Charismatic

Something someone else posted here:
However within the OECD the only folk that work longer hours than us (per capita) are in Iceland IRRC. Is it fair to conclude that it's not that New Zealanders aren't materialistic but that wages here are very low, as is productivity?

This kind of ties in with something I was thinking about a few days ago, most of the “make work” schemes I’ve heard about since I first arrived have been to create jobs in low wage industries like tourism rather than more skilled positions for people to develop real future careers in. Yet interestingly we, until recently and even now to an extent, have quite a low unemployment rate.

One brilliant thing about New Zealand is that we have a highly qualified workforce, more than 50% of New Zealanders have a tertiary qualification. Indeed we fare very well compared to other industrialised countries.

Of course there are many reasons for low wages chief amongst which, as far as I can see, are production of low margin products (dairy, wool, timber, crafts etc.) and low investment rates in companies. Now there isn’t much you can do to promote high value products except try to further industrialisation, particularly in regards to manufactured goods (be that make building manufacturing plants etc. cheaper/easier to build and reducing energy costs). What about investment rates in New Zealand companies? How could we best stimulate investors to “buy into” the NZX (both stocks and bonds) such that companies may borrow capital more easily and at lower rates? Some people blame the strange laws around property taxation, which may be true but given the interest many politicians (not to mention the many voting homeowners) have in real estate that is unlikely to change soon.

So how do you think the future will look like here? Are we fated to low wage activities like primary production and tourism or is New Zealand due for a surge in per capita income in future years?

southerner

Depends whether you are an optimist or pessimist.

Specific factors affecting NZ are:
- small business mentality/low productivity
- isolation from markets
- high average cost of infrastructure (roading/broadband/ports/etc)
- produces surplus food in a world where the food equation is getting very stretched
- abundant natural resources (water/renewable energy/land for housing/etc)
- great education system
- a banking system that is relatively stable.

On the whole I'm a optimist.

As to what to do about investment - my personal preference is that a capital gains tax of some sort is phased in. Of course it will have to be called something else - maybe IPT (Investment Property Tax). Kiwisaver will also make a difference, as will the Cullen 'Super' Fund which will between them create more of a culture towards investing in NZ equity markets rather than property.

irnbru14

A big factor that will hit the income of the whole country from next summer will be the drop in tourist numbers, traditionally those coming out this far from wherever home is have booked 9 months to a year ahead, especially those on cruises or organised tours, so a delay in the effect of this has left tourist figures bouyant at the moment, delayed effect as people won't be travelling as far, certainly not as far as the end of the earth down here, and drop in tourist spend will hit NZ more than most of teh rest of the market collapse problems IMHO

southerner

Although the Aussies will make up for some of the drop off in European/North American visitors. Interestingly there are more cruise ships than ever booked into Dunedin for next summer.

The other thing I read today was that tourism revenue is holding up well even if the number of visitors is off a little, due to the weakness of the kiwi dollar. Those tourists that are visiting have been spending more than before. Also airfares are getting ridiculously cheap as fuel prices drop and as airlines try to keep their planes full. Ultimately as long as the airlines themselves survive they have every incentive to keep their planes in the sky and as full as possible.

MrCFD

You are right, productivity is a huge problem here and that is obviously reflected in the wage rate (the marginal product of labour).

One thing to mention though - you mention about increasing investment in NZ companies through the NZX. This will never happen. The NZX are small cap companies with very low liquidity. Why would someone invest in what is basically the equivalent of a small speculative mining stock on larger exchanges that may not have buyers there when you need to sell (or vice versa) and that the market can be pushed quite easily by whatever the big players in the market want. The only way to encourage more investment through the NZX would be to merge with the ASX as the NZFOE (NZ Futures and Options Exchange) did with the SFE (Sydney Futures Exchange). Also, listing on a public exchange is not a way for companies to "borrow" money, it is a way for companies to raise money through selling tiny chunks of itself.
That said, encouraging investment in the NZX would stimulate the secondary market.

MrCFD

Capital gains tax is about as useful as a National government at the moment. If they get the money, they are not going to spend it in this economic climate, so it is of little use right now (as they certainly will not be crowding out private investment). Capital gains tax would most definitely be a distortionary tax, which would drive us deeper into the recession.

sr71

It's actually disgraceful how NZ has been managed.

