Population of 15m would spur export success: NZIER

Exports are more likely to grow if governments target a population of 15 million by 2060 than by creating arbitrary targets for export growth, the New Zealand Institute of Economic Research says in a paper for the export arm of Business NZ.

The report also recommends considering tax incentives or grants to encourage large, successful New Zealand companies to remain based here, instead of targeting all assistance to companies just starting out as exporters.

That recommendation, which carries no detail, was "very much their own", says Catherine Beard, executive director of Export NZ, which commissioned the report from the independent economic consultancy.

"That was probably one of the more controversial recommendations. It's not generally the sort of thing we recommend."

But there were valid questions about how to maintain the economic impact of New Zealand companies that are bought by foreign investors or moved closer to foreign markets to continue their global growth.

Titled Scale Up or Die, the NZIER report argues other successful exporting nations are not only closer to their markets, but also have larger home markets in which to create the scale needed for export success.

"If New Zealand's biggest impediment to better economic performance is an absence of scale, there is only one way to overcome this over the long term and that is to grow the population through more migrants," say the report's authors, economists John Stephenson and John Ballingal.

"You cannot fake scale. You have to build it."

NZIER has previously advocated a population target of 15 million in the next 50 years, the report notes.

Its authors also accuse kiwis of "egregious double standards" for opposing foreign corporate ownership when their home mortgages are largely funded by foreign capital, and say the Resource Management Act is more of a barrier than a help to sustainable economic development.

The New Zealand dollar remains high and a barrier to exports because government spending is too high, they say, with public servants costing more to hire on average than in the private sector and schemes such as Working for Families and interest-free student loans acting as "a tax on exports".

"Ongoing concern about monetary policy and its effects on the exchange rate is missing the fact that fiscal policy – tax and spending – is a bigger part of the reason for the higher exchange rates and flat output in the export sector."

The report also questions whether the array of government programmes to assist exporters represents repeated attempts to reinvent the wheel, accompanied by a lack of evaluation and impatience for results.

The authors say both there is "precious little evidence on the effectiveness of existing initiatives which try to help firms to grow their capabilities and to internationalise" while also urging policymakers to "give these initiatives time to work".

"While waiting around for something to happen, more information should be gathered on the effectiveness or otherwise of existing initiatives."

It suggests government funding to build businesses' capability may be justified, but questions whether the government is best placed to provide export promotion services.

The report also suggests mineral resource extraction could be an important source of growth, but only if governments have a plan for investing the proceeds wisely.

"With mineral wealth comes to opportunity to invest and build domestic capabilities and increase outward direct investment. This has worked exceedingly well for the Norwegians," say the authors.

The report also identifies iwi-owned and Maori businesses as a source of potential scale because of their greater long-term commitment to being based in New Zealand.

"Business success borne by Maori is more likely to be success and capability which remains in New Zealand and on which scale can be built."

(BusinessDesk)

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We have scale without increasing the population -- we are part of the Australian market. Idiots!!!

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Have we thought of the reality of this?
A New Zealand of 15 million would mean a population of at least three times that of today.
Auckland is congested and expensive enough with its current population of 1.4 million.
It would be bad enough with 2 million. but 3 million or 4 million.
Imagine Wellington with 1 million or Christchurch getting on for that much.
Hamilton would have half a million or more.
New Zealand needs to consider what is right.
5 milllion seems more than plenty.,

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What an insane idea. The rest of the world crumbles under over-population and we want more! Why more consuming, polluting resource hungry bodies is seen as neccesary beggars belief!

Vested interests pormote such nonsense.

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Amazing that someone has this kind of simplistic view. Expand the brain rather than using brute force is the key. The less we have this kind of simplistic thinking the better for NZ.

Singapore is roughly the same population size as NZ but they manage to ramp up exports through shear innovation and hard work ethics.

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And through a regulated state capitalist economy. Not complete free market like NZ.

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New Zealand is not a "complete free Market" as you assert. Justly go to set up the simplest of enterprises and before the day is out you will see how regulated and controlled a Market place we ave. Free it and population becomes redundant. Investment beyond your wildest dreams will flow into here.

