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NZ Institute says NZ needs to increase private savings, reform capital taxation in 10 issues for long term success. Your view?

NZ Institute says NZ needs to increase private savings, reform capital taxation in 10 issues for long term success. Your view?

The New Zealand Institute is calling for policies to increase private sector savings and reform capital taxation to help the country's capital constrained economy.

The institute made the comments in a release on its top 10 issues for New Zealand's long term success.

Top 10 issues for New Zealand’s long term success

The purpose of the New Zealand Institute is to improve long term outcomes for New Zealand and New Zealanders.  Recently, the New Zealand Institute Council met to review a list of major issues facing the country, and agreed which are the top ten issues that, if resolved, would make the greatest contribution to the country’s long term success.

Highlighting the issues focuses attention on positive long term changes that would improve outcomes for New Zealand as a whole.  There is a danger that short term economic, fiscal and election pressures prevent sufficient attention being given to the requirements for long term success.

The list of issues is not in order of importance.

  • Can New Zealand implement stable policies that will improve long term outcomes?
  • Can New Zealand develop and retain a capable, resilient population that works together?
  • Can New Zealand reduce the disadvantages suffered by young people in a way that contributes to New Zealand becoming a successful multicultural society?
  • Can New Zealand benefit economically, socially and educationally from ultra-fast broadband?
  • Can New Zealand gain competitive advantage and contribute to slowing climate change by shifting to a low carbon economy?
  • Can New Zealand manage the natural environment so it remains productive, is an amenity for future generations, and builds our brand?
  • Can New Zealand develop the depth of business and public sector skill required to deliver success for our exporters and local businesses?
  • Can New Zealand secure the capital required to rejoin the world-leaders in economic prosperity?
  • Can New Zealand develop a high performing innovation ecosystem that grows many more high value international businesses?
  • Can New Zealand accelerate the growth of export sectors?

Other groups and individuals in New Zealand are concerned about long term outcomes too, and some are preparing work programmes to help guide the country’s development.  This list can help inform those efforts.

The issue list helps focus decisions about the New Zealand Institute work programme.

“If the country can be mobilised to resolve the ‘Top 10’ issues then the future for New Zealanders as a whole will be more assured.  Efforts on many other important issues facing New Zealand will not stop and nor should they.  But to build the foundation for long term success we should focus on the vital few,” says Rick Boven, the New Zealand Institute Director.


  • New Zealand does not have a long term vision and strategy with supporting policies.
  • Three year electoral cycles cause a bias for policies that have a near term impact at the expense of those which involve investment for long term outcomes. Policies are sometimes reversed with a change of government.
  • A case for policy change often arises in times of crisis, but slow-growing issues e.g. ageing population, low savings, slide in growth relative to other countries, tend to be avoided, especially where changes would adversely affect voting segments.
  • Strategy choices and policies are strongly influenced by the legacy of past decisions, assumptions about „how we do things‟, poor performance management and inertia.
  • Other countries have adopted more active long term vision, strategy, policy and monitoring to lift prosperity. They have chosen to use incentives and interventions to tilt the playing field and advance their interests.
  • The challenge is to increase debate about long term outcomes for New Zealand and what New Zealanders value, establishing the conditions for introducing enduring world-class policies.


  • Many New Zealanders leave for their “overseas experience” but not all return. Around one quarter of skilled New Zealanders now live abroad. NZIER estimates that another 410,000 New Zealanders could emigrate to Australia by 2025 if per capita GDP growth continues on its current track.
  • Population performance is an important driver of societal success. 21stcentury challenges will require a high quality population with skills to take advantage of technologies, drive productivity and manage changes and shocks.
  • Values that drive cohesion are critical. Adverse societal attitudes and behaviour can undermine success and deter migrants. New Zealand has a violent record: fourth worst assault mortality in OECD, increasing rates of family violence, child abuse, alcohol and methamphetamine fuelled violence and school bullying.
  • Other countries do better.
  • The challenge is to develop a skilled, resilient local population, encourage kiwis overseas to return and attract migrants with skills and investment to grow the economy.


