Download The Treasury: Its Role and Contribution

BUILDING A CAPABLE
NEW ZEALAND ECONOMY
Productivity, Ownership and
Growth:
Towards an “NZ Inc.” Approach
Hon David Cunliffe, MP for New Lynn
DEMUTUALISING THE NZSX
 Pressures
for demutualisation
 Members bill
 Timing: faciliatiating rebuild
 Regulatory framework: Securities
Markets and Institutions Act
BUILDING A CAPABLE NZ ECONOMY
1.
2.
3.
4.
5.
The drivers of productivity
Globalisation and integration
Benefits of foreign investment
Risks of hollowing out
Towards an NZ-Inc approach
1. DRIVERS OF PRODUCTIVITY
GDP per capita
Labour
productivity
Labour utilisation
Capital per hour
Participation rate
Multifactor
productivity (MFP)
Unemployment
rate
Macroeconomic stability, business environment, innovation
19
70
19 198
71 0
19 198
72 1
19 198
73 2
19 198
74 3
19 198
75 4
19 198
76 5
19 198
77 6
19 198
78 7
19 198
79 8
19 198
80 9
19 199
81 0
19 199
82 1
19 199
83 2
19 199
84 3
19 199
85 4
19 199
86 5
19 199
87 6
19 199
88 7
19 199
89 8
19 199
90 9
19 200
91 0
-2
00
1
GDP p/c Growth Rate
GDP PER CAPITA GROWTH IS
RECOVERING…
(11-year moving average comparison with OECD countries)
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
11 year periods
NEW ZEALAND
OECD Total
AUSTRALIA
UNITED STATES
EU 15
…DRIVEN BY RISING LABOUR
UTILISATION…..
(11-year moving averages growth in hours worked per capita comparisons with OECD countries)
2.00%
Labour utilisation (hours) growth rate
1.50%
1.00%
0.50%
0.00%
-0.50%
-1.00%
-1.50%
-2.00%
82
84
86
87
88
89
90
92
94
96
97
98
99
00
02
81
83
85
91
93
95
01
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
72
74
75
76
77
78
79
80
82
84
85
86
87
88
89
90
92
71
73
81
83
91
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
NEW ZEALAND
CANADA
AUSTRALIA
UNITED STATES
UNITED KINGDOM
…..MASKING POOR GROWTH IN
CAPITAL-LABOUR RATIOS
(Capital-labour ratios: New Zealand vs Australia, 1988-2002)
Index = 1.00 1998
1.6
1.5
1.4
1.3
1.2
1.1
1
0.9
1988
1989
1990
1991
1992
1993
1994
1995
New Zealand Capital-Labour Ratio
1996
1997
1998
1999
Australian Capital-Labour Ratio
2000
2001
2002
2. GLOBALISATION AND THE
CHALLENGE OF INTEGRATION
 Globalisation:
a fact not a philosophy
 New Zealand is highly trade dependant
 Integration therefore essential but terms
vary
 “Open
up and hope”
 “Head in the sand”
 “Smart engagement”
3. THE SAVINGS GAP AND
FOREIGN INVESTMENT

Domestic savings gap requires capital inflow


FDI brings potential spillover benefits


Partial offset from government fiscal surplus
Technology, capital access, market access
Large net investment outflows on current
account persist (~3-4% GDP)


High level of foreign investment in NZ
Lower returns on NZ investment abroad
4. RISKS OF HOLLOWING OUT
 Out-migration
 Capital
migration
 Intellectual property
 Risk of self-reinforcing processes
 FDI
composition
 High
levels (~85%) of M&A FDI
 Low levels of “greenfields” investment
 Historical investment and migration rules
5. TOWARDS AN “NZ INC” APPROACH



Build on firm foundations
Target capital productivity drivers
Redefine “NZ’s economic space”
(i) BUILD ON FIRM FOUNDATIONS
 Strong
economic fundamentals
 Easy, safe business environment
 Increase labour participation and skills
 Invest in innovation and technology
 Active international trade policy
(ii) TARGET CAPITAL PRODUCTIVITY
 Address
the savings gap
 Deepen domestic capital markets
 Incubate and protect intellectual property
 Leverage technology across sectors
(iii) REDEFINE “NEW ZEALAND’S
ECONOMIC SPACE”


Recognise ownership matters
Maximise the benefits of FDI



Link with domestic sector strategy
Negotiate as “Team Kiwi”
(re)Brand NZ Inc