Joyce says lifting R&D spend, skilled workers, exports are key focus this term

Monday 20th October 2014

Economic Development Minister Steven Joyce says his top priorities for the next three years are to lift private sector spending on research and development, alleviate a shortage of engineers and ICT workers, and keep New Zealand on track to boost exports as a percentage of the economy.

Joyce, whose ministerial portfolios include science and innovation, tertiary education, skills and employment, and regulatory reform, said the government needs to press on with the Business Growth Agenda introduced in 2012. The government trimmed down its growth strategy, which covers exports, capital markets, innovation, skilled and safe workplaces, natural resources and infrastructure, to 62 priorities in June. When asked what hadn’t worked so well yet, Joyce said “I want to do it all faster”.

“The Australians are looking over here and they will come back," he said. "It’s a competitive world and we have to keep working to stay ahead.”

One of the biggest challenges is a shortage of engineering, information and communication technology workers. Tertiary institutions have lifted the number of higher ICT students by 19 percent since 2010, but Joyce said employer demand for skilled ICT workers is still not being met in New Zealand.

The government is investing $28.6 million over four years in ICT Graduate Schools in Auckland, Wellington and Christchurch whose courses are industry-driven, with the first students expected to start study in the second semester next year, Joyce said. The government is also trying to encourage more secondary students into the STEM (science, technology, engineering and maths) subjects.

Joyce said he is confident New Zealand can meet the government's target of boosting exports from 30 percent to 40 percent of gross domestic product by 2025 despite a lack of progress in the past three years.

The nation continues to have a strong reliance on commodity exports and an increasing dependence on China.

To achieve the target, the value of exports needed to double in real terms, whereas the growth rate in the four years to March 2012 was 5.6 percent annually.

“Reaching 40 percent of GDP is not an easy target,” Joyce said. “But it is a worthwhile target for New Zealand.”

The “untold story” was what had been achieved in recent years in raising the volume of exports despite the relatively high New Zealand dollar, he said. “We’re seeing quite a massive resilience in exports.”

He wants to see more progress on free trade agreements and developing other export markets in South East Asia including Indonesia and Singapore, which Australia was already well ahead of us on. “We have a stronger relationship with China than they do but we have to develop the Asean relationship and we’ll be making a lot more effort in that space.”

Latin America was another growth market for a range of industries such as education and agriculture, he said. And New Zealand companies should soon get better access to lucrative overseas government contracts once the process for New Zealand to join the World Trade Organisation’s Government Procurement Agreement was completed.

The goal for business-led R&D spending was to lift it to 1 percent of GDP by 2018 from just under 0.45 percent currently. “We have to really lift that very aggressively which is what we’re doing with the R&D programme,” he said.

This month Joyce had a Twitter debate with Trade Me founder Sam Morgan who labelled R&D grants a “stupid” taxpayer subsidy for unprofitable companies. Companies getting grants were either not good enough to attract private investment or were milking the system, he said.

Joyce’s response then and now is that Morgan was missing the point – that the programme was aimed at reducing the cost of R&D investment, by effectively providing a 20 percent tax rebate. The funding replaced Labour’s R&D tax credits while some critics say the best option would be a further cut in the overall corporate tax rate instead of corporate welfare to some. Whether you should have a 3 percent tax cut or put that money into the likes of NZTE and Callaghan Innovation was a legitimate public policy argument, he said.

“It goes back to the principles of what you’re trying to solve and that hasn’t changed in 40 years – the tyranny of distance and small market of 4.4 million," Joyce said. "You have companies that effectively are not out of nappies trying to compete and win on the world stage. You can help that happen a bit faster but there has to be clear limits to this stuff."

BusinessDesk.co.nz

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