#5 - Ian Mansell 2010-07-19 08:47 - (Reply)

I'm an ex pat Kiwi that was an immigrant to NZ when my parents settled there from the UK in 1974 (A wee lad). At that time NZ was a land of Milk and Honey, we were equal with Australia in GDP. But since then successive Governments have never been able to truly understand what it takes to make NZ a better place (financially), there seems to be this endless desire to have "More" people, but more people based on an agricultural economy is just a lower standard of living for all. All this tinkering around the edges. When will a party step up to the plate as Muldoon did and Think Big? Thinking Big in today’s world, is following the Singaporean model with an emphasis on Finance and information rather than the Muldoon heavy industry, we need low corporate taxes and do everything to get global players to set up shop in NZ. Low tax and a vastly improved IT communications infrastructure would go along way. Many of my highly educated British colleges think NZ is fantastic, but they are so highly skilled in Finance that there are no jobs for them in NZ. We earn more in pounds than what we could in NZ earn in $. Why couldn't NZ be an ultra low tax nation for high intellect corporates? So many intelligent people want the high end work and the lifestyle, NZ is unique in that it "really could" if it believed in itself. Why can't NZ be incredibly innovative in this respect? Why can't we marginally price the tax rate to just cover costs and let this concept grow? It’s like the government owning Air NZ and looking at the total value chain of inbound tourism rather than bums on seats ticket prices. We need a coherent long range strategy, we need Think Big 2.

#7 - Ian Mansell 2010-07-20 10:30 - (Reply)

Andrew, The problem is that we are not picking winners, we are not backing a team plan and a game winning strategy, that’s why our performance is so lack lustre. In a large economy such as the US we can take a "diversified portfolio approach" with regards to the free market allocation system, but NZ is far too small. NZ has to think of itself as a large company and preserve itself. Most large multinationals would happily asset strip NZ and leave it as a natural resource provider as they already have infrastructure located in other parts of the world. Furthermore, NZ is a small economy; there are more people in various cities across the UK than there are in NZ. We simply don't have the scale in investment and in consumers to have enough clout to properly exploit foreign markets. A good analogy of NZ intellectual capital (people) is like an international football team. NZ performs well, and other large and more successful teams simply buy the best players off ensuring NZ is always a second line team. That is what is happening with the best workers. Is bank in NZ going to give me a $300k salary? Well, the City here in London is. In my last post I talked about looking at the full value chain. National could have special tax exempt status for banking and slowly but surely bring in international banks. Singapore did exactly the same gaining even our own blue chip corporates. Where the economy gains is through all the PAYE, GST and just straight out consumption that high end workers bring. We need to get economies of scale that spark off once a sufficient cluster is achieved. But like I say, you need a strategy and decide which horse you are backing, NZ is just too small and can't get the economies of scale in all business, so it must choose which. Getting back to agriculture though, I sincerely don't believe that NZ will win big in the long run via this approach. The absolute vast majority of consumers won't pay the premium and we have places like Ukraine and Russia that have infinite potential to develop and produce for markets. Also technology is moving so fast that advantages that we think we have say in forestry can be lost quite rapidly through genetic engineering (Faster growth of trees etc). Anyway, more another time.

#8.1 - Ian Mansell 2010-07-24 08:15 - (Reply)

Sorry Andrew, but NZ is a little little little place. It cannot just ask the market, as the markets expectations are beyond what NZ can offer. It has to choose its winning industries and cluster enough to achieve the required economies of scale (And barriers to entry). Because it is following the same macroeconomic theory that global economies follow, and thus the very reason why it is failing. As before NZ need only look at Singapore to see some very positive and useful intervention by the government to achieve that clustering. NZ will be no different in 30 years than it is now (well, probably worse off and more like Fiji) by just allowing the normal market cycle to occur. I.e. Small businesses that do well relocate offshore, smart intellectual capital moves to intellectual capital centres (E.g. London), Large MNCs infrastructurally strip NZ so it becomes a simple resource farm. I think it is incredibly naive to think that we just use simple market forces to guide us into the future, As an example large corporates have well developed strategy plans, they allocate capital to loss leaders while they see the longer term market growth potential and so forth, it is no different with NZ Plc but the Government has to step in because NZ does not have the sort of capital or large corporates that can do what is right for NZ. If NZ thinks that its clean green image is the “only” way of the future then I think it is sorely mistaken, as an instance the other day I read that an Italian Kiwifruit type had been grafted to grow in Kent, and the most poignant irony is they stated that it would be far better for the environment as they wouldn't have to freight produce half way round the world. (Why the NZ government has demanded that Kiwi become a geographic reference to protect our produce naming rights is beyond me). Anyway, if I am really honest I actually can’t see any NZ government doing anything hugely constructive and interventionary because you only have to look at things like our diary produce and see that we still sell the raw product to the likes of Cadbury without actually ever having upgraded to making the chocolate ourselves, I mean Toblerone can sell Swiss chocolate in NZ… but can NZ actually step up to the plate in value adding world class commerce?