Making NZ competitive

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Why is there this obsession in NZ to compare their economic performance with Australia? Why is the standard of the good? As an Australian in NZ, it strikes me as pathetic on so many levels. That is not to say that Australia cannot be beaten, but such a comparison kind of suggests you are 'equal bed fellows'. We are not. We are very different.

For starters. Australia has immense mineral and energy wealth. NZ has relatively little, and what exists tends to be tied up in national parks, and not open to development.

The next point is - Australia has a rapidly growing population of 21 million, and NZ has just 4.3 million people, awkwardly split between two islands, and its stagnating. Why? Because every time that NZ seems to start growing, a group of Kiwis seems to leave the country. Usually in recessions when there is no jobs, but even retirees are inclined to leave for sunnier Queensland. Even the immigrants 'freshly acclimatised' in NZ, move to Australia when they get their citizenship. Why? Because NZ business will not recognise their MBA or PhD qualification, so they were only ever able to aspire to a store manager position at Pizza Hut.

The reality is that PM's do not like to tell their electorate how it is. The reality is that NZ ought not be comparing themselves with a stallion like Australia, but a 'cross-bred' like South Australia. South Australia has a similar population to NZ, and its fairly isolated. At this point it has about as much mineral production capacity as NZ, but I actually expect that to change in generations to come. No one wants to live in Sth Australia too, but that also will change. South Australia will be the next WA boom! So where does that leave NZ? Probably comparing itself to Tasmania, which only has 300,000 people. :)

The reality is NZ has huge culturally entrenched attitudes to work which need to change. It has some huge disadvantages to fight, and it really is not doing enough. The problem for the government is that they are just happy to be in power. Why make changes which will get you tossed out of office. The country clearly needs to break into technological niches, but how do you attract investment. NZ at this point is a bloated welfare state. I see no great desire to change that. The leaders here are 'nice', but they don't inspire confidence in their ability to make changes. Helen Clark had bigger gonads than these two leaders. One of them was even challenged by a 'homo in a tizzy' last week. :) Stereotypes aside. NZ has never had a good leader, so it doesn't know what its missing. None of them convey a positive message.

So what needs to be done. Well if we acknowledge that NZ cannot compete with Australia on low value minerals, we have to acknowledge that NZ can compete on competitively priced, increasingly skilled and productive labour. It is a small market, so NZ has to focus on developing niche-technologies like IT, medical devices, biotechnology, etc. There is also great appeal for NZ in other areas like arts and literature, as certain regions like Wanganui could foster services for these people to attract residents, and flow-on business.

There is a need to attract capital, so it would be desirable to reduce decrease consumption taxes and income taxes, and increase 'dead' capital taxes, principally land taxes. This would result in better utilisation of the land, as well as avoiding tax evasion. The welfare state has to be curtailed, local government needs to be curtailed, as its very inefficient, with majors who don't know what they are doing. There is a need for training, but its to no end unless you have the right corporate incentives to attract business. Actually, NZ is in a very competititive wage gap, i.e. It has English skills so it competes with Australia above (30%+ wages) and countries like Malaysia, Philippines, Thailand and India, with their obvious skill and language difficulties. They need to recruit from these areas, but they need to avoid marginalising these immigrants and nurturing their skills. Not alienating them, and forcing them into Pizza Hut jobs.

There is potential for New Zealanders as well. However they have a skills-experience disadvantage. These foreign immigrants have a culture-leadership-confidence weakness. A lot of these Asian migrants are very skilled. We must remember that many of them have been able to leave the country because they are wealthy, skilled, educated and successful. This is NZ's opportunity to grab them. They are keen to work.

The opportunity really falls upon NZ business to identify and make use of these skills. My partner is an example. She has an Psych degree and MBA from the Philippines. She managed 50 call centre staff in the Philippines, she has vast expertise in online marketing and search engine optimisation. She is not a strong leader, so she needs people to tell her 'conceptually' what to do. But she is incredible at execution, multi-tasking. Great work ethic. Very few people in NZ can do what she can do, and she can also offer a competitive edge because she has former contacts and employees offering outsourcing opportunities in Asia, to further increase productivity.

There are opportunities there if NZ wants to take them. Where are the leaders? Managers? Both in business and unfortunately government because it retains such a tight grasp over the economy.

Not all immigrants come from Asia of course. There are a lot of Europeans and Americans coming to NZ, but I would suggest they are mostly coming to retire. If NZ wants to go that way, and stay a retirement village, then I guess high consumption tax is the way to go.

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Author: Andrew Sheldon

Resource Rent Tax Applied Critical Thinking |

www.SheldonThinks.com