Time to pull our collective heads out of the sand - 24 August
Yesterday’s release of Treasury’s Pre-Election Economic and Fiscal Update (PREFU) provides a fairly sobering forecast of
our ability to grow wealth in and for New Zealand, say the New Zealand Manufacturers and Exporters Association.
NZMEA Chief Executive, Dieter Adam says, “We have to face the reality of our lack of economic development in New
Zealand. And now is the right time to challenge New Zealand’s leading parties to tell us what they are going to do to
push our economy towards a more prosperous future for everyone.”
“For the next four years (2018 to 2021) Treasury forecasts a decline in the rate of absolute GDP growth in 2020 and
2021, with a similar decline in the export growth rate, down to just over 2% in 2020 and 2021. By then we’ll be four
years away from the current Government’s goal of growing the share of exports to GDP to 40%, and further away from
reaching that goal than ever.
“These observations sit alongside our own, and Statistics New Zealand’s data on exports of elaborately transformed
goods, which have been in decline for the past 18 months or so.
“Treasury’s forecasts for the increase in GDP, as modest as they may be, are still based largely on a growth of labour
inputs due to immigration for 2018. After that, miraculously, labour productivity will take over as the main driver of
GDP growth. When it comes to explaining what this expectation is based on, given that for the last three years, for
example, we saw virtually no productivity growth in our economy, the report remains silent, but states that
“productivity growth may be slower than assumed if labour inputs grow more strongly than expected” - meaning if the
forecast drop in immigration numbers doesn’t eventuate.
“So, what have we actually got here? An economy projected to grow at modest rates overall, especially in the second half
of the outlook period (2020 to 2021), and growth rates for Real GDP per capita, the real measure of wealth creation, of
1.2% and 1.0% in the same period. And all of that based on a miraculous increase in labour productivity from around zero
currently to between 1.5% and 1.8% from 2019 onwards.
“We suggest it is time we have a serious debate on how we can sustainably improve our ability to grow wealth in this
country. Growing wealth, so we have more money to pay for a better health system, better education, and other public
services. You can’t do that if most of the growth in your economy comes from immigration, or when many people’s
perception of increased wealth comes from rising asset prices fuelled by ever-increasing private debt.
“Growth in wealth comes from growing the output per hour worked – and that, as the late Sir Paul Callaghan kept
reminding us, will only happen if we achieve growth in those sectors of our economy that produce and export high-value
products and services. Our manufacturers, together with other sectors of our productive economy, stand ready to
contribute. It’s about time the major political parties did their bit by making this a key focus of their efforts” says
Dieter.
ends