competitiveness with score of 86.5 in the large countries with populations greater than 20 million. New Zealand ranked 14th with significantly lower score of 72.2 in the small countries grouping. Five years ago we were at very similar levels on international competitiveness benchmarks. Where has Australia improved and where have we weakened?
The IMD survey clearly showed that we are now materially lagging Australia in both ‘Business Efficiency’ and ‘Infrastructure’ – two of the major categories IMD benchmarks.
Our 10 weakest criteria in ‘Business Efficiency’ were quite different to Australia’s. Low levels of skilled labour, poor productivity, competent senior managers not available, and senior business managers with low international experience are New Zealand’s negative constraints. By contrast, Australia’s weakest areas centred more on working hours, unemployment and compensation.
Just as I always suspected! We work harder but somehow manage to produce less and have lower standard of living than the Aussies.
In the ‘Infrastructure’ category our lack of forward planning and investment has left us with distinct disadvantages compared with Australia. Our weakest criteria were, however, in restrictive environmental laws and education staff/pupil ratios. Again by contrast, education did not feature as weakness in Australia’s infrastructure measures.
The two nations’ budget statements and associated policy initiatives were also chalk and cheese in terms of governments being proactive in doing what they can to create an environment for investment and business enterprise to flourish. Australia is on the front foot and confident with personal tax cuts and other business policies to increase the growth of its economy. The Howard government is prepared to take higher (but acceptable) level of risk and leave money in the economy rather than run large budget surpluses.
Australia seems willing to trust the private sector to make its own decisions to deliver growth. The government is proactive on international tax policy to attract foreign investment into the economy. On the other hand, our Government’s almost total rejection of the innovative solutions contained in the McLeod Tax Report (October 2001), is sad commentary on where we are at in respect to foreign investment and tax. Again we lag Australia.
The New Zealand Budget was cautious in the extreme, with few initiatives to lift economic growth and wealth creation. The Government seemingly has no plan to address the weaknesses highlighted in the IMD report.
New Zealand is currently adopting economic policies diametrically opposed to the majority of OECD countries, which are selling state-owned assets, reducing taxes and reducing business investment impediments in their economies. We used to be the odd one out with our progressive economic reforms, others have since followed those policy prescriptions, and we are now the odd one with no forward-looking economic policy agenda.
It is hardly surprising that we are slipping down the international leagues tables. New Zealand has reached the point where we need strong economic leadership and associated bold policy moves to retain competitiveness and our living standards in fast-moving world. But, sadly, the general public does not appear to have the stomach for such changes, or so we are told. I think that’s due to information propaganda that more economic reforms are bad for us.
Our well-performing economy of recent years – the outcome of good prices, low currency and clement climate – has disguised our underlying deteriorating competitiveness and added to the reform progress inertia. Perhaps we need to suffer an economic recession to get the “wake-up” call.
Roger Kerr, FNZIM, is director of Asia-Pacific Risk Management Limited, and member of NZIM National Board and the board of NZIM Auckland.
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