The Growth and Innovation Strategy: Next Directions

These notes were prepared are for a discussion in July 2004. They do not represent the interests, views, or expectations of anybody else.

Keywords: Growth & Innovation;

In February 2002, The government set down its growth and innovation strategy in Growing an Innovative New Zealand. These notes are about where it might want to do next.

As will be evident a major influence on this is the Growth Culture report which asked New Zealanders what they thought of economic growth. They said is they had higher objectives than GDP per capita. However an appropriate growth strategy is necessary to attain those objectives. The success of this growth strategy may not necessarily be measured by GDP, but the general principles of promoting economic growth still apply.

The Growth Culture report, that is how New Zealander’s think about these issues, is not inconsistent with the Growth and Innovation Strategy (GIS). Indeed it gives a foundation to develop it.

The Vision Statement

The vision statement of GIS was in two parts. The opening overview is

A New Zealand Vision
A land where diversity is valued and reflected in our national identity
A great place to live, learn, work and do business
A birthplace of world-changing people and ideas
A place where people invest in the future

Personally I find the vision moving. However I am surprised it contains no reference to ‘social coherence’. It is implicit but I wonder whether there should not be a fifth line which summarises the first four, perhaps ‘A New Zealand where we want to participate in and belong to’. (A la the 1972 Royal Commission”)

The Growth and Innovation Framework

GIF states ‘Policies will be aimed at sustaining:
A stable macroeconomic framework.
An open and competitive microeconomy.
A modern cohesive society.
A healthy population.
A highly skilled population.
Sound environmental management.
A globally connected economy.
A solid research, development and innovation framework.’

I have wondered why there is reference to a ‘healthy’ population but not to an educated one. Perhaps the fifth policy principle should be extended to
A highly educated, creative, and skilled population.

Noting that one element of GIF is a ‘modern cohesive society’ the logic of the previous section might be to move this up to the vision statement.

Brand New Zealand: A Major New Direction?

There is much talk about ‘Brand New Zealand’ presented as a an approach to presenting New Zealand products to the rest of the world. The Growth Culture research suggests that to do this in an narrow way – say the decisions of an expert group focussed solely on business success (and then perhaps of only one or two sectors) – would generate widespread cynicism among many New Zealanders. What is needed is a Brand New Zealand which New Zealanders own.

It might be developed the following way. It would start by asking how New Zealanders want to present themselves to the world. Their desired image of their identity is not just of products, but would include sporting and cultural success, and of themselves as people. None of this would conflict with commercial requirements: indeed with a little skill it could enhance it. It is likely to be wider than the ‘clean green’ (and 100 percent) image which is used heavily in the tourist industry, but excludes New Zealanders as decent people with ability ingenuity and drive – and a sense of humour. (I belong to those who think the kea would be a better national bird, that the kiwi.)

(I ponder if we should also ask about aspirations. This was triggered by my thinking about design (discussed below), and the thought that New Zealanders might like to have a better design sense. I fear that any survey of expressed aspirations would be more in terms of clean finger nails and asking that the young use proper grammar.)

Following the survey, an expert group would distil New Zealander’s expectations into a set of possible images, brands, symbols, and the like. I imagine they would want to build in a bit about how other sees us. They would observe that what New Zealanders claim as their ‘unique’ values are claimed by most other cultures, but there are symbols which are unique (e.g. kakapo, kea and kiwi) and build on to these.

The expert group would then go back to New Zealanders and ask them to judge and prioritise the various brands/symbols/images. I see this as an open national debate. The exercise would not be looking for a single symbol, but a cluster of them, with which New Zealanders would be comfortable. (The symbols must be inclusive.) Of course there will be cynicism, and I’d include in our identity the notion that New Zealanders can laugh at themselves.

There would be a board of national leaders (perhaps presided over by an ex-governor general) who supervise the experts and the process. The board would include national icons including some business leaders. Noting the last sentence of the previous paragraph I’d include a national humorist (with an agreement that he/she may publically parody the exercise). Perhaps only a core of the panel should be selected, and they could consult with the public for the rest. If they chose the All Black and Silver Fern captains then so be it.

I dont see any reason why the process might not include a discussion on the flag (or flags), although this must only be a part of it all, and a minor part.