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It is easier to set up a company and run business with more protection rights in Singapore than in NZ. Less corruption, less swindle, less cheating than NZ.

"Freedom" in NZ is more like "cowboy" type freedom, which is not very conductive to doing big business where rules and regulations to protect all parties are necessary. How many Ponzi schemes and finance companies ripping consumers off do you see in NZ. In Singapore people got thrown into jail and made bankrupt for cheating Charities. In NZ finance company goes belly up and you get slapped with a wet bus ticket.

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uh...just by the way, the reason Singapore has such high exports is because of it's location. Which is very strategic, in case you hadn't noticed. Like it's kind of central. New Zealand, on the other hand, is not a strategic location at all as far as exporting is concerned.

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Again all this simplistic view about Singapore location being its competitive advantage. You should spend some time there to study its economy and how their government works, rather than commenting from pure imaginative ignorant. This kind of self-excused is what holding NZ in backwater.

If you export brain power - as in knowledge-based products - location is not particularly relevant. If you export raw brawn power based products like meat, diary, log etc then location is an impediment.

Singapore has significant banking, e-services, financial and design industries.

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Exporting minerals doesn't create value adding jobs in NZ, but will in China!
So apart from mineral export what else is there? SFA.

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Agree with the sentiment that what we need is to commercialize innovation and put in plenty of hard work. There are plenty of current examples - Sir Peter Jackson and Tait Communications come to mind.
There is already a ready made market for NZ products and services in Australia and the Pacific region which are already our first and second generators of substantial trade surpluses in the $billions. More focus on these markets by the Government would be better than importing people to try and create a domestic market. I wonder how much Export NZ/Business NZ paid NZIER for the report? Their subscribers must be happy to see their funds spent this way.

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I must be a bit thick - they are talking about ramping up exports, so how does the size of the domestic market affect the size of the overseas market?

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A key subject and worthy of debate.
Let's hope that it's not just flagged away, like so many other things that don't fit the current ideology.
Very useful to take the head out of the sand every so often.
liberte

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Re the comment about Singapore earlier, I wonder why they have an aggressive immigration policy?

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Singapore has an almost non-existent birth rate due, in part, to the very high cost of living there and the high stress, workaholic lifestyle of its inhabitants. They're also quite choosy about who they let in and most expats who live there are temporary, not permanent.

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The report does ask the question : "If New Zealand's biggest impediment to better economic performance is an absence of scale ?

Most would answer no to that question.
How does the idea of scale tie in with the concept of an added value , further-processed , niche marketer?.

We produce sufficient protein to feed 20 million people. The problem is that it is sold in shiploads of 25kg bags in the case of dairy. The meat industry has made some progress in achieving more value.
Really the idea of NZ having scale in anything that we can export is quite ridiculous , but in any case lack of scale is not the cause of our poor export performance.
We have to get out of commodities, right?

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Let's go for it! We have untold room in NZ for far more people. Why can't we plan a new city from scratch? There are ways around these things, guys.

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Don't worry Chinese expansionism will eventually consume all of Australasia and Pacific.

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Now that Nathan allows a frequent flyer card to be used instead of a visa I imagine we can have a population of 15 million in about a year. China will be happy to have a found a south pacific rubbish dump.

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15 million in 50 years time will happen anyway without forced immigration. Our current population increase will reach 10 to 15 mill in that time easily. I think the point being made by NZIER was that our export industries would sell more with a lower unit cost and that will only be achieved by economies of scale in production. But then that assumes that you are talking about physical manufacturing products. Financial services, IT products, design houses etc do not need scale to earn more value, but value added to our agri-business products do require scale to lower our sell prices. Our factories are just not large enough to cope with the real scale of production that the rest of the world is used to. Why do you think that the widget you bought is 1.5 times more costly than the internet imported price? Scale of volumes of course. It costs the same to make or import 1000 widgets as it does to make or import 100,000 widgets.

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