Nov 12, 2008

Groser Reiterates Tough Export Goal

We are pleased that John Key is planning to take personal responsibility for our major export industry - tourism and that national is continuing to strive to boost export performance. In a speech this lunchtime on China Tim Groser said the following:

What we know is that there is a virtual circle between higher participation in exporting and higher productivity. It is no coincidence that the first comprehensive study of total factor productivity that I became aware of ten years ago – the Diewart and Laurence study completed for the NZ Treasury – showed that in a 20 year period from 1978 to 1998 total factor productivity of NZ agriculture was almost three times higher than total factor productivity for the economy as a whole – and that included the contribution of NZ agriculture.

Why? Because NZ agriculture generally regards the NZ domestic market as an abstraction. 90 per cent plus of what NZ agriculture produces is for the world market, not NZ. NZ agriculture – and that is far broader than just our farmers since it includes our marketers, our scientists and our trade negotiators are involved in a virtual circle of innovation, product excellence and expanding market opportunities, or they fall away. Our objective is to move an additional 10% of GDP into that space. Or, technically expressed in terms of the National Party External Strategies Paper, our Government will aim to increase the ratio of exports to GDP by 10 percentage points by 2020. It is achievable.

I said earlier that the Labour Government lost office because it lost touch with New Zealanders about the issues that mattered to them in their daily lives – safer streets, stronger economy, better schools, putting the word ‘winning’ back into the NZ vocabulary. I do not expect that our people will use the language I am using here. There is unlikely to be a new NGO called ‘friends of total factor productivity’.

But what is at the end of the total factor productivity sausage machine is higher real wages. That is something every New Zealander can relate to. Every New Zealander knows we have a problem here: our real wages are too low. That is a principal reason why we are bleeding people. And not just bleeding over 80,000 New Zealanders a year – but bleeding young people. 80% of the people who left NZ last year were under the age of 40. Some 30% of our tertiary educated people do not live in their own country – an unprecedented proportion. We need to get NZ back, over the next decade or two, into the top half of the OECD where we were when I grew up. Frankly, it is where we belong. Raising productivity growth is central to that. Raising our exporting performance is an absolute key. And the Chinese market is a large part of that story.

We agree with all this but note that growing our exports as a proportion of GDP by 10 percentage points by 2020 will take a major change in performance and strategy. Instead of crowing about winning an award as the best Trade Promotion Agency in the World, NZTE should be explaining why our exports as a proportion of GDP have in fact been declining steadily since NZTE was established.

Having peaked at 37% in 2001 New Zealand exports as a percentage of GDP have fallen to 29%.

The reason we guess Groser is confident about achieving this goal is that we have dropped 8 percentage points in six years, so growing 10 over 12 should be achievable. We agree the logic but stress the need for major change if we are going to achieve this worthy goal.