Govt wants to double real value of NZ exports by 2025, increasing exports from 30% of GDP to 40%; But warns of fall in short term

By Alex Tarrant

The government wants foreign investors to know New Zealand is open for business as it seeks to help local enterprise attract the capital needed to double the value of exports by 2025.

Releasing a report on the government’s Business Growth Agenda, Finance Minister Bill English said the capital required to achieve the 5.5-7.5% annual export growth desired between 2016-2025 could not be supplied entirely by local sources.

“We simply just don’t save enough, so we need others to help us,” he said.

English, along with Economic Development Minister Steven Joyce and Trade Minister Tim Groser, on Wednesday released a report titled Building Export Markets, the first of six reports to be released on the growth agenda.

“We are looking to make sure people who want to bring capital here to create jobs, and lift incomes, know that we’re open for that sort of businesses,” English said.

“Foreign investors can be easily scared by a bit of controversy, New Zealanders can be easily worried by one or two investments,” he said.

“We understand the need to protect the things New Zealanders are really concerned about, but equally, if we want to get the capital that’s going to give us this export growth, and the higher incomes that go with it, then New Zealanders can’t supply it all.”

While the growth agenda policies would not provide incentives for new capital investment in export-oriented companies, Joyce said the government wanted prospective investors to know it was “on their side.”

“We are prepared to do the sensible things that will allow them to make their investments, and actually encourage them into these areas, as against what they’ve been historically involved in, which has been very much property and retail,” Joyce said.

Export boost

The government’s bid to double the real value of New Zealand exports by 2025 would require a huge effort to develop more internationally competitive businesses in both the commodity and high-value technology sectors..

English and Joyce today reaffirmed the government’s goal to boost exports from 30% of GDP to 40% by 2025.

But a soft global economy and the level of imports required for the Christchurch rebuild could mean some decrease in the percentage of exports to GDP was likely in the short-term before that growth occurred.

Meeting that target would require real export growth on average of between 5.5% and 7.5% a year from 2016 to 2025, on the back of Treasury’s expected 1.8% average growth over the next three years.

Releasing the government’s first Business Growth Agenda progress report on New Zealand’s export sector on Wednesday, English and Joyce said the government was focused on supporting firms to grow exports.

“Achieving our 40% target will require a shift of investment away from the production of goods and services for the domestic economy, and towards international markets,” it says in a booklet released by English and Joyce titled Building Export Markets.

“It will require investment to flow to opportunities in the export sector, as well as the ability of labour and skills to shift in response to changing demand,” it says.

“International experience suggests a shift of this magnitude is possible with concerted effort and supportive macro-economic conditions.”

The government would help strategically position New Zealand companies to take greater advantage of international opportunities, and manage any risks, it said in the booklet.

That would help drive improvements to the operating environment for exporters, and help ensure that the services and assurances the government provided made it easier for Kiwi businesses to succeeded internationally.

English and Joyce highlighted seven initiatives focused on helping build export markets:

Delivering a more compelling New Zealand story; Improving access to international markets; Increasing value from Tourism; Making it easier to trade from New Zealand; Growing international education; Strengthening high value manufacturing and services exports; and Helping businesses internationalise.

The report mainly reiterated existing policies like the ultra-fast broadband roll-out, creation of the Advanced Technology Institue in Auckland, and free trade negotiations.

NZ Story

Two new initiatives were also announced.

One was developing a broader 'New Zealand Story' to try and boost New Zealand's reputation and branding in overseas markets to complement Tourism NZ's 100% Pure brand.

"Businesses have been telling us of the need to better tell the ‘New Zealand Story’ overseas. Smaller exporters particularly emphasise that it is New Zealand’s reputation that gives them their initial market entry point as they are too small individually to secure brand recognition for their product or service,” Joyce said.

"A tool kit will be developed for Kiwi businesses and the public sector to draw on to help tell the New Zealand story, including consistent branding, narrative, and photos,” he said.