The role of the economy should not be any more important in this branding exercise, than the role of the economy in attaining our national objectives – that is central. Similarly for the role of business. It goes without saying that the Maori are an integral part of any New Zealand international brand, but as the vision thing hints, we have to move away from the biculturalism which dumps all non-Maori into a single group, and recognise that we are a multi-cultural society.

Global Connectedness

In my view Global Connectedness is the key element of the GIF. The following are some ways of furthering it.

Branding: See above.

Infrastructure: In the last few years considerable attention has been paid to domestic infrastructure – roads, rail, electricity and water (see sustainability below) is coming on – although it will take a decade to deal with the backlog. In the next few years we need to pay attention to the external infrastructure – seaports, airports, broadband links.

I would also like to see a report on airfreight, which is likely to become more important in New Zealand’s export future as more high-valued low-weight products are produced. The report would be a review of the industry, in terms of its existing business and capacity and future prospects, without necessarily any policy recommendations. Ideally it would alert commercial airfreighters into industry possibilities, and exporters to the potential of airfreighting.

Free Trade Agreements: Our FTA strategy is unclear. Certainly prospects from the Doha Round look very promising – we should know within a fortnight or so – and that has to be the priority. The role of some of the proposed FTA is unclear. Is it that we will do deal with anyone who offers, or is there some overall strategy? (I understand a little why the China and US deals are important, but I am in a very small minority. I join the majority by not understanding what our strategies towards Australia or EU are.)

It may be that out of the branding exercise will come some distinctive feature which may influence our FTA approach. For instance if we like a ‘clean green’ New Zealand, where does the environment fit into an FTA?

Migration: New Zealanders report they dislike migration (despite the high proportion of us born overseas). Again we need to think about it more carefully. One issue is what are we doing to attract more New Zealanders home, and to make use of the offshore diaspora who still want to be a part of the nation.

Economic Structure

World economic trends, especially technological innovation and the falling cost of distance, plus the Doha Round and some key FTAs (China, possibly ASEAN) is going to change the economic structure of New Zealand. I have written elsewhere about this, arguing that service exports will continue to rise, while the share of general manufacturing (and the importance of the Australian market) will fall, to be replaced, one hopes, by intra-industry trade of high tech, high skill, high quality manufactures and other products (to other rich nations).

Here are some industries which may need attention – perhaps just a review:

The Doha Round: Some industries are likely to benefit significantly from the Doha Round. Are any policy responses required?

The Food Industries: A review of the export food industries is being undertaken.

Cut Flowers: In my view is this has an especially promising export prospects if we go about it the right way..

From General Manufacturing to Specialised Manufacturing: What needs to be done to facilitate this shift as changes in the world economy contracts New Zealand’s general manufacturing.

Clinical Stage III Trials and Pharmaceutical Manufacturing: These are two industries arising out of the existing biopharmaceutical research industry, where suitable government assistance could lead to world class industries appropriate for a growth and innovation strategy.

Furniture: There are things going on in this industry which might be worth pursuing.

Infrastructure and Airfreight: Above

Non-tourist Export Services: As for airfreight we need an overview to get a sense of what is important, even though there may not be any immediate policy issues.

Design: The Design Task Force missed the boat. It was too focussed on ‘the’ design industry, and not focussed on ‘design throughout industry’ (or – as the Growth Culture Report would suggest people would prefer – ‘design through life’). How can we raise design standards and sensitivity throughout the community from the shop floor (and the preceding education and industrial training) onward to the New Zealand consumer?

Smart Workplaces: Smart Workers: What further has to be done here? Industrial training is mentioned below.

Regions: I have never been sure where regional policy fits in GIS

Public perceptions of the first phase of GIS got overwhelmed by the focus on the four industry taskforces. The second phase still needs their equivalents, but they should be seen much more contextually. So I have mixed in more of them, and at different levels of involvement.


Savings gives an individual and a nation independence. The government has had an excellent saving record in recent years. (It is also consistent with its stable macroeconomic framework). The household sector’s record is much less satisfactory.

