Get off the Grass - We need to produce more high-value goods and services more efficiently to become a wealthier nation
The latest growth figures from Statistics New Zealand and the latest OECD report review of our economy, published yesterday, show that while our economy keeps growing, we’re lacking in areas that can really make us a wealthier nation, say the New Zealand Manufacturers and Exporters Association.
NZMEA Chief Executive Dieter Adam said, “Our GDP is rising, but on a per capita measure, it is much less impressive – we need to harness our potential and work on growing our high-value productive industries to improve this. Real GDP per capita growth in New Zealand is currently below the OECD average, and remains well below what we achieved for the 20 years up to 2007, as the latest OECD figures show.
“Productivity improvement is the key to improving our economic growth, incomes and wealth over time, however, it continues to lag in New Zealand. For example, the OECD report highlights labour productivity in terms of GDP per hour worked falling consistently behind Australia and the United States over the last 20 years.
“The thing is – as Sir Paul Callaghan told us many times before his untimely death in 2012 – we’re not going to grow the value of what we create every hour from having more tourists and more cows in the country; hence the title of his last book “Get off the Grass”.
“To really grow our economy, we need to produce and export more high-value goods and services, and we need to do so more efficiently, increasing productivity. Manufacturing and ICT, two sectors growing more and more intertwined as digital technologies penetrate our manufacturing businesses, already are key contributors to our economy, and they primarily are the ones to turn to when we look for more high-value products and services.
“The key to growth in manufacturing and ICT is innovation, and in the case of manufacturing, process innovation. There is a raft of new digital technologies coming to manufacturing, often referred to as Industry 4.0 or the Industrial Internet of Things. New Zealand needs to embrace these technologies, while at the same time investing in new and smarter products, services and business models.
“The OECD report provides us with some pointers for how to achieve more innovation and productivity. For example, we need to increase non-residential investment, an area we are low at by international comparison, and we need to invest more in innovation activities - again an area we fare poorly compared to the rest of the OECD.
“The report recommends “More fiscal support for business research and development” – we believe that is best achieved through a general R&D tax credit replacing the cumbersome current grant scheme. But the report also points out that our corporate tax rate still is higher than most of our competitors – again a disincentive for more private investment in R&D.
“It will be interesting to see whether the Government takes any note of the sobering figures and sensible recommendations contained in this OECD report. Let us hope we’re not going to squander another opportunity to really put our economy on a stronger footing.” Said Dieter.