Value creation key to prosperity
No one is surprised that Kiwis are heading across the ditch at a rate of 100 a day in March alone when news filter back that the average after-tax income in Australia is 34% higher than in New Zealand. If New Zealand ranks as the second easiest place on the planet to do business why are we less prosperous than most of the OECD, coming in at 21st out of 30 countries on GDP/capita?
It’s certainly “easy” to do business in this country. Anyone can start up a company within a matter of hours, apparently one of the fastest places you can do so in the world.
However, just because it’s “easier” to do business doesn’t mean that our firms are necessarily more prosperous. Quite the contrary. Our firms are unusually small (over 90% of firms employ less than 10 staff), compared with under 50% for USA and Korea for example. In the highly significant export sector (where we derive most of our wealth), only 4% of our firms export, and 80% of our the total $ value exported is generated by 1.5% of exporters (Source: David Irving, Icehouse presentation Apr 08) .
The reason Kiwis don’t get paid more is simply because we’re not productive enough. New Zealand is in the business of producing pretty low value goods and services. We are easily lulled into a sense of superiority because we are one of the world’s largest exporters of dairy products.
It’s a matter of demand and supply. It’s not just our dairy products that are in demand, but our talent too. As we have seen from the prices of butter and milk in our local supermarkets, we are by no way insulated by global forces, regardless of how many cows we have in New Zealand. In a global market, organisations compete for talent by paying more. Over time, the best resources move to the highest bidder.
New Zealand is a great place to live. No doubt about that. That’s why most of us are still here. We can and should still talk about what the government and the rest of us can do to make New Zealand more competitive.
Personally I would like to see more people create value by growing their businesses, employing more staff, and selling higher value products/services. Hopefully if enough people do that, Kiwis get paid more, and fewer would have to move to Aust/UK for more money.
I had the chance to visit a high tech company last week and spend some time with the owner (as part of a leadership training programme I’m attending). It was absolutely amazing to see how they managed to grow from nothing to a “mini-multinational”. I’m now pretty inspired to make a difference!
I’m pretty happy that at Euroasia we help people connect with foreign cultures, and a fair few of our clients have extensive contact with people from overseas. They build relationships that help with international trade and New Zealand’s global competitiveness. I have a feeling that in 5 years, we’ll see a lot more people providing cross cultural training and consulting services. And when you google “cross cultural training” you will find more than the handful of providers you see there now.
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