Local headlines are constant harbingers of economic bad news: from productivity declines to persistent inflation and
losing Kiwis to Australia where they’re paid more and their dollar goes further. It’s clear we’re in trouble - but we
won’t fix these issues without a step change in productivity which will only be achieved if we completely rethink our
economy and the role the Government plays in shaping the future.
Rupert Carlyon, Founder and Managing Director of Kōura Wealth, weighs in on the three key shifts in mindset that are
essential to shifting the dial.Rupert Carlyon. Photo/Supplied.We cannot copy our way out of crisis
Lacking their own creativity, our politicians often look to other nations for solutions; pointing to foreign examples
for answers. More often than not, they will look for countries where the ‘politics’ align with their own. National will
hold up low-tax nations like Singapore or tax arbitrage havens like Ireland as their role models; while Labour often
hold up high tax, high social welfare Scandinavian countries as their nirvana.
This, however, is akin to trying to fit a square peg into a round hole. Copying other nations' models might offer the
appearance of a plan, but won’t lead to sustainable long-term success because we are extremely different.
Our starting point, instead of looking outward for a template, should be a hyper-focus on what makes us unique as a
nation and how we can leverage that. We need solutions that are tailored to our unique circumstances and strengths
rather than strategies that leverage other people’s successes.
New Zealand has always prided itself on its ingenuity and ability to punch above its weight. This is the time to double
down on those strengths. Our homegrown businesses, world beating agriculture, thriving startup ecosystem and world-class
research institutions offer a great starting point for nurturing expanding growth and job creation.Time to pick some winners?
For 40-50 years, New Zealand’s economy has relied on growing raw commodities and exporting them. New Zealand meat, wool
and wood are famous abroad; but albeit inspiring, this positions us at the very bottom of the financial food chain,
despite having an enviable free market we are dependent on the cycles of commodity prices and other countries demand
cycles.
Despite significant effort over the past 50 years, we have never managed to shift up the value chain and if anything,
the share of raw materials sent offshore for processing continues to grow (some would argue because we have never really
done it properly).
The antidote? A fundamental shift in our identity from a nation of ‘producers’ to experts in ‘production'. When we move
on from exporting raw materials; to manufacturing high-value products, we’ll not only boost our economy but also create
jobs, spur innovation and build a more resilient economic framework.
How do we do this? We need to be brave and very focused on making this happen. In practice, this means picking the areas
we want to grow and creating an ecosystem around them. Using forestry as an example, we could create an ecosystem that:Focuses our country's universities to develop improvements in production techniques and products to ensure wood products
are used more often and are cheaper to manufacture here than offshore.Makes the planning and resourcing requirements for building large scale manufacturing facilities easier.Uses state funds to support (via loans, not handouts) the significant investment required to build out or scale global
facilities.Makes it more expensive to export raw logs (think levies on raw log exports) so domestic producers can get logs cheaper
than their foreign competitors (who are often state sponsored).It’s time to incentivise the right tech
Locally New Zealand’s tech ecosystem has outsized potential but is crying out for policies that actively support tech
development, from grants and tax incentives to infrastructure investments and talent development programs. These are
crucial, with any cuts in funding responsible for curtailing the industry’s ability to drive economic growth and
position New Zealand as leaders in innovation. Every other country in the world has a plethora of tax incentives or
other programmes in place to support tech innovation and small businesses.
In addition, we need to pick our winners and move away from generic support to being hyper-focused on technology in the
industries and areas where we want to win. Given our agricultural strength, for instance, agritech might be a sure bet
as the world wakes up to the need for more sustainable, climate friendly and data-driven methods of producing food.
Alternatively, if we want to win in the Fintech world - we need a domestic regulatory regime that makes it easy for
fintech businesses to innovate.
Amidst persistent economic challenges - from inflation battles to the Kiwi brain drain - NZ stands at an important
crossroad: imitate; or innovate. Only one of those approaches represents an economic strategy with the power to bring
about lasting and effective change.