Shaping our slice of heaven: How to link global opportunities with New Zealand’s advantages to create growth opportunities for our economy. First, look at the map

By Linda Meade and Stephen Smith*

Welcome to the first edition of Shaping our slice of heaven, a new series from Deloitte Access Economics in New Zealand. The first edition, entitled Industries of opportunity, identifies and discusses growth prospects across key Kiwi industries. These industries offer some of the best opportunities for the country’s future economic prosperity.

The New Zealand economy has experienced solid economic growth of late and is now in its seventh consecutive year of expansion. But low productivity and an ageing population, along with increasing protectionist rhetoric coming from some of our traditional trading partners, has the potential to stall New Zealand’s economic progress.

So where can New Zealand look to maximise its future economic prosperity? This report identifies the industries that are expected to experience above average global growth in the next twenty years. It also assesses the comparative advantage of industries here. We believe New Zealand’s industries of opportunity lie at the intersection of global growth and national economic advantage.

These industries of opportunity are:

• Tourism
• Agribusiness
• Food processing
• International education
• Advanced manufacturing.

Each of the industries of opportunity listed above are expected to achieve above average global growth, in large part due to the rise of the middle class in emerging economies, an ageing population and the expected pace of global growth in each particular industry. Consumers around the world want many things New Zealand can offer – excellent agricultural and food products, high quality education, the latest health technologies and unique tourism experiences.

This report is a call to action. There are competitors waiting in the wings if we are complacent.

New Zealand’s prosperity map

The five industries we have identified are at the heart of our prosperity map. They provide New Zealand with the best chances to successfully turn local advantages into global opportunities. We project these industries to grow globally at annual rates between 3.66% (international education) and 3.88% (tourism) from 2017 to 2037. This compares to a projected annual growth of global gross domestic product (GGDP) of 3.4% over the same period.

The comparative advantage an industry enjoys is crucial to identifying its growth opportunities. We provide an advantage score for each industry, where a higher score indicates a higher level of advantage, based on data that evaluates performance in key areas relative to competitors. These five industries have advantage scores between 8.7 (advanced manufacturing) and 16.4 (agribusiness), compared to the collective advantage score for the New Zealand economy of 5.6.

Tourism

Tourism is New Zealand’s largest export industry and a major contributor to economic prosperity. We have given it the second highest industry advantage score and it is projected to be one of the world’s fastest growing industries.

Opportunities to take full advantage of future growth include better understanding of how the sharing economy is changing the industry, preparing for increasing demand for tourism from Asia and ensuring New Zealand continues to offer a unique visitor experience and more affordable direct air access. Challenges include renewing the infrastructure that supports tourism and maintaining the international visibility of New Zealand as a tourist destination.

Agribusiness

We have given agribusiness the highest industry advantage score for New Zealand and the industry will be among the fastest growing worldwide over the next twenty years. New Zealand can be a long-term winner in agribusiness by focussing its strategy more on growing value than growing volume, and we identify practical solutions to contribute to this shift.

However, there are a number of disruptors with the potential to transform the industry and affect any value-driven strategy. Global megatrends including demographic shifts, climate change and greater value chain integration will intensify disruption in the industry, while new customer preferences and the development of agricultural technologies are accelerating the speed of disruption.

Food processing

New Zealand is in a good position to take full advantage of opportunities in the food processing industry. Consumers are increasingly looking beyond the traditional preferences of price, taste and convenience, to include health and wellness, safety, social impact and experience. This shift in what lies behind food purchasing decisions presents a meaningful opportunity for the food processing industry. New Zealand offers a diverse range of products that address these evolving drivers.

However, future success will require both adapting to changing demographics and consumer preferences, as well as managing in an increasingly global and complex business environment. New Zealand food processors will need to collaborate across the value chain more effectively, while adapting to a marketing environment influenced by the reach of new media and social networks.

International education

New Zealand has been able to achieve success in the international education industry. This industry is currently the fourth largest export earner, and there are over 130,000 international students participating at all levels of education.

But students are more mobile and flexible about the location and timing of their study than ever before. And technology is changing the way education is purchased, experienced and consumed, extending international education markets beyond their established geographic and service boundaries.

