Closing the gap. Can Australia catch up with New Zealand?

Sydney Opera House

 

 

Can Australia catch up with New Zealand? No, I have not got this round the wrong way!

There has been plenty of debate in New Zealand about “closing the gap with Australia”. I want to pose the opposite question to stimulate deeper discussion in New Zealand. I hope that these fresh insights might stimulate discussion in other countries as well, such as Ireland and Canada. They both have far larger and more prosperous neighbours that are a magnet for the brightest and most ambitious.

Let’s start by defining the problem:

  • New Zealand loses too many citizens to Australia.
  • This is at least in part driven by higher wages and more opportunities.
  • The gap between the two countries, measured in GDP per capita, is growing.

The calls for “closing the gap with Australia” are laudable, but some of the reasoning behind the ways to close the gap is questionable. New Zealand does need to increase the level of prosperity, as Professor Sir Paul Callaghan argues so eloquently. We should think carefully about what type of society we wish to live in and how best to become more prosperous.

One-off measures, such as mining in National Parks, have been dismissed, at least for the time being. Thus type of mining would cause irreparable damage to our cherished environment, but no lasting benefits. Trying to become “more like Australia” is futile. It was the veteran British Labour MP, Austin Mitchell, who dismissed Auckland as an “amateur Australia” some decades ago.

So why pose the question in the opposite way? I have to thank Steve Tighe of Chasing Sunrises, who was one of the keynote speakers at the Mindshop Australasian Conference in Sydney in May 2011. He was comparing the three main types of society: traditional, materialistic and post-materialistic. Most societies have components of all three, but which one is dominant? According to Tighe, the Scandinavian countries, Canada and New Zealand are more “post-materialistic” than Australia. Hence my question “can Australia close the gap with New Zealand?” Australia now has the biggest houses in the world, but at what price? If we look beyond GDP, and consider other factors such as obesity and mental health, a different picture emerges.

We need to challenge some of the assumptions, which can have a significant influence on the debate in New Zealand. Back to Professor Callaghan, who roundly dismisses the 2025 Task Report, chaired by Don Brash, as “fundamentally flawed, but beautiful prose”. We also need to think more strategically to better define the problem and devise workable solutions. Let’s start with a military analogy. Don’t fight a bigger and better armed opponent head on. Use stealth to surprise your enemy and attack where there is a weak point. The English writer Peter Bells suggested the best time to attack France was at lunchtime!

One of the fundamentals of marketing strategy is differentiation. A small company can seldom compete directly with a far larger competitor. A bigger product range and marketing budget, coupled with lower product costs, make this a tough battle. This is “red ocean thinking” in the words of the authors of “Blue Ocean Strategy“.

So what sort of society do we want and who do we want to keep and attract to New Zealand? Two of our biggest industries are dairy and tourism. Our fragile environment cannot sustain more dairy farms and there are two problems with tourism. Firstly we cannot double or triple tourist numbers without destroying one of the main reasons for coming there. Secondly, tourism is a low wage sector, generating only $80,000 per employees and we need increase the wealth created by each worker. Sir Paul Callaghan in “Reflections on Science” advocates that our future lies in the hi-tech sector, where employees generate over $250,000. He cites companies such as F&P Healthcare. Think “computer chips” instead of “potato chips”. Read the TIN100 2010 Report for more information about the hi-tech sector. He also argues we should strive to be “a place where talent wants to live“. I fully support his views and I “walk the talk”, to coin a phrase. I have worked with a number of innovative hi-tech companies in New Zealand over the last 12 years. I also made a conscious choice to migrate from England nearly 30 years ago.

Let’s look at “talent” more closely. How do we define talent and what might induce these talented people to choose to come here? Consider some of the differences between materialistic and post-materialistic societies outlined by Tighe. The former is about prestige, conspicuous consumption and striving for “bigger, better and faster”. The latter is about sustainability, intellectual curiosity and celebrating diversity. We want more of the latter!

Scenario based planning often uses a single descriptor to encapsulate different futures. How about “utu” and “aroha“? These are two Maori words that are now part of New Zealand English.

“Utu” means revenge, “an eye for an eye”, under this scenario we might see:

  • Emphasis on the individual
  • Even more prisons
  • Incentivise the rich with lower taxes
  • Incentivise the poor by cutting benefits
  • More roads and car parks in the centres of our cities.

