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Outcome: Improved Economic Performance

New Zealand's long-term poor economic performance has seen a relative decline in New Zealanders' living standards compared with high-income countries.

Relative levels of nominal GDP per capita, 1970 to 2009 (OECD Average=100)
Relative levels of nominal GDP per capita, 1970 to 2009 (OECD Average=100).
Source:  OECD

New Zealand's poor performance is reflected in a lower level of labour productivity, which is associated with relatively low levels of both capital intensity and multi-factor productivity. Reversing the decline in New Zealand's relative standard of living requires policy changes that have the potential to lift productivity across the economy and support a substantial lift in export performance.

How We Have Contributed to This Outcome

The Treasury has provided advice on key government policies that relate to growth. Highlights from the year include:

  • providing advice on integration of the Youth Guarantee and Youth Pipeline, aimed at better identification of at-risk young people; better support and pathways into post-school education and training or career; improving the performance of the student loan scheme; and the provision of high-quality education and training programmes leading to meaningful qualifications
  • promoting regulatory reform, providing advice on regulatory sectors that matter for growth and achieving a shift in the quality of the regulatory management system
  • developing advice and providing input into the Savings Working Group, resulting in changes to savings and tax systems in 2011
  • implementing, with IRD, major tax reforms that were announced in Budget 2010
  • contributing to the development of economic frameworks that are used by agencies in the natural resource sector. We advised on New Zealand's climate change commitments, ensuring that the economic implications of options were understood as New Zealand negotiated its climate change strategy, including at the United Nations Climate Change Conference in Cancun, Mexico. We contributed to the secretariat of the Emissions Trading Schemes led by the Hon David Caygill
  • contributing to work on how to achieve the greatest value for New Zealand from fresh water, through the development of inter-agency advice on water policy in the lead-up to and following the mid-2011 Report of the Land and Water Forum: A Fresh Start for Freshwater
  • developing the second edition of the National Infrastructure Plan, aiming to give businesses confidence that the infrastructure environment will be responsive and support their business growth. The plan has been well received by stakeholders
  • providing advice on critical international areas, including reviewing the Overseas Investment Act 2005 (resulting in immediate reduction in compliance and administration costs), concluding a Closer Economic Relations (CER) investment protocol with Australia and supporting ongoing negotiations on the Trans-Pacific Partnership Free Trade Agreement
  • engaging in a range of significant international relationships, including new engagements with the US Treasury and Indian Ministry of Finance
  • providing secretariat support to the Welfare Working Group on how to reduce long-term dependency for people of working age, and
  • significant investment in understanding New Zealand's growth performance, culminating in a growth narrative that integrates both macro- and microeconomic perspectives and indicates key areas for policy change in order to shift New Zealand's growth performance towards a target of 4% per annum.
Outcome and Intermediate Outcome Indicator and Measure

Outcome and Intermediate Outcome Indicator and Measures:

Position in 2010/11

Outcome: Improved Economic Performance

Growth rates sufficient to deliver high incomes to New Zealanders.

Target in 2011-16 SOI: A strong recovery in 2012 is sustained, lifting five-year average real GDP per capita above the Organisation for Economic Co-operation and Development (OECD) average and ultimately reaching 4% per annum.

Growth in New Zealand's real GDP per capita was 0.4% for the year to March 2011.

For the five years ending 2009 (latest available data), OECD average real GDP per capita growth was 0.3%. Over the same period, average growth in New Zealand was 0.5%.

The economy rebalances to deliver higher growth.  Growth in tradable sector output at least matches that of the non-tradable sector over the next two years, and then significantly exceeds it.

Target in 2011-16 SOI: Growth in tradable sector output at least matches that of the non-tradable sector over the next two years, and then significantly exceeds it.

Growth in output in New Zealand's tradable and non-tradable sectors was 0.1% and 2% respectively for the year to March 2011. For the five years ending March 2011, growth in the tradable and non-tradable sectors was -1.9% and 1.6% respectively.