  • Many children are not doing well. There is a high incidence of child poverty and a large proportion not succeeding in education. While there is strong performance at age 15 in international tests, thereafter one-quarter leave school without upper secondary qualifications and nearly half of tertiary education entrants leave without completing qualifications. There is high youth unemployment. One in ten 15 to 19 year olds are not in education, training or employment.
  • Poor transition from school to work results from silo approach. Schools educate but are not motivated by subsequent outcomes. The tertiary sector competes by offering courses that appeal to students. Employers compete for available talent rather than fixing their supply chain. New Zealand exports and imports talent, yet still has talent mismatches.
  • Maori, Asian and Pacific Island populations are growing faster than European and other groups, particularly in Auckland. Greater labour force diversity will result. Disadvantage needs to be addressed in a way that recognises cultural differences.
  • The challenge is to improve incomes and other outcomes for the most disadvantaged children and youth resulting in higher labour force participation and higher productivity.


  • Ultra-fast broadband will allow

– World-class access to data, information and media for New Zealand businesses, educators and consumers

– New Zealand businesses to overcome many distance barriers

– Telecommuting to change residential location mix.

  • A large public and private investment is required

– Many billions of dollars

– Around ten years to complete deployment

– Demand potential for fast broadband not yet well understood.

  • Competing countries are making similar investments.
  • The challenge is to ensure the opportunities from this large investment are actively pursued so benefits are available across a broad spectrum of society and prosperity improves.


  • Climate science and work by the Intergovernmental Panel on Climate Change, indicates early and large scale intervention is required to reduce the risk of abrupt climate change i.e. 25-40% reduction relative to 1990 levels by 2020. The NZ Government has offered a 10-15% reduction relative to 1990 levels, introduced an ETS and is leading a global alliance for agricultural emissions research.
  • If the science is even roughly correct, much more ambitious reductions will be required to meet international obligations (and preparations to adapt to climate change should commence).
  • Other successful small economies are aggressively pursuing low carbon or green economy strategies; e.g.

– South Korea plans to spend US$85b on environment-related industries in five years from 2009

– Denmark has committed DKK700m to developing and commercialising clean-tech

– Singapore allocated S$700m to clean-tech growth

  • The challenge is to harness valuable natural resources, strong green brand, inventiveness and innovation to gain advantage in the emerging low carbon world.


  • New Zealand has an enviable natural environment but it is at risk; e.g. degraded water quality in low-land streams, rivers and lakes, bio-security risks from invasive species or diseases affecting productive and native environments.
  • Without protection and management by humans, established pests, weeds and diseases would destroy most native forest, birds, bees, fish and habitats. Climate change will alter the ranges of important plant species.
  • The country's clean, green brand, which attracts tourists and migrants relies on sustaining a high quality environment.
  • The challenge is to develop, adopt and adapt technologies and policies that will protect and restore environments to ensure healthy and productive air, water (fresh and coastal), soils, plants, animals and ecological systems.


  • New Zealand‟s recent economic performance has been less than desired and some policy choices have contributed.
  • The success of modern economies is strongly driven by the skills of private and public managers.
  • There are opportunities for improvement

– Shortages of skills required for internationalisation

– Many universities with high tertiary participation; but none are world-leaders, NZ is slipping down the rankings and funding is reducing

– Outward migration continues

– Research shows our managers regard themselves as better than they are.

  • Many owners of New Zealand‟s large population of SME businesses are nearing retirement

– Few have succession plans in place

– The Gen-X population who would take over ownership of these businesses is depleted.

  • The challenge is to systematically improve skill levels in important public and private sector roles.


  • New Zealand is capital constrained

– Lower capital intensity than Australia explains part of the prosperity difference

– Shortage of domestic capital for productive ventures

– Businesses struggle to attract equity investment and pay a premium for debt.

  • Need FDI to supplement our shortfall in national savings and to provide access to critical knowledge and connections

– Equity to fuel expanding businesses

– Some past bad experiences with FDI, restrictions in some sectors and the „opaqueness‟of policy settings deter overseas investment

– Compared to other countries, there is little active effort or incentives to attract capital.

  • The challenge is to introduce policies to

– Encourage greater private sector savings

– Reform capital taxation

– Incentivise domestic and international equity investment in high productivity activities.


