Technology vital to lift NZ out of OECD doldrums

New Zealand needs to invest in research and development and higher education, says economist

David Skilling, director of the New Zealand Institute think tank, gave the IBM Forum 06 a rather discouraging picture of New Zealand’s business performance to date.

We need more productivity-boosting technology, he says. And a more highly educated workforce would be useful too.

Skilling put up a succession of charts with this country near the bottom of almost every one.

The decline in New Zealand’s per capita GDP trended downwards from the 1970s to the 1990s, but shows a modest reversal in the past 15 years. Australia tracks a similar profile but 25 to 30% above, while Ireland shows a meteoric rise.

For decades, New Zealanders have tried to improve national fortunes by working harder. We apparently work longer hours than people in most other countries but have the lowest productivity per hour of any OECD country.

Productivity improvement implies investment in technology — “and I’m not saying that just because this is an IBM conference”, says Skilling — it also means investment in human capital.

“We need to gear up and make the required investment; it won’t happen automatically.”

Human investment, for Skilling, means research and development and higher education. On both counts, New Zealand scores badly, although, puzzlingly, so does Ireland, which has experienced dramatic growth and reorientation of its economy.

“We talk about a knowledge economy but we don’t invest in it,” Skilling says.

He also fingers “low levels of international economic engagement” as contributing to low productivity. New Zealand exports less than most developed countries, OECD figures show.

“There are lots of myths about us ‘punching above our weight’ in international markets, but in reality we are one of the few countries whose proportion of foreign direct investment has decreased since 1990.

With the help of ICT, cross-border flows of capital have increased markedly in other advanced countries, he points out. Our businesses must try harder to forge links with overseas businesses. Ironically, but not surprisingly, given salary levels, we have the largest proportion of our citizens working overseas of any OECD country.

“We talk frequently about innovation, but there must be an increased focus on where we look for innovation. We should cultivate the habit of looking more outside than inside.”

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