Sustainable economic growth for New Zealand:

An optimistic myth-busting approach

Paul CallaghanAlan MacDiarmid Professor of Physical Sciences

Victoria University of Wellington

Income inequality 26/33

Unemployment 15/33

Level of democracy 3/33

Life expectancy 11/33

Prison population 26/33

Math score 9/33

Science score 6/33

New Zealand performance1. New Zealand is an egalitarian society

2. New Zealand is clean and green

2. New Zealand is clean and green

Alpine Zone

Tussock

Exotic grassland

Exotic forest

Scrub, wetlands

Native forest

Settlements, crops

100

80

60

40

20

01000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000

year

Recent history of New Zealand land coverperc

ent t

otal

land

are

a

Science and trade Can we have our cake and eat it?

Earthrace “ecoboat”aka “Ady Gil”

“Sustainable energy, without the hot air”David McKay (UIT, Cambridge, 2008)

Earthrace “ecoboat”

“Sustainable energy, without the hot air”David McKay (UIT, Cambridge, 2008)

3. We don’t need to be more prosperous

New Zealand economy and ChristchurchSome data 15 % Christchurch % nation’s economy.NZ$51 bn Tax revenue in the 2009/10 financial year.NZ$153 bn New Zealand GDP

The costNZ$15 to NZ$30 bn cost of rebuildNZ$3,400 to NZ$6,800 per residentNZ$11,500 to NZ$23,000 per FTE of employment

New Zealand economy and ChristchurchSome data 15 % Christchurch % nation’s economy.NZ$51 bn Tax revenue in the 2009/10 financial year.NZ$153 bn New Zealand GDP

The costNZ$15 to NZ$30 bn cost of rebuildNZ$3,400 to NZ$6,800 per residentNZ$11,500 to NZ$23,000 per FTE of employment

NZ$15 billion

residentialdamage$ 9 bn

businessdamage$ 3 bn

infrastructuredamage$ 3 bn

New Zealand economy and ChristchurchSome data 15 % Christchurch % nation’s economy.NZ$51 bn Tax revenue in the 2009/10 financial year.NZ$153 bn New Zealand GDP

The costNZ$15 to NZ$30 bn cost of rebuildNZ$3,400 to NZ$6,800 per residentNZ$11,500 to NZ$23,000 per FTE of employment

Who paysNZ$2 bn from EQC NZ$7 bn from central governmentNZ$4 bn from insurance(with NZ$3 bn from reinsurance overseas)NZ$ 2 bn in private losses

Government$7 bn

private Insurers

$4 bn($3 bn offshore)

NZ$15 billion

EQC $2 bn($5 bn-$3 bn)

residentialdamage$ 9 bn

businessdamage$ 3 bn

infrastructuredamage$ 3 bn

private loss+ local government

$ 2 bn

35%US $35 bnNZ$ 45 bn

Japan

Greece Spain

Iceland

Canada USA

IrelandUKSweden

Italy

Germany Belgium

France

Austria

Netherlands

Finland

SwitzerlandAustralia

4. New Zealanders have a relaxed easygoing lifestyleor We need to work harder to be more prosperous

JapanNew Zealand

Greece Spain

Iceland

Canada USA

IrelandUKSweden

Italy

Germany Belgium

France

Austria

Netherlands

Finland

SwitzerlandAustralia

4, New Zealanders have a relaxed easygoing lifestyleor We need to work harder to be more prosperous

5. More tourism would be good for the New Zealand economy

0

$100,000

$200,000

$300,000

$400,000

$500,000

Needed for current

per capita GDP

200,000100,000 300,000

Rev

enue

per

em

ploy

ee

FTE of employment

NZ has 1.3 million FTE of employment

0

$100,000

$200,000

$300,000

$400,000

$500,000

Needed for current

per capita GDP

200,000100,000 300,000

Tourism

Rev

enue

per

em

ploy

ee

FTE of employment

Wine

NZ has 1.3 million FTE of employment

0

$100,000

$200,000

$300,000

$400,000

$500,000

Needed for current

per capita GDP

200,000100,000 300,000

Tourism

Rev

enue

per

em

ploy

ee

FTE of employment

Food manufacturing

Wine

NZ has 1.3 million FTE of employment

0

$100,000

$200,000

$300,000

$400,000

$500,000

Needed for current

per capita GDP

200,000100,000 300,000

Fonterra

Total NZ Manufacturing

Tourism

Rev

enue

per

em

ploy

ee

FTE of employment

NZ Manufacturing Exports

Food manufacturing

Wine

NZ has 1.3 million FTE of employment

0

$100,000

$200,000

$300,000

$400,000

$500,000

Needed for current

per capita GDP

200,000100,000 300,000

Fonterra

Fisher and Paykel Healthcare

Total NZ Manufacturing

Tourism

Rev

enue

per

em

ploy

ee

FTE of employment

NZ Manufacturing Exports

Food manufacturing

Wine

NZ has 1.3 million FTE of employment

Year ended December 2008

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Tour

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0

2

4

6

8

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earn

ings

(US

$ bi

llion

)