  • Innovation drives economic prosperity in advanced economies. The most prosperous small advanced economies export high value differentiated goods and services.
  • New Zealand has many worthwhile strengths. We have adequate tertiary participation, sound universities, quality scientific research institutions and are inventive. We have a growing export sector based on technology and innovation.
  • But New Zealand‟s innovation ecosystem is not performing as well as others

– Business R&D spending is one-third of the OECD average

– There are shortages of talent, capital, knowledge and connections for internationalising businesses

– Weak, but developing, governance of innovation

– Small size and distance makes internationalisation more difficult but NZ provides less support than competing countries.

  • New Zealand has many opportunities to grow high value exports but also important obstacles.
  • The challenge is to develop strategies and policies that guide and support the development of the innovation ecosystem.


  • Economic success of small advanced economies depends on high value exports.
  • Exports are currently around 30% of GDP but Government has set a target of increasing exports to 40%.
  • New Zealand‟s natural resources and capabilities can be the foundation for export growth e.g.

– Resource-based: dairy, forestry, fishing/aquaculture, wine, fruit/horticulture, mining, oil and gas, tourism

– Skills and labour cost-based: education, health services, tourism.

  • The challenge is to ensure productivity is high enough to lift incomes and identifying the best interventions to accelerate growth.

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A collection of ideas that have been floated over the past 10 (or more) years. The question that needs to be answered is really "what will it take for government to articulate a (cross-party) strategic vision, and execute accordingly?"

One can dream. My gues is it will be more of the same, until change is forced by crisis. By the time that point is reached our time and options are likely to be far more limited.




Absolutely right !

As long as the country e.g. this blog the private sector, but particularly the “Parliamentarian Kindergarten” argues about details adding to our patchwork economy – of course nothing changes.

We need solutions, which serves the country as a whole - not private/ sectors interests only.


Yet another worthy and largely accurate description of the problem, but if nothing changes nothing changes. 

What needs to change? 


HA ! John what does the NZMEA change - reading your site - going around the circle - no vision !!


Sadly we can only promote change, governments and officials have to act.  As you asked what do we promote to fix NZ:

Recognise, embrace and implement the realisation that central planning and winner picking will fail in the high value add sector.  Face the fact that policy settings matter in investment decisions and an unpredictable exchange rate has a massive negative impact on the real economy.

Capital gains tax / land tax to remove the property advantages in the tax system.

Managed exchange rate - lower interest rates substituted by LVRs, CFRs and capital inflow controls.

Support of high value exports on the same basis as other developed economies (level playing field) - R&D support, depreciation rates and investment incentives. 

Compulsory saving to individual account.


John, Les I made so many valuable proposals for culture changes over the years, in favour of production/ manufacturing with hardly any support of you guys.


Introduction – in a few words.


Listening to our economists/ politicians sitting in offices in the 2nd floors+ upstairs- studying economics from old books and charts comparing and analyzing. Yes, yes, yes all good, but in today’s ever and fast changing real life – not more then telling us more about our “Traditional Patchwork Economy” (TPE) – with some exceptions to be fair.

 Well, the world is struggling, fast moving and changing for ever- time for New Zealand to find visionary solutions.

In the current situation it is probably wiser to listen to philosophers, environmentalists, ecologists and humanists (I’m not religious - sorry) and find the right answers to solve our upcoming challenges.


Greed & Megalomania

The people of New Zealand are not only suffering under too much consumption but Greed, Megalomania of a minority – including corruption and a bloated government without a clear economic direction for years.

How much longer is the younger generation waiting for a revolt in “Beautiful New Zealand” ? The “Powerfools” in this and other countries are not only destroying theirs, the public’s natural environment, the land, the waterways and the air, but also their future, our souls and pride. The BB generation is currently causing enormous damage in our society not investing, but for them selves– costing this, but especially the next generation Billions to clean up the mess in may sectors/ levels. Not to mention our bubbly Property Industry – making our NZkids renting flats on Rock Creek Rd or worse, while foreigners living in flash houses on Orchid Park Drive  – HA this is all crazy!


Ethics- Philosophy- Economy

More and more country are losing the battle against a clean and green environment, healthy food supply/ production, fresh water and air – quality of life. As a remote and rather under-populated country we have an exceptional chance to be different. The key is branding New Zealand - the introduction of a “GREEN & CLEAN” economic philosophy – why ?