The changing nature of the international education landscape means New Zealand’s opportunity is evolving. Focussing on targeted strategies for international collaboration and being in front of the innovation curve for online studies could help deliver significant benefits for New Zealand’s international education industry.

Advanced manufacturing

New Zealand is in a good position to take advantage of the opportunities within this industry. The advanced manufacturing industry is a revelation in New Zealand, having experienced significant growth in export earnings, as well as a material increase in foreign direct investment (FDI), in recent years. Health technology is the industry’s largest export sector, followed by generic pharmaceuticals and scientific technology.

But there are big challenges to address. To take full advantage of the global opportunities in the industry, New Zealand needs to be internationally connected through trade and investment, and the flow of people and ideas. Business and government will need to take bold steps to realise the full opportunity that exists in the industry. This can help advanced manufacturing support greater diversification of exports and become one of the biggest drivers of prosperity.

Next steps

Shaping our slice of heaven: Industries of opportunity analyses where global opportunities and New Zealand’s advantages will coincide to create growth opportunities for the economy. Recognising that New Zealand’s prospects are as bright as they were a decade ago is not in itself enough. How can New Zealand businesses and government apply these insights to their specific situations? How can New Zealand take a longer-term view and what does that mean in practice?

The answers lie in understanding where companies are positioned today, and identifying the best ways to move towards areas of higher growth and greater advantage. Government can play a role here, but it is worth underscoring that although government policies can help, success or failure lies more in the actions of the business community.

It is important to consider how businesses and government might take full advantage of the opportunities identified in this report “within New Zealand”. We believe it is just as important to articulate a “within New Zealand story” as it is to have an outward focussed “New Zealand story”. Business and government need to develop strategies to consider how New Zealand’s regions can work both separately and together to be more productive, and collectively, more competitive. It is not enough to develop regional economic development plans in silos; rather, they need to exist within an overarching framework.

Our core message is that while global or domestic opportunity and structural advantages are necessary, they are not sufficient. To ensure success, we need to build on New Zealand’s areas of advantage to maintain and improve performance relative to global competitors.


Linda Meade is a partner, and Stephen Smith is a lead partner at Deloitte Access Economics. This article is the executive summary of their report Shaping our Slice of Heaven - Industries of Opportunity.  It is re-posted with permission. You can download the full report here.

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25 Comments

Tourism: NZ is approaching peak tourist. Need to increase earnings and reduce numbers. Our major industry depends on terrorists letting of bombs in Europe, India and America. Once ISIS is proven defeated tourists may choose elsewhere.

International Education: it could have been a growth area but (a) our PTEs are developing an international reputation for rorts and corruption - it is always easier to get a bad reputation than to build a good one (b) our main universities are sliding down the the international league tables (c) online education is ideal for tertiary ~ why bother with the cost of coming to NZ to listen to our professors when you can watch lectures from MIT and Harvard.

Advanced manufacturing: we are in the wrong location. However our high skill, traditional No8 wire mentality and especially low wages do help. Given any significant success the business will move out of NZ to a better location nearer the customers.

That is a very unwise remark as many Europeans reading could constrew tacit acceptance of Terrorism for our Economic benefit.

May even be untrue. However I meet many fairly wealthy retirees in Auckland who take several foreign holidays each year to ever more exotic places and they are saying they will not be going to New York, Uk or Europe because of fear of terrorism. They tend to prefer cruises but have taken trips to South America and Mexico and rural USA. I just extrapolated from their anecdotes.
Terrorism does change tourist revenue - I lived in London during the IRA bombings and it did have a negative effect.

Tech and Advanced manufacturing: NZ surprisingly has a very good tech industry that is capable of punching above its weight in advanced tech particularly for cutting edge areas like AI development (Artificial Intelligence).
You can find out a lot more about these by going long to industry meetups and social events in Auckland and Wellington.

But in the last few years with vastly over inflated cost of living for our main tech hubs, it has been creating a very difficult environment for these companies to survive in a global economy. I've seen a number of tech companies go under due to high running costs especially in Auckland. From a personal point of view, I would certainly like to see house prices and rents become more affordable so we can attract and retain the brightest and best people to work in our tech industry.

