2 Building a more productive and competitive economy
New Zealand's economic prospects ultimately determine the living standards we can afford. To achieve higher incomes and more jobs, the economy needs to be more internationally competitive and productive. The New Zealand economy lost competitiveness over the 2000s and our high-level aim is to first restore and then exceed the economic performance achieved over the 1990s.
Lifting economic performance requires many specific actions to improve the environment for businesses to grow, invest and hire workers. The Government has a 120-point action plan that will improve the competitiveness and productivity of the New Zealand economy.
A broad range of microeconomic reforms are focused on removing roadblocks that prevent firms from taking advantage of growth opportunities. Reducing the regulatory burden on businesses and individuals is a key means of improving productivity and competitiveness. We have already streamlined much regulation. Specific regulatory reform initiatives under way include thorough reviews of the Building Act, the Resource Management Act (RMA) and the regulatory costs imposed on exporters. Other initiatives in the 120-point plan include:
- pursuing an ambitious programme of free-trade agreements, such as the Trans-Pacific Partnership
- overhauling our securities law to improve investors' confidence in New Zealand's financial markets
- setting a six-month time limit for the consenting of medium-sized projects under the RMA
- reducing the costs and bureaucracy of the collective bargaining wage-setting process, and lowering the barriers to work for our youngest workers
- encouraging oil and gas exploration with a competitive new system for processing permits.
In addition, Budget 2012 will lift investment in science and innovation. Industrial Research Limited (IRL) will be transformed into an advanced technology institute to work alongside the high-tech manufacturing and services sector. We will establish funding for a series of National Science Challenges to find innovative solutions to some of the most fundamental issues New Zealand faces in its future development.
In delivering this action plan, the Government will ensure policy supports macroeconomic stability, investment and saving. As well as returning government accounts to surplus, we will ensure that core Crown expenses are reduced to around 30 per cent of GDP and implement policy that is conducive to lifting domestic saving. We are committed to a broad-based, low-rate tax system, and substantially reformed the tax system in Budget 2010.
The extension of the mixed ownership model will allow a large reprioritisation of capital for use in upcoming Budgets through the establishment of the Future Investment Fund. The Future Investment Fund will invest in new public assets and modern infrastructure, including the building of 21st Century Schools.
New state highways, ultra-fast broadband and the Rural Broadband Initiative continue to be rolled out. More generally, the Government is determined to make more efficient use of the Crown balance sheet so that it contributes to improved economic performance. The Crown balance sheet contains $245 billion worth of assets, so small gains in efficiency have the potential to have significant positive impacts on both the fiscal position and economic performance. We will continue to concentrate on making the most out of what is already owned.
A more efficient and innovative public sector can make a contribution to overall economic performance. Public provision of goods and services makes up about a quarter of the economy, so higher productivity in the public sector directly contributes to improved economy-wide productivity. An efficient public sector also means resources are freed up so they can more easily flow to sectors exposed to international competition.
