New Zealand’s economic future – cohesive strategy needed

New Zealand needs to refresh many aspects of its economic strategy including giving greater focus to innovation and the knowledge economy, says a report by some of our leading economists and researchers.

They call for investment in Auckland as an innovation hub – together with building off the concentrated expertise in other cities, boosting the country’s national research and development (R&D) spend, and encouraging multinational corporations to invest in New Zealand R&D as part of a cohesive strategy to reset our economic future in the wake of COVID-19.

New Zealand’s economic future: COVID-19 as a catalyst for innovation was produced by Koi Tū: The Centre for Informed Futures, a think tank and research centre at the University of Auckland.

Written by Dr Ryan Greenaway-McGrevy, Professor Arthur Grimes, Professor Tim Maloney, Dr Anne Bardsley and Sir Peter Gluckman, the report says COVID-19 has presented a unique opportunity to develop comprehensive economic policies that address research and innovation, the role of cities, housing and taxation, and demographic and workforce issues.

“It is time for fresh thinking about how we do business. Given our geographical isolation and the need to reduce the impact of extractive industries, our most important asset will be knowledge applied in all sectors, including digital and agricultural sectors. Building this asset will require new strategies, and a significant change in direction and focus for the New Zealand economy,” the report says.

There has been support for an innovation strategy from all political parties over recent decades, but the policy settings and commitments to make it a reality are lacking, incomplete and disconnected, it says.

Koi Tū Director Distinguished Professor Sir Peter Gluckman says New Zealand needs to have tough conversations about what we might do differently to improve our standard of living while continuing to progress our long-term sustainability goals in the face of significant global uncertainty.

“We need sustainable long-term strategies for growth which extend beyond political cycles and support economic growth, social justice and the environment.”

The sudden impact of the COVID-19 pandemic has underscored the economy’s reliance on the tourism, international education and primary sectors.

“It’s time to think how we can build and diversify the economy by cultivating high value-added industries that provide increasing incomes while reducing our environmental footprint.”

Professor Arthur Grimes, Chair of Wellbeing and Public Policy at Victoria University of Wellington’s School of Government and Senior Fellow at Motu Research, says New Zealand has considered regional development as one driver of economic development, but to compete in a technologically progressive world, Auckland needs urgent support.

“Succeeding in the knowledge economy over the next 50 years will require further development of our largest and most internationally positioned city, Auckland, into a hub for knowledge-intensive businesses.”

He says the efficiencies and benefits derived from firms and households locating close together are referred to as “agglomeration effects”.

This needs to be complemented by industry-specific clusters in other cities, which in the case of agriculture, will likely not be Auckland-based.

Professor Grimes say attracting multinational companies and foreign direct investment to New Zealand will be critical if we are to diversify our economy and grow its ‘weightless’ component, including knowledge production, innovation, and high value-added services.

He says multinational companies are core to global innovation systems. Yet, they have little productive or research footprint in New Zealand, compared to other small advanced economies which encourage foreign direct investment and multinational companies to leverage existing talents and resources.

He says while many home-grown businesses are already developing new ideas and processes in the IT, medical, agritech and manufacturing sectors, New Zealand does not yet have a critical mass of labour, capital and expertise to catalyse further entrepreneurship, create capacity to market globally and earn at scale in the knowledge economy.

“We need to capitalise on our current unique opportunity. People want to come here and invest here,” he says.

Read the report here