I'm tired of seeing young well educated people leaving NZ to try to find more affordable cities to live and work in causing a brain drain effect in what should be a huge economic growth area.

It's not just Auckland that is finding it hard to compete in a tech global market with over bloated living costs. Cities like Vancouver are also feeling the same pain, which this article illustrates quite well:-

Better Dwelling article: Vancouver’s Tech Scene Shows Just How F**ked Up The City’s Real Estate Is
https://betterdwelling.com/city/vancouver/vancouver-tech-scene-shows-jus...

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In other words if for the last 10 years our immigration rate (permanent residency) had been the same as other OECD countries (about 10,000 not >45,000) and we had stopped foreign property investment and our immigrants were software engineers not checkout operators in fast food outlets then Auckland and Wellington's population would have remained stable (from above figures that is 350,000 fewer residents and most immigrants end up in our cities) and stable or low house prices. It would have left NZ with a great advantage as other international cities also get congested and expensive. WE would have had a great lifestyle, modern hospitals and schools, cheap rents and cheap houses (prices roughly as per 2007) that would be enough to attract modern tech and advanced manufacturing.
You are right about NZ having a reputation for level headed capable skilled engineers and programmers - we should have concentrated on them rather than immigrants whose skills were baker, shop manager, tourist guide.

I totally agree and So does Winston Lapun. Labour party continues down the same path as National thinking that high population growth is a winner.
The reality being that they think pushing house prices with population growth is being productive. A sad outcome that our leaders or the leaders chosen by the voters have such lack of foresight.

Sorry if I offend fellow contributors here but NZ is a lifestyle choice not a career choice for highly qualified individuals.y
Unless salaries increase drastically the only migrants arriving in NZ will predominantly be those who cannot gain residency in higher wealth countries
I wish I had a dollar for every migrant enticed to NZ on false promises of a lower cost of living

True. When I arrived in 2002 the house prices and the absence of traffic jams compared well with working in London. All with better weather. My kids went to decent schools and university was not too pricey and well reputed. It kept me here - in fact with a wife and four kids I couldn't afford to live in London. So NZ received another experienced but slightly long in the tooth computer programmer.
If I arrived now the traffic is noticeable although nowhere near as bad as London and schools are still adequate but accommodation would stop me. Maybe the ethic diversity is denting the natural Kiwi friendliness too - if so only slightly at present but today i would have to think do I want my kids to go to a majority Asian school - some advantages and some disadvantages.
You are right only very generous salaries would tempt me now (easy to say now I'm retired).

Well, my husband just won a national award in the UK for his work in programming and development. He is also in the top earning bracket for his field and probably amongst the top of his game for what he does. UK company, with international clients, corporation tax in the UK and income tax in NZ.

It took a LOT of persuasion to get him to consider moving back to NZ. He is a West Aucklander originally and absolutely hated it there growing up. The ethnic diversity certainly wouldn't be what put him off either, it would mainly have been the sport-obsessed-anti-intellectual mentality and also the lack of a vibrant, centralised cultural city vibe.

Admittedly, he is something of a geek. Very high IQ, growing up he was put in "enrichment programmes" in his Kiwi state schools, came top of his year at uni etc. But with all that talent, did he feel that NZ was somewhere he could thrive? No....he got his head kicked in and bullied constantly through primary and high school because he wasn't machismo or sporty. He would say, that he left NZ in his early 20's and NEVER wanted to return because he felt oppressed as a person by the machismo-sport-obsessed-anti-intellectual culture he experienced around him.

Innovative, cutting edge businesses require creative minds and high IQ's but are those attributes really encouraged in NZ? Are those types of Kiwi's given the message by society growing up that their skills are valued?

So I wonder if part of the reason so many of Kiwi's brightest and most talented live overseas is something related to this also, which in turn puts downward pressure on NZ's homegrown innovation and intellectual capital? I wouldn't want to generalise based on a sample of one, but I think you could find quite a lot of examples of similar.

