Executive Summary
The government's overarching goal is to improve New Zealanders' living standards in a sustainable way. This is clear from its vision, in which New Zealand becomes:
- a land where diversity is valued and reflected in our national identity
- a great place to live, learn, work and do business
- a birthplace of world-changing people and ideas
- a place where people invest in the future.1
This is a vision of sustainably improving living standards based on innovation, investment in skills, capital and research and development, with strong returns and business success.
As part of its work to achieve this vision, the government is preparing a broad suite of indicators covering social, environmental, cultural and economic outcomes. These indicators aim to measure progress towards the government's wider goals and provide a view of New Zealanders' well-being. The growth and innovation indicators discussed in this report are part of this broader picture.
Current Performance
The chart illustrates the current direction of changes in some 'headline' indicators and New Zealand's ranking among member countries of the Organisation for Economic Co-operation and Development (OECD).
Although well-being is more than just income levels, income is an important component of living standards. New Zealanders' material standard of living is lower than many other OECD countries, although the decline in our relative incomes appears to have stabilised.
Similarly, in recent years there have been improvements in productivity growth, particularly in labour productivity. However, productivity levels and productivity growth are still low by OECD standards.
There are signs of improvements in New Zealand's innovation, entrepreneurship and technology, and openness to trade, with New Zealand businesses as innovative as their European counterparts, if not more so. However, levels of research and development (R&D) are low by international standards, particularly for the private sector.
New Zealand also needs to improve its export performance (relative to GDP) to match that of similar OECD countries. Given the relatively high quality-of-life ranking of New Zealand cities in international surveys and a flow of skilled migrants, such improvements should serve to increase New Zealand's connections with the rest of the world.
Investment flows give some indication of future confidence in economic performance. While the current stock of foreign direct investment (FDI) in New Zealand is comparatively high, from the late 1990s to 2001 new investment declined at a time when global FDI increased significantly, and has continued to decline as global FDI has fallen dramatically. New Zealand also has average levels of capital investment, but investment in plant, machinery and equipment (as opposed to land and other physical assets) is relatively low compared with other OECD countries.
Finally, the quantity and quality of skills and the match of these with labour market requirements are critical for improvements in productivity and sustainable economic growth. The proportion of the population with a post-secondary school qualification, while improving, is below average in international terms. There are encouraging signs for ongoing improvements in the skills of the workforce. New Zealand ranks top in continuing education and training for adults in the OECD's International Literacy Survey, and most employers appear to be investing in external or in-house/on-the-job training.
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