It could easily have been another Singapore - a small highly educated country that had ability to be innovative and adapt quickly to new technologies. Instead they have chosen to languish as a large 'Pacific Island'

There is no incentive for smart people to stay here, and many, many Kiwis live a very selfish existence with an "I'm alright Jack' mentality which prevents society moving forward with any large infrastructure programs.

The world is full of examples of Kiwis that have made it big, or have been extremely successful - not because they are Kiwis, but because other countries have afforded them the opportunity to do so.

there doesn't seem to be any genuine desire for the country to 'get ahead' and move positively into the future. It is too small-minded to do that.

Genesis

[QUOTE=sr71;7551922]It's actually disgraceful how NZ has been managed.

I have to say as a layman NZ seems well and totally shafted from a fiscal/ business point of view. You only have to look at the finance house debacle that the govt of the day ALLOWED to unfold without taking ANY action..which they easily could have...they just could not be arsed.

This country is in a shambles from an economic standpoint, the NHS is propped up by people like Kate (my wife) and all the other emigres who keep it going..pretty much like all the other skills shortage areas.

This country has HUGE potential but somehow its all been pissed up the wall. Fortunately Kate is in a secure nursing job, our life savings are gone thanks to finance house fxxk up so no more money to lose!!!!!!

One day the good ship NZ (with someone wise at the helm) will rise from the ashes like a phoenix and be in a position of strength..and in comparison to the UK and their parlous state of affairs I see little difference..so might as well be here with empty beaches and less day to day stress aye??

The flip side is that it will not rise from said ashes and will be doomed for an eterntity to be a less than mediocre world player. In that case last one out would you please turn them off?

whitesand

I wouldn't say that NZ has 'abundant natural resources'. Compared to OZ the country has very few resources. That's why the standard of living is much lower than OZ.

sr71

It has actually got quite a bit of natural resources, obviously nowhere near as much as Oz - but IMO Oz is a stupider country in many ways. They have, and are, making a lot of money from their natural resources but they are very similar to NZ in that they don't seem to want to develop a 'smart' economy. In fact I actually think they are behind NZ in many respects including IT. And again, find a successful Australian and they are usually a Kiwi

MrCFD

I think it is a tie for being stupid. It doesn't matter that there are successful kiwis in Oz. The fact is that they are in OZ contributing to their economy and spending in Oz - doesn't sound stupid to me!

Payens

Although I agree with sr71 that NZ is economically behind in so many ways, I think the assertion that it could 'easily' have been another Singapore is slightly false. If that were the case, then surely we would have seen multiple examples of other 'Singapore's' around the globe, but this isn't the case.

Singapore has, from an economic perspective, important natural and political advantages that NZ doesn't. For example, geographically it's perfectly situated as a hub between the Asian economies - meaning it's an ideal trade interface between Asian countries and can easily tap the skilled workforce from nearby highly populated economies. Secondly, the same government has been in control for decades, as their political process although technically democratic, is mostly authoritarian* compared to western standards (same government in power for decades). This has allowed Singapore to implement very long term economic plans without political opposition.

As for the future I'm pretty optimistic for the outlook for NZ, for the reasons outlined by southener above, but the major issue not raised so far, is the refinancing of the massive current account deficit relative to GDP (due mostly to kiwi banks borrowing money from abroad to finance public household debt).

* I've not been, but my relatives who have been ex-pats there, tell me you get fined if you don't flush a public toilet after use or caught with chewing gum and they have capital punishment

Vile

Becoming another Singapore is something to be avoided at all costs. Who wants to live in an (effectively) dynastic dictatorship police state? Also, Singapore's economy is not all it's cracked up to be when you evauate it more closely - or so I'm told by friends who know more about this sort of thing than I. As for large infrastructure projects, I live in a place which is very fond of these white elephants - Hong Kong has been a major wealth creator for engineering multinationals over the last century-and-a-half. They ruin the environment, create large amounts of short-term unskilled employment for largely migrant workers, and make a few people very, very rich indeed.

The food in Singapore is significantly better than in Hong Kong, though, as is the landscape architecture!

Charismatic

We actually have have some potential for development of natural resources .

Just to add here that I don't think New Zealanders are very ambitious either, they do what they know and that suits them very well thank-you-very-much.

Black Sheep

C - do you have a source for this statistic that you could link to please? Thanks