Intermediate outcome: Improved business environment

Business investment as a percentage of GDP.

Target in 2011-16 SOI: Increases substantially to OECD-average level.

New Zealand business investment (gross private non-residential investment) as a percentage of GDP was 10.4% for calendar year 2010.  For the five years ending 2010, the average was 11.2%. The OECD average was 10.6% in 2010, with a five-year average of 12.1%.

Business expenditure on research and development (R&D).

Target in 2011-16 SOI: Lift business expenditure on R&D substantially to around 1% to 2% of GDP.

New Zealand business expenditure on R&D was 0.5% of GDP in both 2008 and 2010. The OECD average in 2008 (latest available) was 1.6% of GDP.

Regulatory Impact Statements meet most or all of Regulatory Impact Analysis requirements.

Target in 2011-16 SOI:75% by 2012 and 90% by 2013.

Of significant proposals requiring a Regulatory Impact Statement, 66% met most or all of the requirements.

The National Infrastructure Plan and annual Infrastructure State of the Nation report provide certainty to business/investors and the public about the performance of New Zealand's infrastructure.

Target in 2011-16 SOI:The National Infrastructure Plan and State of Nation report provide investor certainty, with improvement in the World Economic Forum ranking of New Zealand infrastructure quality.

Stakeholder feedback about the 2011 National Infrastructure Plan was positive, with endorsement of the approach and principles, and enthusiasm for the  three-year action plan.

New Zealand's negotiating position in international meetings on climate change.

Target in 2011-16 SOI: Consistent with the final climate change targets imposing economic impacts no greater than those faced by comparator countries.

The Treasury advised on the economic and financial implications of New Zealand's climate change negotiating strategy, including at the United Nations Climate Change Conference in Cancun, Mexico.

New Zealand's export share of world trade.

Target in 2011-16 SOI (Amended): New Zealand's export share of world trade increases.

New Zealand's export share of world trade in 2010 was 0.22%. For the five years ending 2010, the average was 0.21%.

The flow of foreign direct investment (FDI) and outward direct investment (ODI) as a percentage of GDP.

Target in 2011-16 SOI: ODI as a percentage of GDP increases to half the OECD average and the flow of FDI increases to 30% of foreign investment.

In 2010 New Zealand's ODI and FDI were both 0.4% of GDP. The OECD average for ODI and FDI was 2.4% and 1.5% respectively.  As a percentage of total foreign investment in New Zealand, FDI was 8.7%.

Better international linkages and relationships.

Target in 2011-16 SOI: Memoranda of Understanding for Treasury-to-Treasury dialogues with one or more countries of economic significance to New Zealand.

Undertook first set of Treasury-to-Treasury consultations with the US.

Undertook second set of Treasury-to-Treasury consultations with India.

Intermediate outcome: Enhanced human capital and labour supply

Percentage of young people who achieve at least National Certificate of Educational Achievement (NCEA) Level 2 or equivalent by the time they complete their schooling or reach the age of 18.

Target in 2011-16 SOI: 95% to 98% of young people achieve at least NCEA Level 2 or equivalent by the time they complete their schooling or reach the age of 18.

69.8% of 2009 school leavers achieved NCEA Level 2 or above.

Proportion of young people achieve vocational and tertiary qualifications at Level 4 and above by age 25.

Target in 2011-16 SOI: A greater proportion of young people achieve vocational and tertiary qualifications at Level 4 and above by age 25.

In 2009, 38% of those 25-year-old and younger had completed a tertiary qualification at Level 4 or above.

OECD mean in the proportion of 15- to 24-year-olds who are not in education, employment or training (NEET).

Target in 2011-16 SOI: There is a reduction to at least the OECD mean in the proportion of 15- to 24-year-olds who are NEET. 

In year to March 2011, the NEET rate for 15- to 24-year-olds was 9.9%, down from 10.8% in the previous year. The OECD 2008 average NEET rate was 12% across 15- to 24-year-olds.
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