 For years our economy is so unbalanced, unstructured and unorganised- badly managed, when serious philosophical questions have to be asked. What is New Zealand way of life in the 21st century ?

The large and increasing national account deficit seems to force the government into stupid actions of desperation. Obviously falling into a trap by considering revenues form:

- natural resources damaging our environment/ nature and  eco- tourism -

- opening more land for extensive (dairy) farming destroying our environment, undermining animal welfare standards and in disregard of the influence of climate changes –  

- doggy immigration policies leading to social, employment and housing problems etc.-

- it doesn’t create skilful jobs (see below) -   


I’m proposing a clear, consistent, long term strategy for our economy to be the world leader:

 branding New Zealand’s unique “NZ100% pure Economy” Model of the World”


Such a model would make us unique in the world, inspires, lift ethics, spirit, pride among the population and feed into many sectors of our economy and society.  But it also supports strong and already existing sectors. It would make Billions in revenue, the country would prosper.



Industry and Ecology

 Today and in the future “Green Industries” offer new, good opportunities for NZ’s economy. Manufacturing Research & Development in sectors like Power, Transport and Telecommunication, in fields where we relay on foreign dependency most, even to a degree that our national security is at risk is essential. The government needs to pick winners, so building sustainable niche markets, producing and branding quality goods for us and to cover export demand will be successful.


Energy, Public Transport, Telecommunication


Two examples of how we should proceed with infrastructure needs in Energy and other such as Public Transport:

Financially and economically it doesn’t make sense to import or to produce heavy and expensive machinery/ equipment like turbines/ generators, nuclear power plants or heavy trains.

Such imports are mostly under overseas contracts, managed and installed by overseas technicians and workers, without hardy any local workforce especially skilled ones.

In stead we should research, develop and produce –SMALLER UNITS- manufactured and installed by Kiwis in our own country. A step, when ordered by government with enormous, but positive implication for our country:


- increase employment opportunity – happiness -
- better education after school –

-  technical skill and knowledge improvements -
- higher wages/ imports of brainpower –
-  positive influence to other sectors/ fields such as Science and Research -

- less quality imports / reduction of account deficit -
- control and sovereignty –

- quality infrastructure services –

- national security improvement –

- almost no affects caused by natural events -

 Sustainable Public Transport - developing a sector of industry to cover public mobility within a 100- 150km radius. Innovative businesses producing SMALL QUALITY UNITS starting from bikes, scoters, light rail systems and the interaction within, hardly seen in other countries. All planned, developed, installed, maintained and ran by Kiwis.

Sustainable Power supply/ savers SMALLER QUALITY UNITS developed, produced, locally/ regional installed and ran/ maintained by Kiwis.


We do need a “Mixed Economy Model” with a clear strategy to master the international dependency on fossil fuel, gas and power consumption.


Please, read and understand this article in context to my many other articles.

Walter Kunz  15.08.2009 (edited slightly in 2010)


We need smaller and more innovative solutions to the   huge   lumbering buses clogging up our cities  , and those infernal bus lanes .

Improve NZ's public transport by privatisation , and the introduction of jeepneys and tuk tuks .


Thanks for your postcard from Manila - Roger.


Some comments:

1) A disappointment when contrasting against the earlier diagnostic paper, 'A goal is not a strategy.' Read on.

2) If :

  • The challenge is to introduce policies to

– Encourage greater private sector savings

– Reform capital taxation

– Incentivise domestic and international equity investment in high productivity activities.

Translates to rebalance taxation and investment inventives away from property to productive activity by effective taxation of land/property/ capital gains - good, but let's see language consistent with grasping the nettles, even if it does mean frightning the horses, and NZI's members and sponsors. 

3) Just as 'The Force' is strong in Luke, the tendency for 'picking winners' and central planning for inappropriate areas also seems erroneously strong. It's not required where needs are disaggregated (eg. differentiated products, to use the NZI parlance) and markets could/do function when supported with non-interventional general pluralistic policies. (Yes to removing sectoral constraints, eg. management competencies in hi-value add niche manufactures, no to preferentially reducing R&D support to ag. because of aggregated need and proximity to development limits, yes, to dealing with profitability/lending/value dynamics for the goose.) 