NZ External Trade Statisticshttp://www.stats.govt.nz

US$ 35 billion

ELT

Pet

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6. You can’t manufacture in New Zealand

“As a share of GDP, New Zealand government spending on R&D is higher than in countries with materially higher incomes (including the United States, The United Kingdom and Canada)”

“As a share of GDP, New Zealand government spending on R&D is higher than in countries with materially higher incomes (including the United States, The United Kingdom and Canada)”

“The taskforce is not convinced that there is a compelling case for more government spending on research and development through whatever means.”

“As a share of GDP, New Zealand government spending on R&D is higher than in countries with materially higher incomes (including the United States, The United Kingdom and Canada)”

7. New Zealand is small so we need to specialise in the knowledge economy

e.g.we are good at agriculture, therefore our best chance for a high tech economy is in biosciences

Abt Associates report to MoRSTwww.morst.govt.nz

New Economy Research Fund1999-2005

New Zealand USA(and nearly everyone else)

7. New Zealand is small so we need to specialise in the knowledge economy

e.g.we are good at agriculture, therefore our best chance for a high tech economy is in biosciences(latest fads=“smart foods”, “cleantech”)

Abt Associates report to MoRSTwww.morst.govt.nz

New Economy Research Fund1999-2005

New Zealand USA(and nearly everyone else)

$100m

$200m

$300m

$400m

$500m

$1410m

100 90 80 70 60 50 40 30 20 10 1

F and P appliances Datacom

F and P Healthcare

Navman wireless NZ

NDA

Temperzone

Rakon

Gallagher

Weta Ltd

Tait Electronics Ltd

Douglas pharmaceuticals

Allied TelesisMethven

GlidepathDynamic controls

Schneider electric

Skope industriesTruTest

NextWindowOrion Health

NZ Pharmaceuticals

TIN100 New Zealand Technology Companies

Rank

Ann

ual r

even

ue (N

Z$)

Moffat Ltd

The words of truth are always paradoxical.

Lao Tzu4th century BC

Irony

The perceived notion of an incongruity between what is expressed and what is intended, or between an understanding or expectation of a reality and what actually happens, "when the literal truth is in direct discordance to the perceived truth."

Jane Austen Pride and Prejudice “It is a truth universally acknowledged, that a single man in possession of a good fortune, must be in want of a wife.”

“Am I not destroying my enemies when I make friends of them?” Abraham Lincoln, 16th US president (1809-1865)

April 9, 1865(Appomattox )

Paradox: our two greatest scientists

Paradox: if it sounds unfamiliar, it may stand a chance

$100m

$200m

$300m

$400m

$500m

$1410m

100 90 80 70 60 50 40 30 20 10 1

TIN100 New Zealand Technology Companies

Rank

Ann

ual r

even

ue (N

Z$)

$3.9 bnOur top 10 technology Companies

F and P appliances Datacom

F and P Healthcare NDA

Temperzone

Rakon

Gallagher

Tait Electronics Ltd

Douglas pharmaceuticals

Moffat Ltd

Ask the question: why would such a business want to stay in New Zealand?

100 companies, 100 inspired entrepreneursAn additional $45 bn per annum in exports (double our present exports)

Ask the question: why would such a business want to stay in New Zealand?

100 companies, 100 inspired entrepreneursAn additional $45 bn per annum in exports (double our present exports)

“A place where talent wants to live”

Total $60 bn contained in all landTarget: $45 bn per year

Strategy for economic growth via the knowledge economy100 companies, 100 inspired entrepreneurs

Whole of government commitment to strategy: “A country where talent wants to live”

Commitment to education•Tell the stories of the job opportunities for New Zealand kids at home

(Get the kids and teachers visiting the smart businesses)•Significantly boost science and mathematics education in schools•Build school programmes in entrepreneurship•Boost university engineering and science capability•Refine PBRF to reward commercialisation work

Commitment to R and D•Boost science and engineering research from 0.52% GDP to 0.70% GDP

(a mere $300 million)•Enhance R and D credits to the knowledge sector•Compel CRIs to give IP share of benefit to employees and allow employee spinout•Help establish incubators, business/engineering/science synergy

Commitment to Branding•Understand the value of the conservation estate, liveable cities, quality of life•Identify and “call out” phony environmentalism and “science-phobia”•Market NZ as the “smart country, a place where talent wants to live”

Commitment to Leadership and vision•Bipartisan approach•Evidence basis for decisions-understand what works for us

As for leaders,

The worst, the people hate,

The next best, the people fear,

The next best the people honor and praise.

But for the best leaders, the people do not notice their existence.

When the best leader's work is done the people say, 'We did it ourselves!'