The second was an announcement from Groser that New Zealand would join the World Trade Organisation's Government Procurement Agreement.

The total value of worldwide procurement covered by the Government Procurement Agreement was estimated at US$1.6 trillion in 2008 – representing 2.64 per cent of the world’s gross domestic product, Groser said.

“Member countries have agreed to revised coverage that will see this amount increased by US$80 – 100 billion each year. The value will also go up as new countries, including China, come on board," he said.

Business Growth Agenda

The government announced it would form a business growth agenda in March this year ahead of creating the new Ministry of Business, Innovation and Employment (MoBIE), which combined the old Ministry of Economic Development, Department of Building and Housing, Ministry of Science and Innovation, and the Department of Labour.

The agenda would focus on six key areas, English and Joyce said: Capital markets, Innovation and ideas, Skilled and safe workplaces, Natural resources, Infrastructure (including electricity, broadband, transport); and Export markets.

Following today's release of the progress report for export markets, reports for the remaining five areas would be released by the end of the year.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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20 Comments

And how is this going to happen with a currency persistently overvalued and a housing market doing all the same things all over again?
Where's the actual policy change to make this happen?
The government has already pulled the levers (tax switch and building depreciation changes) and it is actually getting worse.
Time to change monetary policy and seriously look at taxing capital gains and land.
cheers
Bernard

The government pulled the levers to make the rich richer and we're seeing that. We're also seeing what happens when the rich do get richer - the economy collapses.

the eighth initiative that actually need to come first would be to get rid of the MMP nonsense system so we get a govt that can actually make some bold moves - instead of the present namby pamby guilt-ridden tip toe over to the drilling rigs and whanau ora gang reps

Damn right. How about compulsory sterilisation for poor people and re-education camps for greenies too. Micro chipped workers for foreign investors. Give them a bit of a zap if they go too slow :)

What you dont get gonzo is, MMP or FPP doesnt really matter.  If the "rich pricks" had actually voted for ACT then National could do as it wants (if its not already). Of course the only reason National couldnt is the swing voter which would be the same under FPP...they'd run to Labour and bye bye JK and co....you'd just have more polarisation...and swings left or right. The present Green voter would be voting Labour....and maori.....ACT would be bye bye...mind you it is anyway.
regards
 
 
 

Yes Bernard, when will they grasp the nettle?
 
NZMEA & John's comment here, starting at approx 10.58:

http://tvnz.co.nz/breakfast/2012-08-16-video-5026791

 

Nadine, re. your comment at the 15min mark:

 

http://www.nzinstitute.org/index.php/nzeconomy/paper/a_goal_is_not_a_strategy_focusing_efforts_to_improve_nzs_prosperity/
Anyway, things are bound to get better once National get in .......
Yeah right!

I'm looking forward to finding out about the "supportive macro-economic conditions". I presume they will be in the report somewhere?

Who will stop the megalomaniac’s in this country - driving the majority of the NZpopulation, tax- and ratepayers into bankruptcy ?

Excuse me Mr English, to grow exports you need investment in the export sector, but are you not the same guy who is sucking up investment dollars by privatising utilities?                         Would it not be smarter to supply the exporters cheap power and encourage Mum and Dad investors to invest in new export companies, so they are locally owned and not foreign owned. The number one concern I see if that exports will grow, but the profits earned from them all end up in foreign investors pockets.....Figure out that problem for me Mr English.

You know what New Zealand is? Just another polynesian cargo cult, that's what. We're building runways and expecting planes to land!

Absolutely agree Don. English and Key have both said they want to sell down our SOEs to give Kiwi investors somewhere to put their savings. So instead of helping NZ companies expand and export with our own capital he's grovelling after foreign money. What's all that about?
 
How is this going to help our chronic current account deficit? Look at the net effect of our mining and oil industries. Apart from pennies in the dollar royalties and a small number of jobs the repatriated profits are sucked offshore. The resource is disapearing along with the cash.
 
