28.01.2026
This article by Sir Peter Gluckman and Dr Christopher Erwin of Koi Tū Centre for Informed Futures originally appeared on BusinessDesk:
Recent commentary has suggested that the cancelation of compulsory superannuation by Muldoon was a bad miss. This like many other past decisions has likely impaired New Zealand’s development, for hindsight is rarely wrong: it may help us understand how we got where we are, but it does little to shape where we are going. Superannuation, the age of retirement and enhancing KiwiSaver are again in the political frame, all mentioned in the Prime Minister’s state of the nation address.
Many past decisions which we now see as mistakes can be seen as a failure of foresight – a set of tools that New Zealand policy makers and politicians have been reluctant to use. Whether New Zealand remains an advanced economy will depend more on our willingness to better govern with foresight than on retrospective blaming. But foresight has not been one of New Zealand’s consistent strengths. Our three-year electoral cycle and constitutional arrangements tend to favour the short-term, often at the expense of longer-term capability and resilience.
This is not the only policy trap: in too many areas of policymaking New Zealand has failed to act early or learn from others because our policymakers believed the country was immune or unique. For small, open economies like ours, foresight is not optional: it is the means by which we can build advanced capabilities before constraints become binding.
New Zealand’s approach to productivity over the last 50 years is both due to a lack of foresight, and of learning from others. As our productivity diverged from other OECD countries from the 1970s, we failed to ask why. The establishment of the Small Advanced Economies Initiative in 2014, led by New Zealand was at least an acknowledgment that we had something to learn from similar small countries.
In the 1980s, these other countries recognised that, with the increasingly globalised and connected economy, much domestic manufacturing would disappear, relocating to lower cost countries in Asia. They also recognised the need to move into an economy in which knowledge and technology would shape their economic future, thus allowing them to meet their citizens’ expectations.
Singapore may be the most obvious example, as it did not have a primary production phase. But Denmark, Israel, Finland, and later Ireland all rapidly increased their investment in science, research, and technology. OECD data show that this has paid enormous economic dividends, but the returns were not immediate.
As these economies took off, New Zealand made no real adjustments to address how to support economic growth through generating and exploiting knowledge. Comforted – and buffeted – by the ability to sell milk to Asia at a premium, our country did relatively little to adjust our economic profile. We remained an exporter of products with limited added value, while domestic manufacturing was replaced by imports.
Public investment in research and development (R&D) in New Zealand remained well below that needed to drive private-sector capability and attract international investment – both essential and central features of innovation-based economies. Public investment has hovered around 0.6 percent of GDP for decades, despite repeated analysis showing that this was insufficient to support a future-focused economy.
Investment in science and research is not the only requirement of an advanced economy. It is one of the clearest indicators of whether a country is preparing to be an advanced economy in an increasingly technological age. Yet the political rhetoric in New Zealand remained that R&D was something ‘rich’ countries did, rather than an investment that helped make countries rich.
The returns from R&D are delayed and nonlinear. As a result, the continued deferral of investing in R&D has been a recurring error of political judgment across successive administrations. Only recently have the implications of this approach become difficult to ignore.
Science is now listed as one of the Government’s five core economic strategies, but the danger of underinvestment remains. The science and innovation system has been reviewed and is being restructured. These are necessary steps, but restructuring will only succeed if the level of investment, and the state of human and physical infrastructure, are adequate to support an advanced economy.
The risk is that short-term considerations will again prevail, investment will again be deferred, and New Zealand will continue to fall further behind other small, advanced economies.
The private sector has attempted to fill some of the gaps, and there are encouraging signs, including the emergence of firms such as Rocket Lab, Halter and Xero. But the private sector cannot alone shoulder the risks of embedding New Zealand in global knowledge and technology value chains without the government as a partner. Other countries have shown how it can be done.
Reforms are underway, and there are promising signs. But the question is not whether the path ahead is visible: it is whether we can follow it, and are prepared to act on what is already evident. Every society has options in balancing priorities for the short- or long-term. If “building the future” is the country’s goal, long-term investment choices are necessary, even when the political rewards are delayed. That is policy foresight in action.
