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The step forward

By Vincent Heeringa

Friday 9th September 2005

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While watching the walloping of the Lions a few weekends ago some mates began to wax on about the triumph of the Kiwi rugby machine - the superiority of the All Blacks' fitness, the suave nature of the taciturn Kiwi demeanour, the sheer tactical brilliance of Dan Carter blah blah. Conversation warmed as we drank more local product and reflected on the general wellbeing of the country: the 'stronger for longer' economy, the surprising endurance of house price figures, the confidence felt by the Reserve Bank (justified or not), the falling Kiwi dollar, maybe lower interest rates and record low unemployment.

It got a bit self-congratulatory and, well, beer enhanced.

So why don't we feel that great when we wake up? No, I'm not talking about my hangover. Business confidence is at a 17-year low and the exodus to Aussie continues apace. Workers report lower expectations for future job prospects. Brendan O'Donovan, Westpac's eloquent economist, reckons we're "teetering on the brink". Of what exactly, he doesn't say, but I guess he's thinking 'precipice' not 'stardom'.

I share O'Donovan's worry about the Kiwi economy, albeit for different reasons. It seems to me that our economy has been 'on the brink' for years. If you look at the charts in O'Donovan's monthly newsletter you'll notice that the last three downturns in GDP growth all coincide with downturns in commodity prices. No surprise there - we are still heavily reliant on commodity products for our overseas income. What's surprising to me is that while we fret about the tone of Alan Bollard's latest fart about inflation or the minor dial changes recommended by this year's OECD report we keep missing the really big, hairy gorilla of a problem.

Which is this: Do you recall the feeling you had when first hearing about the Waiheke Island foot and mouth scare? Yes, it was a hoax but not so silly a hoax as to not make our hearts skip a beat. According to one Treasury report it would wipe $10 billion from the economy overnight and take six years to recover from. And that was based on a scenario of a quickly contained outbreak. Foot and mouth has the potential to screw up a lot more than agriculture, as we saw in Britain. Our country and economy is premised on an industry that's unsustainably vulnerable to a host of diseases, inequitable trade rules, fickle prices, a squeeze on global shipping and the political effectiveness of self-centred farm lobbies. At the same time we produce largely what every other agricultural country produces and hope like hell we can sell on price. Which is pretty stupid when you're up against the inner plains of China and Brazil.

I don't like the odds. When I get the night terrors it's not just about my standing with the Almighty - it's also about the idea that I'm living in some kind of dairy shed in the middle of a sophisticated, 21st century urban landscape. Are we irrelevant? Are we about to be bulldozed? Are we nothing more than an anachronism for tourists to coo over?

I'm not anti-farming. But what I'm getting at is the difference between Fonterra and Nestlé, between milk powder and Dairy Whip, between a kiwifruit and Zespri. The former is the stuff of the land, the latter is the stuff of ideas. Ideas are to us now what refrigeration was to New Zealand a century ago. They are the new cool. Ideas have no shipping costs. They don't catch diseases. Good ones are a little hard to find but they can change the world. There is no global price set for ideas. They can come from anywhere, so why not here? They take what everyone can get and turn it into a rare stone. Ideas feed upon themselves and burst forth in surprising ways: one day you're researching an anti-smoking drug when, presto, it's Prozac!

Ideas are where we should be centring the bulk of brain power, leaving the fraction that remains to deal with the trivia of the day. But we're not. We're pissing about arguing about how middle-right or right-middle our labour relations should be. I'm convinced that a refinement of the present economic framework will not deliver the kind of growth we want for a vibrant country. I'm constantly disappointed by the self-appointed business leaders who seem to have no greater imagination than to ask for a tax cut at every turn.

What I'd like to see is better, and then better again, business ideas for New Zealand and from New Zealand.

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