Exports are the key to building national wealth, the Ministry of Economic Development has told incoming minister Steven Joyce.
In its briefing paper produced following the 2011 election and released yesterday, the ministry says New Zealand will need to generate an extra $20 billion in exports if exports are to rise to a target of 40 percent of GDP.
Exports and internationalisation matter, the paper explains, because they enable countries to specialise and gain scale which in turn fosters productivity.
"Without higher exports and deep internationalisation, New Zealanders will never achieve the living standard to which they aspire."
The volume and sophistication of New Zealand exports has not kept pace with global changes. While the OECD export average is around half of GDP, New Zealand's is only 30 percent.
However, it's clear growth in commodity exports alone will not suffice. The briefing notes that New Zealand will need to continue building on the primary sector, requiring a combination of private sector initiatives supported by complementary government actions, as well as shifting toward higher-value goods and services.
New Zealand already exports in high-value areas such as processed food and beverages, a sector that has grown 9.6 percent annually since 2000 driven by firms such as Tasti, New Zealand Natural and Sutton Group. Other knowledge-intensive manufacturing companies generate high returns and dominate niche global markets such as Endace and Fisher and Paykel Healthcare but have yet to demonstrate a major impact on overall economic performance.
"Rapid growth in high-value sectors has come from a very low base and has not yet been sufficient to effect a significant reallocation of resources across the economy."
A number of ministers are due to report back to the Infrastructure Committee this month on strategies to make the economy more internationally competitive.