New Zealand and Prosperity
New Zealand is not a self-sufficient economy. It has to trade with other countries to survive let alone earn sufficient foreign exchange with which to invest in expansion, procure raw materials for its ‘value added’ industries and service the population’s consumer demands.
The extent to which New Zealand can expand its trading potential is the major key to any improvement in the country’s prosperity. It is that simple. If New Zealand does not sell its natural beauty, goods and services to overseas buyers, or be able to entice overseas commercial organisations to set up shop in New Zealand, then it is not possible for New Zealanders to prosper. There is some scope to add to New Zealand’s prosperity from within, through the internal sale of goods and services produced by New Zealand based industries, but only if the produce and services are cheaper than those imported them from overseas. In reality there must always be a trade off between the cost of supplying social welfare to the unemployed and New Zealanders finding employment with companies that supply goods and services that could be sourced more cheaply from overseas suppliers. In addition, although most Western economies state that they support the concept of free trade, most do not practise what they preach as proven by the existence of government subsidies and import tariffs to protect the internal production of goods that could be purchased more cheaply overseas. Although protective import tariffs is a short-term solution to some social problems, it is not a catalyst that could be used to trigger developments that would lead to an improvement in the country’s prosperity.
New Zealand is far removed from the rest of the world; it is an island country with limited mineral wealth but it does have an abundance of natural resources from which it currently derives over seventy-five percent of its overseas earnings. Some products are exported in their raw state and some processed containing a ‘value added’ component. In addition the top 15 commodities account for over eighty percent of export earnings, with tourism the largest single earner at around thirty-seven percent. (NB. Statistics were obtained from the New Zealand Customs who deal in produce and not services). New Zealand also exports its expertise, especially expertise in farming. Whether, imported expertise balances the value of similar exports, is not easy to ascertain.
New Zealand’s remote location, geological formation and climate, as well as being its major asset also limits the types of economically viable goods and services it can offer to the international trading environment.
For New Zealand to be more prosperous it has to:
• Do what it can do well. Desist from export drives that promote ventures that are not suited to the country’s location, natural resources or social structure.
• Expand and grow existing export oriented activities that currently inject healthy foreign exchange into the economy.
• Identify and grow new export oriented activities that provide products and services that are in demand and can be delivered to markets at competitive prices.
• Increase the number of trading partners
• Identify what goods and services internal industry can supply more economically than by importing them from overseas. Support those already engaged in such activities and encourage commerce to invest in those not already in operation.
• Learn from other countries that are similar to New Zealand and emulate their successes.
In order to carry out this vision three things are required, clever promotion, skilled resources and money. A solution can only be found and implemented through close co-operation between the government, commerce and education where:
• Government moves towards the creation and maintenance of a social and economical environment that is attractive to overseas investors and supports and encourages export-earning commerce.
• Commerce identifies implements and expands viable export earning opportunities. This includes obtaining investment that will be initially, mostly sourced from overseas.
• Education provides most of the skilled resources.
Some of the biggest existing hurdles that New Zealand needs to overcome are:
• Its relatively high level of business taxation
• Low levels of export incentives. A ‘free world wide trading’ environment would also help, but New Zealand can only support, and not impose this principal on its trading partners.
• The lack of support from within the populace to implement measures required to turn the economy around. A massive promotional drive would be required to educate the population to appreciate that prosperity provides benefits for even the lowest paid section of the community. At a guess around 70% of the population currently relate the word ‘prosperity’ to the rich and ‘well off’.
• The lack of a fair personal taxation system that rewards success without imposing any additional financial burden on lower paid workers. One way of achieving this could be to have a flat rate of taxation that only kicks in at a certain level of personal income. For example this level could be set at the current amount paid out to people on the ‘dole’, or the government pension for single beneficiaries. By-products of this type of taxation system would be to reduce the effort required to administer the PAYE taxation system and provide a base from which to eliminate the poverty trap.
In summary, the economy can only grow if leaders within government, commerce and education share the same vision and work together to play their part in the road back to prosperity.
© Copyright; Foundation for Economic Growth and various authors. Individual authors retain their own copyright.
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