4) The point is made, in round terms, that unless all issues are addressed expected benefits will be diminished. I guess that's the problem with micro-managed central planning approaches - the real world presents too many risks for the probability of each targeted intervention to be successful - hence the benefit of a higher level of abstraction in planning (call it policy), that is, plan (a policy) for the jungle, but let the animals do their own planning.

5) I almost forgot - monetary policy, exchange rate? Where does this figure in the 10 point prescription? Why doesn't it? Because like or not, it does figure in the real world.

Lots of similar stuff was churned out by organisations like MED, NZTE, Business New Zealand in the last Labour government. They seemed to love it - but it made no significant difference, because the nettles didn't get a good grasping. Just like .....

Oh well.

Cheers, Les.


I dfu churubly shreddung fophuga sa fudeli wohl - dashaemer alles scho mal ghoert - Les.


I assume that's an ancient Kaikoura dialect Walter? What does it mean?

0 are wohl correct Les - the seventh of December......


"Climate science and work by the Intergovernmental Panel on Climate Change" including one Dr. Lucka Kajfež Bogataj, Top International East European Climatologist.

How timely:

Another Top International Scientist Jumps off Global Warming ‘Titanic’
By John O'Sullivan

A top East European climatologist, who shared the Nobel Peace Prize with UN global warming colleagues, jumps a sinking ship as ocean data signals a cooler climate.

Dr. Lucka Kajfež Bogataj left cold clear water between herself and her former UN shipmates by declaring that rising levels of airborne carbon dioxide probably don’t cause global temperatures to rise. The news scuppers hope for a change in fortune for the beleagured UN climate agency.

Their doomed ‘ship,’ the Intergovernmental Panel on Climate Change (IPCC) has been sailing on an ill wind ever since it was struck by that Climategate ‘torpedo’ last year.

The Slovenian climate professor made the chilling announcement last month in an obscure foreign language journal that has only now been translated into English. The lambast came in the publication Delo Polet (18/11/2010), translated into English as, “Inconvenient Truth.” Inside Bogataj publishes a paper entitled, “The more we know, the better. “

Buried in an otherwise drab study on paleo - and proxy methods, Dr. Bogataj admitted to what skeptics have long been saying and what the ice core proxy data shows: that rises in atmospheric levels of carbon dioxide (CO2) are proven to mostly, if not always, occur AFTER rises in temperature.


Another one for the in-house Al Gorescicples :)

Re the rest, did I miss the mention of the monetary system? Or are the clowns who contributed to this stuff as clueless as all the other "experts"?



We need a cohesive well defined, properly documented  5 YEAR ECONOMIC PLAN  , which should cover all issues bogging us down , such as : low growth , poorly diversified economy , dependence on food exports and tourism , Maori and Pacific islanders not taking advantage of opportunities to get ahead . Too many people  on benefits and handouts.

We need real  fixed direct foreign investment (not fickle capital flows)  which benefit everyone , and the plan should include how we are going to achieve this.

We need GROWTH , GROWTH AND MORE GROWTH of the economy to get up on the OECD scales and to catch the blokes across the ditch . 

The over-arching thing is we need a PLAN


The video pertains to the earlier NZI report, 'A goal is not a strategy', which was not such a disappointment as the 10-point prescription work that is the subject of this article.

Monetary policy problems and exchange rates issues do not appear in the 10-point prescription work by were mentioned in the discussion section of 'A goal is not a strategy' - although they didn't make it to the conclusions, so the writing was on the wall back then. That said it did get a mention and is discussed in the last couple of minutes of this double-shot interview.

Rick notes the problem with hedging longer than a year. Rick needs to double check that, but it is however correct for certain types of exporter - which ones, any ideas? Anyway, a lender/borrower can hedge against RB monetary policy execution for how long? And what proportion of lenders/borrowers do that? No wonder RB can't control non-tradeables inflation, a problem which then leads to an overvalued and over-volatile exchange rate.

So if this video is for an earlier work and Rick was going to look into it, why no mention in the 10-point prescription?

If we are unwilling to address the root causes of the problem, maybe the Export Credit Office should team up with the RB to offer a public hedging facility for those in tradeables, especially given that RB shares responsibilty for the exchange rate mess? (Yeah right.)

Cheers, Les.