Business person flying with the cloud

OpinionJune 20, 2016

The NZ economy is on the cusp of a new era, and it’s been stuck there for at least 17 years

Business person flying with the cloud

For all the bold talk of knowledge waves and a weightless tech future, we’re still reliant on farms and tourists. Time to try a new approach, argues Paul Brislen.

Seventeen years ago I helped put together an issue of Computerworld devoted to the idea of building a “Knowledge Based Economy”.

It was an exciting time. The newly emerging internet was rapidly moving from an academic project through to wider usage with a brief stop off in commercial land and the papers were full of stories about “e-commerce” and the need for a fully featured “web site” that would be your “portal” to the world.

Many speech marks died to bring you that issue.

“We are standing on the cusp of a new era,” I wrote, one where the tyranny of distance was no longer a factor, where Kiwi companies with good ideas were as close to market as everyone else. That our distance from markets was no longer an impediment but rather a benefit, because our costs were that much lower than, say, a company in downtown New York trying to do the same thing.

Seventeen years on we are still standing on that cusp.

An ordinary hardworking individual surfs the knowledge wave in cloud computing
An ordinary hardworking individual surfs the knowledge wave in cloud computing. Image: iStock

We’re still reliant on tourism, on teaching our kids to say “would you like fries with that?” to rich visitors from another world.

We are still reliant on farming – an industry that pays less than the OECD average wage and which is utterly reliant on things beyond our control. The weather. International commodity trends. On cows eating grass and relaxing their muscles in the appropriate order to produce milk.

Sure, there have been some gains over the past 16 years. MBIE, the ministry of All The Things, says we have more than 10,000 businesses in the ICT sector. Employment is up, exports are up and all is rosy.

But it’s grown incrementally throughout an era when the rest of the global  industry has grown exponentially. Exports have increased by 14% compound annual growth rate for the six years to 2014. That’s not exactly Angry Birds territory but nor is it anywhere near the middle of the pack. We are growing steadily but oh so slowly.

The milk payout is $3.90kg/MS – the average farmer is estimated to need a payout of about $5.20 a kilo of milk solids to break even. This simply isn’t going to be the way forward.

This isn’t a zero sum game. it’s not dairy farming or a technological future. It’s not Tourism versus Tech. We can have both without any risk of one interfering with the other.

What should be apparent to all is we can’t have an economy based entirely on one sector. We really should be encouraging development of other sectors that aren’t reliant on the same inputs (weather, grass, land) so if (or when) there is an issue on one side of the ledger, we’re not wiped out on the other.

Let’s look at the numbers. We spend a paltry amount on research and development – barely more than 1% of GDP – where the OECD average is more than double that, and the world leader, Israel, weighs in at more than 4% of GDP.

Of those 10,000 Kiwi ICT companies most are not listed on the stock market and those that have tend towards the ASX not the NZX, because over here the investors just aren’t interested in high-risk tech stocks. Better to invest in housing, it seems.

We don’t need more government investment in funds and grants. Steven Joyce has announced nearly $800 million additional spending in science and tech in the recent budget but the private sector needs to step up. We need to change the settings to encourage companies and individuals to spend more.

Tax incentives work everywhere else in the world, they should be introduced here instead of the current grant programmes. Grants are fine but they don’t encourage innovation, they encourage business compliance, an avoidance of risk taking – and that means the companies that win the grants tend to be the safe options. That’s not going to change the world.

AUCKLAND, NEW ZEALAND - AUGUST 01: Prime Minister Helen Clark at the Catching the Knowledge Wave conference at the Sheraton Hotel in Auckland, Wednesday. (Photo by Michael Bradley/Getty Images)
Helen Clark urges New Zealand to “Catch the Knowledge Wave”, 2001. Photo by Michael Bradley/Getty

Government does need to realise it is the single biggest buyer in this market and put its money where its mouth is. Tenders should focus not only on delivering the project but also on how much of the work will be done here in New Zealand. If government got behind local ICT development shops it would have a huge impact on our ability to compete internationally.

And why don’t the big internationals set up shop in New Zealand? Why do they chose Sydney instead of Auckland? Let’s at least have a harder look at what we can do to encourage these companies to set up here instead of (for example) casinos and steel smelters.

And then there’s the elephant in the room. Why do we give tax breaks to those who buy rental property but not to those who invest in local businesses? Let’s sort that out sooner rather than later. Because unless we do none of the rest of this matters a damn.

Mad Chapman, Editor
The Spinoff has covered the news that matters in 2021, most recently the delta outbreak. Help us continue this coverage, and so much more, by supporting The Spinoff Members.Madeleine Chapman, EditorJoin Members

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