Thanks. That balances my comment. Admittedly I was never as brilliant as that and the only company I ran employed only me. I can understand his attitude even if I do love NZ and I am quite happy to have left the UK which I find overcrowded. Agreed about ethnic appeal - since I have a multi-ethnic family I was attracted to Auckland North Shore and the mix of many cultures is healthy here - that does not always apply especially in some English cities [apparently the critical point is about 40% one foreign ethnicity and then even the most liberal families chose to move their kids elsewhere].
Three of my children and one grand child went to various North Shore schools - yes our schools are keen on sport especially the big name schools but they are also very good for all levels of academic performance and unlike most of the UK good for music too.

Back to the point: even if your husband had loved his Auckland upbringing would he start a business in NZ or UK? I'm sure it would be UK with a market 15 times larger and international potential maybe 100 times larger. Not just the bigger market but the technical support and the skilled programmers that can be poached as required.
That is why much as I love NZ I am pessimistic about the potential for serious wealth generation by our Tech and Advanced manufacturing businesses. A very few rather small winners and any that are really great move on out of NZ.

Lapun,
I think the population argument in this respect if something of a Non Sequitur. Innovation and invention is a fact of human history not necessitated by population size. We have always been innovating. And in the global economy as it now exists, you can incorporate a business almost anywhere and working in IT is certainly and increasingly a non-geographically bound career.

I also, don't mean to suggest that sport is a bad thing. Merely that perhaps NZ doesn't champion creative and intellectual people and that sport is over represented as something of value in NZ media/society.

For instance, if you were a young teen, naturally looking for role models to aspire towards, and you were creative and intellectual.... who would you find to inspire you in the NZ media? Of course there are some but I wonder if there is enough?
Taika Waititi is a good example. He's a super smart, creative, talented guy. He is probably doing more to raise NZ's profile in the world, and offer potential career and innovation prospects for the future of NZ than any single other non-politician person in NZ. And yet he gets waaaaaaaaaaay waaaaaaaaaay less media coverage than even lower grade sports people, or Polly Gillespie even. Hells, I think I have seen more RE Agents faces in the media that I have seen Taika Waititi.

I suppose my hubs and I give this kind of thing, quite a lot of thought, deciding to raise our kids in NZ, rather than the UK, we did think about all the pros and cons. We live in Wellington, and actually, it's a very creative city and much less of the anti-intellectual thing. But still. Our eldest is 9 and can already code, she wants a robotics programme for Christmas. She does plenty of physical stuff too, but she probably gets through 3 books a week, so is far more of a book worm than a sports enthusiast. Where are her role models in NZ?

I sometimes worry that this is perhaps a contributing factor in NZ's appalling mental health record and high youth suicide rates. That these kids that are suffering with these mental health issues don't feel like they belong, like they are valued maybe?

I also wonder if the "tall poppy syndrome" and the anti-intellectualism, based in NZ's history of equality and anti-British-class-ism has somehow manifested in this particular way over the decades. NZ doesn't seem anywhere near as focused or proud of its equality and equality of opportunity as it once was, or there wouldn't be such tension and discord between the haves and the have nots. There is a lot of wealth boasting around, and the tall poppy chopping doesn't seem to apply to the wealthy or the sport's heroes. It seems to apply more to other forms of success, like intellectual success.

I don't think there is any practical reason why NZ couldn't punch way way above it's weight in IT/ tech innovation, the way it has in the movie industry. I think increasingly that aspect of the world will not be dependent on geography, but for that to happen, NZ needs to nurture it's intellectual capital. That means creating opportunity for young people, offering more diversity of role models, investing more in education. Governments recognised that the film industry was a potential growth area for NZ decades ago. They put in place tax advantages and they invested in that field. We could do that for tech and we should certainly continue to worry and address the "brain drain", we don't want our best and brightest fleeing overseas because they don't feel welcome and valued in NZ (or because they can't afford a home which again, has been about government not thinking about the future of NZ). If they are leaving for experience and broadening horizons, sure. But I don't think that is the only reason so many Kiwi's leave and don't want to come back.

To an extent I agree with Zachary about the Anglophone. Being English speaking is a major advantage, and NZ is believed in global psychology to be a trustworthy, stable country.