I've no doubt the Nact government will be willing to do whatever to accomadate multinationals to the detriment of working Kiwis. Warners rewritting our labour laws, cuddling up to Skys gambing den and sleazy backroom deals over the Pacific free trade agreement are just the tip of the iceberg. The desperation is scary. 

“Achieving our 40% target will require a shift of investment away from the production of goods and services for the domestic economy, and towards international markets,” it says in a booklet released by English and Joyce titled Building Export Markets.
 
Why would you shift away from the production of goods and services for the domestic economy?  Shouldn't it be in addition to providing for the domestic economy or do we just rely on cheap imports for domestic consumption?
 
“International experience suggests a shift of this magnitude is possible with concerted effort and supportive macro-economic conditions.”
 
What are the international examples?  China with it's cheap labour supply or Germany with it's consumer financing of the rest of Europe?
 
Is this just another hope and pray policy?

Well I suppose it's a plan BUT first  you had better address a few of the implications of the RMA. Increasing Value from Tourism - a small boutique operator has just gone for a variation to their Resource Consents to operate winter funcions as well as their summer functions of 6 months (6 functions per month) under their current Consents. To date they have had to spend $40K in the application and hearing. No near neighbours, no adverse effects, secluded premises in beautiful garden setting and the local and international users love it.
 
This $40K is on top of the $60K they had to spend in obtaining their original consents.
The owners of this operation live on site and are required to leave the function building at the same time as those who hire it. So they couldn't even stay and clean up when they had back to back functions. So if you want Tourism numbers increased then I suggest Bill you have quite a bit of work to do as I could tell you of many cases that are similar.
 
 
 
 
 

 
<Apologies for the rant>
They will need those fairies. Lots of them.
Get real. Every country in the world seems to be looking to export its way out of recession. Including the big guns. Mostly through higher 'added value' and high tech products. NZ will have to face the stiffest competition ever. And then there is competitive devaluation of currencies on top of it. The words 'snowball' and 'hell' come to mind.
It would be wise to remember the sound advice of Sir Paul Callaghan. NZ is in no position to compete in fields where other countries even in a full-blown recession have a lot more economic and thus R&D firepower. Be nimble in niche markets.
A complete change of attitude towards investment will not occur until the curse of bloated real-estate returns has been corrected. It is quite telling that even in construction NZ has no leading innovation. Too easy to make money - no pressure to come up with new solutions.
NZ will need to change it's attitude towards investment through a change in taxation that no longer excessively rewards speculative investment in property, a monetary policy that curbs carry trades in the NZD and it will need to make a real effort to improve university education. Not one NZ university makes the top 50 in any list. 
Soft commodity prices will probably keep it all afloat. But it will not lift the economy much further.
</rant>

Managing the currency to be competitive should absolutely be the first priority if they are remotely serious. If they don't do that, then all the rest would be a waste of money and resources (and sounds like general motherhood statements in any case).
There is a hint of promise in them finally stating that macro economic conditions need to be correct (and acknowledging in that line that they have severely mismanaged them over the last 4 years). If they actually know anything about macroeconomics, and its genuinely hard to be confident that they do; then the mandate for the new Governor of the Reserve Bank is a must first step. Interesting to see if in fact they do make appropriate changes to it.
As an aside they are consistent with all their recent predictions, in stating that the good news will conveniently come after the next election is due. Boys, you've had 4 years already; surely some good news should be around the corner by now from something you've done.

Come on SL.
You and I both know this from BE is what Smiley Wavey defines as "aspirational"
we do not need a plan, all we need is to aspire and it will surely happen.
;o)
Boom, boom,
Basel

My money is on the more likely scenario that we "expire" before that happens

so we must control house prices because the market will not work for houses prices.
so we now must have exports after ruining exports because of house prices. well make up your mind. tourism, fishing,farming, forestry sounds like the NZ economys back bone. exports thats a new concept!!!! LOL
 

Um, have we failed to notice that every country is trying to export its way out of the mire?

Get the dollar down by 20% (its reasonable level) and exports would rise from 30% to at least 33-34% immediately.