Long Term Contractual Household Savings: There is a committee of enquiry at the moment. I’m hoping it will come up with a proposal for encouraging long term contractual households savings, say with a fiscally neutral incentive in which deposits into and returns on the scheme are income tax exempt, but withdrawals are taxed (technically it is EET). Unless we have something really imaginative (but consistent with economic theory) we are not going to get the savings lift we need.

: Student borrowings for tertiary courses involve financial dissaving to fund human-capital investment. This dissaving is offset by the government savings. Even so, we need to try to reduce the student debt burden. Among the possibilities are:
– improved student allowances;
– more incentive to repay early;
– partial remittances for staying on in New Zealand;
– partial debt remittances for persons working and living well away (say 80 kms) from major tertiary centres (thus sharing the benefits of tertiary education around the regions).
– partial debt remittances for persons working in socially valued low paid occupations (such as charities);
– partial debt remittances for parents at home with small children;
– is there a place for some employers to contribute to the paying off employee debt?
(By ‘partial remittances, I have in mind that the government may write off $1000 p.a. in each case.)

Unlocking Government Investment Funds: There are a number of government investment funds which are administered by separate boards of independent trustees, without any government direction, other than as specified in legislation. (ACC, GFS, NZS) There needs to be a review as to whether there are any artificial barriers which prevent them investing in New Zealand (but not in anyway compromising trustee independence). Possible new lines include the funds
– investing in SOEs and other government owned or part-owned corporation;
– investing in venture capital opportunities.


The international surveys suggest New Zealand produces one of the top secondary educational performances in the world. We need to strive to stay there. The priorities of focussing on the teaching process and on the lower tail are sensible ones. We also need to get our tertiary system up to the top of the international top too. (The – albeit fragmentary – evidence is that we are producing two many certificates and not enough degrees.)

The New Zealand Brand: Suppose we construct/identify a New Zealand Brand/Image. How is the education system going to respond? Some sort of core history/social studies may be key here, albeit with opportunities for diverse responses. It should not neglect the economy (and consequentially businesses role) in the growth of the nation (as far too much New Zealand history research and teaching does today).

: What contribution can the education sector make to enhancing New Zealanders sense of design (above) – at least among younger generations.

: Tertiary education seems to need a complete review, at least of funding (and the related quality control, or lack of it), which is very influential on student choice (much funding seems wasted). The totality of the needed reform is too large to go into here but there needs to be greater focus on the provision of generic skills, the provision of industrial training (with an experience dimension in them), and of genuine education.

Research and Development

We need to give more emphaisis on the effective international tramsmission of research and development.

Compliance Costs

Business: The government has a program of reducing compliance costs on business.

The RMA: Many issues have been addressed and waiting times are being reduced. Even so it is a continuing issue with considerable conflict between developers and community, which probably cannot be readily resolved.

People : However there is no parallel program for reducing compliance costs on people. Was the question of the compliance costs of obtaining a new passport including vias renewal considered when the life of passports were halved from ten to five years? There needs to be a focussed effort within the public sector of simplifying the interactions by individuals who approach it. Incomprehensible websites are too common, symbolising the tendency for the designers to forget that they are meant to be communicating with the public. The private sector is under competitive pressure to communicate with its customers. The public sector has to make a special effort to do the same.

Both the Work and Income and Inland Revenue could make available their software which are used for determining entitlements and income tax.

The Digital Strategy is under development.

There will have to be a sustainability component to the GIS (integrating the 2003 package). Areas which need particular attention are energy, water, and the (see above).

Footnote on Global Connectedness

It is a common moan about New Zealanders that we are insular. This misunderstands the actually situation. The irony is that the moaners are insular, for they have little sense of how insular is most of the rest of the world. We have one of the highest ‘born overseas’ proportions in the world, we are great global travellers travelling far from home, we are major exporters and importers (especially when adjusted for the difficulties of location, and that we cannot be a significant re-exporter), our private donations for foreign assistance are among the highest in the world and we take in refugees with generosity, international news is a central feature of our media and events are debated in the pubs and cafes of the country (admittedly not always well informed, but the intentions are there). Some of these statistics are consequential on the smallness and location of the country, but it is just ignorant to say New Zealanders are insular. I say this because we underplay our global connectedness. At issue is improving it, especially for business, in the context of a rapidly changing world.

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