New Zealand needs a better economic strategy to rise from stagnation

Dave Ananth
Auckland, June 24, 2024

The world of economics is often dominated by discussions around demand and supply, interest rates, and spending cuts.

These traditional approaches, while essential, can sometimes overshadow the need for strategic thinking and innovative solutions. As a person deeply involved in this cycle for a long time, I find it increasingly frustrating to see the same strategies being touted by so-called experts without considering more creative and practical solutions.

Effective economic management requires more than just textbook theories; it demands a nuanced understanding of the unique challenges and opportunities facing a country like New Zealand.

Money, Money, Money

New Zealand is currently facing a significant cash flow problem.

The reality is stark: there is no liquid cash because we have spent more than we earn.

This fundamental economic imbalance, known as a deficit, is not something that requires a PhD to understand. It is a straightforward concept that everyone should grasp, yet it remains a persistent issue.

The country is financially struggling, and the lack of cash flow is a critical barrier to economic growth and stability. Everyone I know, in business is looking for money.

Without addressing this core issue, the New Zealand economy is at risk of stagnation. High taxes, Goods and Services Tax (GST), minimum wages, and the rising costs of food and rent exacerbate the problem. These factors contribute to a challenging business environment, making it difficult for local companies to thrive and for foreign companies to consider New Zealand as a viable place to set up operations.

The need for incentives

One of the most significant issues is the lack of incentives for businesses. Without these, companies have little reason to remain in New Zealand, let alone invest here. Many businesses are looking across the Tasman to Australia, where the economic environment can often seem more favourable. I do not blame them for making such decisions; it is a rational response to the incentives, or lack thereof, offered in New Zealand.

To retain businesses and attract new investments, New Zealand needs to rethink its approach to economic incentives. This means not only financial incentives but also creating an environment that supports innovation, growth, and sustainability. For instance, tax breaks, grants, and subsidies for businesses that invest in green technologies or sustainable practices could position New Zealand as a leader in the global green economy.

New Zealand has many strengths that can be leveraged to boost its economic standing.

The country is known for its clean, green image, and this reputation can be a significant selling point on the global stage. Promoting New Zealand’s commitment to environmental sustainability can attract businesses and tourists looking for eco-friendly destinations and partners. But we are not doing enough.

New Zealand offers high-quality products and services. However, good quality alone is not enough to drive economic growth. We need to effectively market these strengths to the world. This involves not only highlighting the quality of our products but also emphasising the value for money, transparency, integrity, and honesty that come with doing business with New Zealand. New Zealand is upfront, we do not cheat, we are clear. You pay for quality.

Effective economic management

Effective economic management in New Zealand requires more than just repeating the same old strategies. It requires strategic thinking and innovative solutions tailored to our unique challenges. This means looking beyond traditional economic policies and exploring new ways to stimulate growth and development.

One approach is to foster a culture of entrepreneurship and innovation. By supporting startups and small businesses, New Zealand can create a more dynamic and resilient economy. This could involve providing easier access to capital, offering mentorship programs, and creating incubators and innovation hubs where entrepreneurs can collaborate and grow.

Additionally, investing in education and training is crucial. By equipping the workforce with the skills needed for the jobs of the future, New Zealand can ensure that its citizens are prepared to thrive in an evolving economic landscape. This includes not only traditional education but also vocational training and lifelong learning opportunities.

Attracting Foreign Investment

Foreign investment is a critical component of economic growth. To attract foreign companies, New Zealand must offer compelling reasons for them to set up shop here. This goes beyond just providing financial incentives. It involves creating a business-friendly environment that supports innovation, sustainability, and growth.

For instance, simplifying regulatory processes and reducing bureaucratic red tape can make it easier for foreign companies to do business in New Zealand. Additionally, offering targeted incentives for industries that align with New Zealand’s strengths, such as renewable energy, technology, and agriculture, can attract high-quality investments that drive economic growth.

Moreover, promoting New Zealand as a gateway to the Asia-Pacific region can be a powerful selling point. The country’s strategic location offers access to some of the world’s fastest-growing markets, making it an attractive destination for businesses looking to expand their global reach.

Enhancing Global Competitiveness

To compete on the global stage, New Zealand must enhance its competitiveness. This involves not only improving the business environment but also investing in infrastructure, technology, and innovation. For instance, upgrading digital infrastructure and expanding access to high-speed internet can support the growth of tech industries and enable businesses to operate more efficiently.

Furthermore, investing in Research And Development (R&D) can drive innovation and create new economic opportunities. By fostering partnerships between businesses, universities, and research institutions, New Zealand can accelerate the development of new technologies and products that can compete in global markets.

The economics of stupidity lies in the failure to move beyond traditional economic strategies and embrace innovative, strategic thinking.

New Zealand has the potential to overcome its economic challenges and build a prosperous future, but this requires a willingness to think outside the box and implement bold, creative solutions. By promoting its strengths, creating a supportive business environment, and investing in innovation and education, New Zealand can attract investment, stimulate growth, and enhance its global competitiveness. The time for complacency is over; it is time for New Zealand to up its game and take charge of its economic destiny.

Dave Ananth is the President of the New Zealand Malaysian Business Association based in Auckland and a member of the Indian Newslink Legal Panel for Communities.

 

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