Treasury international connections paper

On 2 April 2009, the New Zealand Treasury released a ‘blue-sky’ paper entitled International Connections and Productivity: Making Globalisation Work for New Zealand (Productivity Paper 09/01).

The Paper advances the interesting argument that, although New Zealand’s economy is “relatively open”, New Zealand is “only moderately well connected” with the global economy.  This may have benefits during periods of turbulence, such as the present global financial crisis, but “[r]aising productivity is the core economic challenge for New Zealand over the medium term.  Small, high-productivity economies rely heavily on international connections – the flows of people, capital, trade and ideas between countries around the world.”

The paper uses a range of statistics to make the case that New Zealand is not taking full advantage of the international connections available to it and identifies three broad priority areas for policy attention: domestic policy settings, regional economic integration, and further reducing barriers at the border.  The most eye-catching of the statistics are those showing the size of New Zealand’s diaspora (15% of New Zealand’s population; second only to Ireland in OECD terms) and the paucity of New Zealand’s outward investment.  Whilst New Zealand’s figures are comparable with many other OECD countries on a range of other measures, it sits well behind the United Kingdom, Ireland, Canada, Australia and the United States in terms of the proportion of GDP directly invested overseas.  Indeed, New Zealand’s figure of 12% is approximately half the OECD average.

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Related topics: International trade & investment; New Zealand productivity

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