In fact New Zealand is in the process of slowly falling behind. What does this really mean?

Chart 1:  GDP per capita as a share of OECD average, 1970 - 2005

This chart shows how New Zealand has been performing against our competitors. In the early 1970s we were wealthy and successful. Then, with the United Kingdom joining the Common Market, the oil crises, and a lost decade of interventionist economics, our performance began to slip. It steadied in the early 1980s, and then slipped again, and is currently bouncing along at a bit below 90 percent of the OECD average.

In relative terms we are roughly 30 percent less wealthy than Australians are today. This isn’t good enough, and it gets worse…

Chart 2: New Zealand output per hour worked

This is the productivity story. New Zealanders work longer and harder than workers in almost any other developed economy. But, for any given hour worked, a New Zealander typically produces less than an American, an Australian, and yes, even a Frenchman.

Why?

It’s clearly not about laziness. It’s about technology, machinery, capital and frankly proximity (everyone else is closer to their key markets than we are). For example: it takes one person to drive a packing machine, while a packhouse gang employs many. The hourly rate for the machine driver can be much higher than for any one of the packers, but the cost to the producer is potentially a lot lower.

The big challenge for New Zealand over the next decade is about increasing output per employee and per hour worked - without suddenly telling a whole lot of hard working kiwis not to come in on Monday, because the new machine is going to be doing their jobs.

So where does exporting come in?

A dollar earned overseas and brought back to New Zealand is a dollar that gets circulated through our economy. It grows the business that earned it, it pays wages and taxes, it gets invested in plant, and is a dollar that we don’t have to borrow from overseas.

We also know that companies that are exposed to international competition are more productive. Successful exporters not only generate dollars for New Zealand, but import work practices that encourage higher performance, and generate more output per hour worked than other companies. These businesses create higher value, higher paying jobs in New Zealand for New Zealanders.

What does NZTE do to help?

NZTE is the Government’s national economic development agency. We work closely with businesses across the economy, but our key role is to support businesses to achieve their internationalisation objectives.

That is, we are here to help exporters successfully establish and maintain markets overseas, and (the internationalisation bit) to help them access value chains across the world, and to increase the value that they earn from their products, and thereby the value that gets retained in New Zealand.

My role as Chief Economist is to look at how we can achieve the substantial economic growth that this country needs, through the growth of New Zealand’s international business.

I will be posting regular insights online about how to create value in market, how to strengthen your company to take advantage of global opportunities, and how to ensure you have the resilience to survive the inevitable challenges.