GingerNinja: thank you for your thoughtful comment. You raise many good points. Just a few random remarks in reply.
The UK is as obsessed with sport as NZ. What really bugs me is NZ's obsession with UK sport especially their premier league soccer. Both countries put minor sport celebrities on the front page. I rather like sport so have to mention that at present NZ is one of the top sporting countries by population (behind Samoa and Tonga in my opinion) but I can't help following Lydia Ko, Valerie Adams our canoeing and netball. They are all down to earth stars; I meet people who know them and their lives are like mine (say Richie MacCaw's annual camping trip for example). The +ve thing about sport is you only succeed by effort and that is a good role model for all of us.
NZ also beats the UK at music per capita. Classical, jazz, pop.
Academic - well Rutherford is generally accepted the greatest practical experimental physicist. He left NZ so he could succeed. Which supports my argument and nurtured his genius in a remote farm which supports yours.
NZ film industry is supported by the government. We need time to see if the investment of our tax makes sense. Better examples would be Xero or fisher & paykell.
Teenage Suicide: I saw Jacinda at a political meeting just after she announced her plan for mental nursing skills in all schools. Commend her doing something but the questions are why has it doubled in recent years and what about suicides in your twenties. I have no answer but it can't be sport fixation. Not valued true but why is it worse than it was when I grew up? Did the bullying I endured toughen me up (I doubt it) is it to do with physical mobility so we have less sense of place (doubt it since it is common among farmers) is it family breakup (my guess is yes) or replacing human interactions with social media (my guess is yes).

I suspect we see things more alike than this exchange shows. Six months ago on a different website I was arguing the opposite to my current opinion: what about Lego, Nokia, Samsung - you don't have to be in the centre to succeed. What about USA's big businesses with headquarters in Bentonville and Omaha. What about NZ development of the jetboat in Irishman Creek & Christchurch. Possibly being away from distractions is an advantage allowing creative minds to concentrate. However much as I agree that NZ can punch above its weight I have been persuaded that many new businesses need some kind of critical mass. Look at the demographics of American cities - about 8 getting bigger and wealthier and spawning new industries and the remainder in decline.
I certainly hope your husband is successful - the economic success of NZ is critical for what matters most to me: my kids and grandkids. It is just I have to be realistic - we will have a few winning tech companies especially those that don't require large numbers of suppliers (IT yes, a hovercar no).
Apologies that my comment is waffle - your considered post deserved a better response. I do hope you contribute an article to Interest.co.nz since clearly you are both a thoughtful and a fluent writer.

Lapun,
And thanks in return for your very well articulated and reasoned posts.

Whilst the UK *is* indeed sports obsessed, there are alternatives. And there always has been. There have always been intellectual and artistic role models. Historically, there were social mobility issues with that. Only middle and upper class persons were allowed those roles, but that is well and truly over turned now, there are many working class artists and role models. There are still massive underlying class issues and issues of inequality of opportunity though and just to reiterate, my point isn't that there is anything wrong with sport, sporting role models, or that sport doesn't have value but that it is over represented and there is an absence of other forms of role models and social capital.
And i'm not saying that NZ doesn't have intellectuals or artists, I have been to many art gallery events since moving to NZ and attend courses and lectures on amazingly interesting topics, just for fun. No shortage of that at all! But I am thinking more of the social capital. I don't think NZ champions and embraces their intellectual and creative successes in the way it does sports or wealth success. So for me it's about role models and visibility. Sporting tall poppies aren't chopped down, but creative ones might be? A particular example I might give is a lack of gay role models. The statistics on suicide show that a higher proportion of gay people are represented and I don't think the context of a very heteronormative and machismo culture in NZ is irrelevant to that. Being "othered" is biologically damaging. Humans evolved as a social species, we require acceptance from each other to be mentally well.

