NZ population at 15M would spur export success, says NZIER

Friday 16th November 2012

New Zealand exports are more likely to grow if governments target a population of 15 million by 2060 than by creating arbitrary targets for export growth, says the New Zealand Institute of Economic Research in a paper for the export arm of Business New Zealand.

The report also recommends considering tax incentives or grants to encourage large, successful New Zealand companies to remain based here, instead of targeting all assistance to companies just starting out as exporters.

That recommendation, which carries no detail, was "very much their own," said Catherine Beard, executive director of Export NZ, which commissioned the report from the independent economic consultancy. "That was probably one of the more controversial recommendations. It's not generally the sort of thing we recommend."

But there were valid questions about how to maintain the economic impact of New Zealand companies that are bought by foreign investors or moved closer to foreign markets to continue their global growth.

Titled "Scale Up or Die", the NZIER report argues other successful exporting nations are not only closer to their markets, but also have larger home markets in which to create the scale needed for export success.

"If New Zealand's biggest impediment to better economic performance is an absence of scale, there is only one way to overcome this over the long term and that is to grow the population through more migrants," say the report's authors, economists John Stephenson and John Ballingal.

"You cannot fake scale. You have to build it."

NZIER has previously advocated a population target of 15 million in the next 50 years, the report notes.

Its authors also accuse kiwis of "egregious double standards" for opposing foreign corporate ownership when their home mortgages are largely funded by foreign capital, and say the Resource Management Act is more of a barrier than a help to sustainable economic development.

The New Zealand dollar remains high and a barrier to exports because government spending is too high, they say, with public servants costing more to hire on average than in the private sector and schemes such as Working for Families and interest-free student loans acting as "a tax on exports."

"Ongoing concern about monetary policy and its effects on the exchange rate is missing the fact that fiscal policy - tax and spending - is a bigger part of the reason for the higher exchange rates and flat output in the export sector."

The report also questions whether the array of government programmes to assist exporters represents repeated attempts to reinvent the wheel, accompanied by a lack of evaluation and impatience for results.

The authors say both that there is "precious little evidence on the effectiveness of existing initiatives which try to help firms to grow their capabilities and to internationalise" while also urging policymakers to "give these initiatives time to work."

"While waiting around for something to happen, more information should be gathered on the effectiveness or otherwise of existing initiatives."

It suggests government funding to build businesses' capability may be justified, but questions whether the government is best placed to provide export promotion services.

The NZIER report also suggests mineral resource extraction could be an important source of growth, but only if governments have a plan for investing the proceeds wisely.

"With mineral wealth comes to opportunity to invest and build domestic capabilities and increase outward direct investment. This has worked exceedingly well for the Norwegians," say Stephenson and Ballingal. "

The report also identifies iwi-owned and Maori businesses as a source of potential scale because of their greater long term commitment to being based in New Zealand.

"Business success borne by Maori is more likely to be success and capability which remains in New Zealand and on which scale can be built."

BusinessDesk.co.nz

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