Medium Term Economic Issues: a Loose List.

Keywords: Globalisation & Trade;  Growth & Innovation;

1. Macroeconomic Issues
            1.1 The International Financial Crisis is leading to a world economic recession. Nobody knows how deep or long it will be. It is bound to impact on New Zealand and will take up a lot policy time in the near future.
            1.2 A major strategic issue is the extent to which the growth strategy should be maintained (perhaps with reordering of immediate priorities to reflect different opportunities) and the extent to which it will be abandoned for other objectives.

2. Resources
            2.1 What further initiatives need to be taken to allow for the rising price of oil, and hence energy generally, in the medium term. (Note it will not rise indefinitely since alternatives will cut in.)
            2.2. What is the total impact from this on food (especially given the alternative of biofuels) and related resources (wood)?
            2.3 The impact of global warming and the mitigation policies need to be taken into account.
            2.4 The world is facing a water shortage (which the rising cost of energy will exacerbate). Is New Zealand well placed to seize its comparative advantage here.
            2.5 As ocean stocks of fish deplete, the price of fish will rise. New Zealand has one of the few fishing regimes which is pretty well sustainable.
            2.6 It seems likely that there are substantial oil or gas reserves offshore (especially in the Great South Basin) which will become commercially exploitable as the oil price rises and the technology of search and recovery improves.

3. Globalisation
            3.1 Globalisation is driven by the falling costs of distance. The rising price in oil is likely to slow down goods and people movement, or even stagnate it for a while (but probably not longer than a decade).
            3.2 Improvements in efficiency will, to some extent, offset any rise in transport fuels.
            3.3 Service tradeables involving ICT are much less affected by fuel cost rises.
            3.4 Do we give any credence to the theory that the next phase of globalisation will reverse the fall in the secular decline of food terms of trade, and instead have the price of manufacturing fall relative to the price of foodstuffs (and other resources)?
3.5 What will happen to trading arrangements?
            3.6 What will be the pattern of future export destinations?
            3.7 Is there any limitations on how much we should expose the New Zealand economy to overseas forces?
            3.8 What is the relevance of intra-industry trade to New Zealand?

4. One Leg or Two?
            4.1 Whatever happens, one leg of the future New Zealand economy will be dependent upon its resource base (including tourism).
            4.2 To what extent should New Zealand be a commodity exporter living on the rents from the commodities, rather than a sophisticated processor of them. (e.g raw wool for auction with the alternative of Icebreaker)?
            4.3 Has traditional manufacturing much of a future of New Zealand (except where it has to be located close to the consumer), given that low-cost producers can ship increasingly more cheaply..
            4.4 Is there a second leg to be based on creativity. quality, innovation and knowledge? Can we think about it more rigorously than the platitudes in the previous sentence?
            4.5. To what extent is the production of sophisticatedly processed commodities and a strategy involving a second leg different?
            4.6 And how does the non-tradeable sector (mainly services) fit in?
            4.7 To what extent, and by how much, will changes in the pattern of production matter?
            4.8 Or can we continue to think and strategise about a single aggregate measure of production like GDP? (How how far out can we think about a single commodity economy?)

5. Production Techniques
            5.1 What manufacturing will become more decentralised as a result of cheap information flows (note that music and literature as examples where this is already happening).
            5.2 Will production economies of scale become more or less important?
            5.3 Will regional economies of scale (agglomeration) become more or less important?
            5.4 If regional economies of scale remain important, what does that say about the future of Auckland? (And what do we mean by ‘the region of Auckland’?)
            5.5. Do we have to develop Christchurch as a second agglomerative node?
            5.6. How important is infrastructure and networks? We need to think about these in their particularities instead of as a single concept, since different types have different economic implications.
            5.7 How do we encourage and sustain first movers (i.e. producers who start on a new product first)?

6. Factor Inputs: Labour
            6.1. It is a platitude to say that labour will have to become more skilled. Can we be more precise?
            6.2 What about degrees of specialisation and flexibility? Iusnt there a conflict here?
            6.3 Dont we need some relatively low skilled workers – say in residential day care homes?
            6.4 Is migration just a matter of avoiding us paying for the training of skilled workers (and supplying low-skilled workers we cannot provide ourselves), or does it have any other purposes?

7. Factor Inputs: Capital
            7.1 Will savings recover to more positive levels (and in which sectors – household, business, government)?
            7.2 To what extent is savings and investment inhibited in New Zealand by a lack of (or narrowness of) opportunities?
            7.3 What should be the balance between savings invested in New Zealand and invested overseas.
            7.4 Are there any limits on foreign investment in New Zealand?
            7.5 What will regulation of the financial industry look like after the international crisis settles down?

8. Technology
            8.1 It is a tautology to say that (per capita) economic growth is a matter of ‘higher productivity’ (which I suppose is why we can all agree on it). It is not a platitude to say that it dependent on the application of new technologies.
            8.2 What are the key (across industry) enabling technologies likely to be ? (Possibly biotechnology, design, information and communications technology and new materials?)
            8.3 Where do the new technologies come from? Have we the right balance between those that come from overseas and those which are domestically generated.?
            8.4 Can we imporove the uptake of foreign technologies (including the speed of uptake)?
            8.5 Have we a labour force (managers and those on the ‘shop floor’) who are sufficiently responsive and able to take up the new technologies.
            8.5 The adoption of new technologies usually involve some sort of investment (even in the most prosaic instances). Have we got the right capital flows to enable this?