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The end is nigh

Each year 70,000 New Zealanders leave our shores, says David Skilling—and in December he’ll join the exodus

Each year 70,000 New Zealanders leave our shores, says David Skilling, the chief executive of the New Zealand Institute—and in December he’ll join the exodus and take a job in Singapore. So why is this man still smiling? Skilling says he’s not completely pessimistic—but he has a few parting shots

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Photograph by Kellie Blizard

 

Why leave? You’ve just begun!

I’ve been running the Institute since it was launched in 2004. I had a year prior to that getting it off the ground. So it’s been five years, plus another two [at Treasury]. I think that the institute got to a stage of acceptance, brand awareness and impact. It’s time for some fresh ideas and perspectives—and energy.

When you first started there was really only one voice of business: Roger Kerr and the Business Roundtable. Have you shifted the debate?

I think more voices are generally better than fewer. We’re not anti the Roundtable, but no one else has really made a powerful contribution for policy debate for some time. The media don’t have the resource. And outside of the lobby groups, unions and business groups, there really weren’t that many other independently funded non-partisan think tanks.

You’re a bit of lone voice on the importance of economic growth. What’s your beef?

It matters in terms of the quality of health, education and social services that we can afford in this country. Also, importantly, it gives a sense of confidence and momentum. If you look across history and across countries, periods of sustained economic growth go hand in hand with improvements in welfare, better treatment of immigrants and minorities and more generous attitudes towards social and environmental issues.

And we’re losing 70,000 New Zealanders permanently each year, and we have done for quite some time.

Is it really possible to compete against Australia, where the weather is better and it has scale—plus all that uranium?

Well, rain is good for the farmers—things are not so good if you’re in the outback at the moment. Every country has disadvantages. But nothing is fatal, it seems to me.

I don’t think that we ought to be completely pessimistic. If you look at some small, successful countries before their economy took off—say, go back to 1960 in Singapore and 1980 in Ireland—there was as huge amount of angst. Singapore was thought to be non-viable. Ireland was a basket case. Both were haemorrhaging people.

Now, we’re not Ireland or Singapore; we can’t just replicate their experience. But there is a sense in which, if we are clear what strategy makes sense and we execute, in an aggressive, disciplined way, I don’t see any reason that New Zealand can’t do a good deal better than it is at the moment. But we’ve got to want it.

The worst case for New Zealand is not terrible, catastrophic, Third-World status. Worst case is probably Fiji with snow: bit of agriculture, a bit of tourism, friendly people, half-decent rugby team

What should we be doing?

We could be a country that extracts a good deal more value from our natural resources. I just don’t think that we have been as innovative around business models and the like as we could be. In addition, the Institute has championed the idea of the ‘weightless economy’. That’s an area where New Zealand could carve out a position of global competitive advantage. I mean the creative industries, or financial services, or research-heavy activities. It doesn’t really matter where in the world you are, as long as you’ve got skilled people, the requisite infrastructure, and an ability to communicate that value to customers who will pay for it.

That sounds awfully familiar to what Labour said when it started. How do you rate its handling of the economy?

A wasted opportunity. It has done some good things. They’ve increased spending on R&D off a very low base, but not nearly aggressively enough. There’s KiwiSaver and the New Zealand Superannuation Fund, but in terms of a coherent guiding vision that gives politicians and others confidence to invest heavily behind a direction, we haven’t seen any of that.

No vision and no targets, right?

One of the things that bedevilled us in New Zealand is that we don’t know if we’re making good progress or not. The Institute put out some work on New Zealand’s international performance around exporting and outward direct investment. It shocked quite a few people, because the numbers were terrible. The impression was [that] New Zealand is a small trading nation and we’re doing pretty well. Actually, that’s not the case.

What are these terrible numbers?

Outward direct investment, which is when a company like Fletcher Building buys an asset in the United States—so a direct investment in another company or in a greenfields site—was about 13 or 14 percent in 1990. It’s less than ten percent today. But compare that to the rest of the world—it’s tripled as a share of GDP across the developed world.

Our exports as a share of the economy have flatlined over the last 25 years, while world trade growth has gone up by a very significant amount. So New Zealand, bluntly put, is not participating in globalisation. And for a small country this matters enormously.

I think the real tyranny of distance for New Zealand now is that we don’t fully appreciate the intensity of global competition. We don’t, in a deep sense, understand how intense that competition is, and the implications for New Zealand. If you go to Asia, you talk to people in Singapore, all they talk about is what Hong Kong is doing. You go to Hong Kong and all they talk about is what Singapore is doing. It’s kind of two city-states, and it’s a dog-eat-dog competition.

In New Zealand we’re small, we’re remote, at one level we kind of understand that it’s a competitive world. But not in a way that really forces us to take meaningful action, be it on tax, or education, or R&D.

Let’s talk about sustainability. This is an area that New Zealand could excel in, and yet one of your reports said we should be fast followers, rather than pioneers in sustainability.

We said we should be fast followers in quite a specific sense, which is in terms of the commitment to reducing emissions. It was unrealistic and perhaps quite economically costly to claim that we’re going to commit to a world-leading target, because a world-leading target now means about 80 to 90 percent reduction in emissions compared to 1990 levels. We’re 25 percent up at the moment. So I find it quite disingenuous for people to say we’re going to lead the world on response to greenhouse gas emissions. Our record in New Zealand is appalling. Now it’s one of the worst in the world.

What makes our record so appalling?

Our emissions have grown by 25 percent since 1990, [through] a combination of growth and agriculture. And despite all the talk about carbon taxes and now the emissions trading scheme, we still don’t have a scheme. We have no meaningful policy response.

Australia is going to hit its Kyoto target; New Zealand is going to miss ours by a country mile. So when people castigate the institute for saying we should be a fast follower and say “We should be a world leader”, the debate has a touch of the surreal about it, because at best we’re a slow follower.

Now you’re leaving for Singapore, what’s the worst kind of New Zealand you hope to avoid coming back to?

I think the worst case is not terrible, catastrophic, Third World status. Worst case, I think, is probably Fiji with snow: bit of agriculture, a bit of tourism, friendly people, half-decent rugby team. And that’s pretty much New Zealand. So it’s not terrible.

But on current course and speed, there’s going to be a 60 percent income gap between ourselves and Australia in 20 years’ time.

Sounds like we’ll be begging to join the lucky country by then. And the best?

I don’t see any reason we couldn’t overtake Australian incomes within the next 20 years or so. Australia only overtook us 30 years ago. If we wanted to invest heavily in our primary and secondary industries, but also in education, R&D, and high speed broadband; if we had a real view about growing firms and attracting firms from overseas; and if we create an environment that’s conducive to the growth of scale firms, then, yeah, I think it’s possible.

It’s really up to us. Many of the trends globally are breaking in our direction. We need to seize the opportunities.