My educational background is in child and adolescent mental health, in the interests of full disclosure. The issue of worsening mental health stats in NZ or in any country is huge. HUGE. And perhaps too much of a tangent away from the article above. But I will summarise a few issues, if you can accept that in being brief, I am massively over simplifying? Some major issues IMO would be, changes in the understand and beliefs around mental health awareness, diagnosis, acceptance etc. More accurate records on suicide (the stigma of suicide, especially in the more religious context of previous generations meant suicide rates were not honestly recorded or shared), and I agree with you that some changes in society have been less conducive to mental well being (we are less physical and this weakens our neurological balance, our support networks are often more fragmented, more time socialising via media forms that deliberate use brain hacking techniques against us *the founders of FB and google have recently admitted this was their conscious intention etc*).

I also agree that access to bigger markets and populations makes certain aspects of business and innovation easier. It's certainly a factor. But I don't believe it's the only one. We can look at the history of population across the globe at various points in time and see huge innovations are occurring all the time going back millennia in different places. And ultimately the innovations have found their way across the globe. In modern times with digital communication the barriers of geography and population size are less pronounced.

Kiwi's have a habit of referring to per-head-of capita a lot. Their population size, their limited tax revenue etc (in terms of government spending on infrastructure, their geographical isolation). But honestly, what is patently clear about human beings across time... necessity is the mother of invention. We are a problem solving species. If our problem solving and innovative youngsters feel strongly connected to NZ then they will stay and innovate here. With the limitations of NZ's population and geography presenting fuel for the innovation. And it's in NZ societies interests to try and incentivise that kind of scenario.

I will use the film industry as an example. NZ-ers wanting to work in the movie industry could have simply moved to LA. But because the industry was incentivised many have a better opportunity staying in NZ than they ever would have in LA (where there is MUCH more competition). NZ used its geographical isolation to its advantage instead of disadvantage. The tax incentive, the subsidising and the amazing scenery combined to create a very tempting proposition. And the film industry has undoubtedly led to much greater tourism and interest in NZ.

Resisting the temptation to write too much. Please submit an article about NZ suicide and mental health. You have the background knowledge and the data. It has to explain why the problem is reputedly worse in NZ than other countries.

In the last week I have been discussing our suicide rate with a French facebook friend. His post was about banning guns in the USA to address their murder rate. Well New Zealands suicide rate is worse than the US murder rate.

There are some answers to this I believe, perhaps just not where people tend to look for them. My study of Architecture and urban design giving some. Part social you could say. But also economic, I comment below in the thread on that. A lot of the jobs that once might have been said to have meaning have disappeared.

I also make these comments with some professional front line exposure to mental health.

Sad, really! Is there no hope!

Yes: concentrate on agri-business - less milk powder more fancy cheese, fewer logs and more furniture, etc. Encourage and support Tech Businesses but don't expect them to save New Zealand's economy.

Hi Lapun,

NZ's economy doesn't need saving. It's hardly a basket case!

NZ's prospects are really very good - and certainly so in the medium/longer term.

TTP

True life is good. But 70 years ago NZ was about number 1 country per capita economically and now we are no 35 and still sinking. OK staying at the top may be impossible but every two years another country overtakes us. It makes no difference whether we are Labour or Nat or bringing British immigrants or Asian or protectionist or neo-liberal we keep falling behind. And the last 5 years has seen virtually no increase in wealth per capita whereas the rest of the world has moved up.

Our prospects will only be good in the medium/longer term if we accept reality. We do have so many advantages and do try starting a small tech business and make it great.

Dream on, buddy.

Agribusiness - There is huge long term risk to NZ agriculture business through synthetic meat and fish. We risk no longer having a competitive advantage in these areas of agriculture. Carbon emissions are also an issue. Diversification will be needed.

Real hourly wage rate i tourism and hospitality have fallen 45.5% between 1979 and 2006. When Delloitte say there is potential in tourism who (and how) will benefit?

There is part of the answer to our suicide rate, which is raised by Ginganinja above.

Do you have any links that provide correlations between suicide and potential causes. The little knowledge I have is anecdotal and unreliable. Poverty in the '30s did not seem to relate to suicide (nor violent crime) but I can imagine disparities of wealth could be a cause. Is there still a relationship between sunshine, latitude, exposure to green plants, immigration, parental breakup, etc. Even a simple question like is there a relationship between mental health and suicide?