Growing our economy

Their aspiration is to raise exports from the current level of 30 per cent of GDP to 40 per cent and achieve income parity with Australia by 2025.

This means New Zealand needs:

• more New Zealand firms successfully exporting and investing offshore
• high-value activity being retained in New Zealand through high-value jobs, retained profits, intellectual property etc.

Building the number and scale of export businesses is crucial if we are to grow our economy.

The role of New Zealand Trade and Enterprise in helping meet the Government’s goals is to focus support on businesses with the realistic potential to achieve international scale and competitiveness, and the ability to deliver economic benefits to New Zealand.

If we are serious about trying to close the income gap with Australia, we have to increase our national income by $30billion a year.

That’s not an easy task.

My job as Chief Economist is to look at how we can achieve this through the growth of New Zealand’s international business.

All things are not equal

As Professor Paul Callaghan has pointed out, this means looking to grow five or more Fonterras or to grow 300 or more Icebreakers.

We’re not going to get there by tinkering around the edges. We have to support our largest firms to grow, but the agile, fast-moving, high-value firms are a source of huge growth potential.

Over the last twenty years there was a strong presumption that government should get the basics right (the ‘level playing field’) and leave the rest of the economy alone.

There is a growing appreciation that for a small, distant economy like New Zealand, this isn’t going to be enough if we are going to pay our way in the world and fund the services, infrastructure and way of life that New Zealanders aspire to.

This means we have to make hard calls about where to expend most of our energy and resources.

New Zealand needs larger exporters who have the critical mass and disciplines to give us a strong exporting base.

Of course there’s an argument for leaving successful businesses to just get on with it.

But don’t forget they’re still small players on the world stage. Helping them to scale up their international activities is also likely to result in a proportionally larger return to our economy.

Market conditions good for those ready and willing to take advantage

For those who have the scale and commitment, market conditions are not as bad as a recession would suggest.

Never let a good crisis go to waste, as Barack Obama’s Chief of Staff said recently. While our competitors are hunkered down in survival mode, nimble, resilient New Zealand businesses are getting going.

NZTE runs a monthly survey of our international network of client managers to gain insight into recent market activity and its impact on New Zealand businesses.

Client managers’ views are formed by their close relationship to the businesses they work with and their knowledge of local market conditions.

Our most recent reporting suggests that overseas markets are calm, with cautious optimism the prevailing sense. The main concerns of our clients are now the continuing volatility of the exchange rate along with flat demand in traditional markets such as the United States and some European countries.

Recent surveys do show that New Zealand businesses remain generally optimistic. Many exporters still feel bullish about overseas opportunities and it is clear that for those businesses able to deliver value in market, these are abundant opportunities.

All we need now are more businesses prepared to take advantage of these opportunities.

Gareth Chaplin is Chief Economist at New Zealand Trade and Enterprise.