“Aroha” means unconditional love, under this scenario we might see:

  • Emphasis on the Individual
  • More child care centres
  • A more equitable sharing of the tax burden
  • Help for the less privileged seen as a life-time investment, rather than a cost
  • More public transport and car parks at transport nodes.

In summary, we need to make New Zealand “a place where talent wants to live” and steer clear of aspiring to be an “amateur Australia”. We must change our thinking to become more creative, flexible, accepting of diversity and daring to be different. Cities have a vital role to play, and the new Auckland super-city should lead the charge by becoming a super city.

I invite you to join me by commenting on this post and by spreading the message!

Simon Fawkes
Business to Markets Ltd

8 comments

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  1. Great article Simon.

    I think you’ve hit the nail on the head – what is NZ’s real competitive advantage?

    If it is the beautiful lifestyle environment (and I think you’re probably right) then the challenges are how does NZ provide the necessary infrastructure to enable knowledge workers to live in a great environment and be productive at work?

    I live in a regional area and access to a quality broadband service is a major issue if your livelihood depends on it.

    Regards Russell

  2. Well done Simon, this article puts forward a solid argument for your points and I believe is a critical issue to be raised.

    regards

    James

  3. The whole idea of trying “to catch up to Australia” has grated me for a while and i get left wondering “WHY?”. It seems like one of those cases of “the grass is always greener on the otherside of the fence” – until the guard dog catches you!!!

    I work as an independent design consultant, and even though I could effectively work anywhere in this great country, I am limited to places with good internet broadband. The “remote office” concept works great for me as I get to keep the commute travel miles down and stay out of the greater Auckland carpark.

    Not everyone strives to live and work in a big city. Improving supporting infrastructure, like better broadband access, will go a long way to making New Zealand an attractive place for our departed tech talent to return home to.

    I look forward to following the continuing discussion on this topic.

    regards

    Grant

  4. I agree Simon the New Zealand is better adapted to life in the 21st Century, that Australia, and we need to do much more too. New Zealand can be:
    Sorry this is so long, but I think it helps.

    A place that prides itself on using less stuff. Reduce, Reuse, Recycle.
    A place where people are open to new knowledge and have a wide consciousness about local and world issues.
    A place with open, transparent and participatory local government.
    A place that doesn’t seek to expand it’s population base.
    A place that strives to use appropriate green technologies.
    With government help, a place where prices are REAL, because “bads” are taxed, and subsidies are rare.
    A place where knowledge and learning is encouraged in every home. A knowledge society.
    A place where social justice is practised. There’s lots of lip service in NZ to values we’ve abandoned.
    Those are J.G. Speths’s eight necessary transitions.
    http://www.streetgroups.co.nz/eighttransitions.html

    Add to that new economic thinking based on ecological principles: Environment, Community, Governance, and the Economy, in that order.

    Environment:
    I see us recognising that preserving the services of the environment is our prime responsibility not only to ourselves, but to our grandchildren, and their children, to the 7th generation I hear Maori people saying.
    We look after the environment and it looks after us.

    Community:
    I see us planning to include the poor in new housing development.
    I see us planning a society that promotes good health, and particularly good mental health, which we neglect.
    I see us realising that a good community, doesn’t need a lot of social services from agencies; the police, work and income, child welfare etc. What have we been doing to destroy “a good community” in the last 60 years?
    We can’t BUY, a good community we have to MAKE one, by making one possible.

    Governance:
    Once again you can’t buy good politics, that has to arise out of the community.
    See the call for open and participatory government, and for good information. We need ubiquitous broadband.
    We need to stop political groups “buying the right” to be the government. That’s part of our problem too.

    Economy:
    There is no shortage of money. Money is not wealth, money is debt, someone’s obligation to pay in the future.
    There is irresponsible use of money, in ways that destroys our resources and reduces our real wealth.
    No modern economy can employ all it’s people in what we usually call “production”. To do so would be to destroy the earth in short order. That’s why we’re building a “service economy”, or a “knowledge economy” but that doesn’t work either. Many more of us will work from home in future. We’ll work much fewer hours.
    Local production will become much more important to the way we live.
    The solution to the “economic problem” is social. No amount of money can
    fix it.

  5. I like where you’re going with this Simon. A couple of things I would add:
    Australia has a far more aggressive desire for success, which can be seen on the sports field and in business. As a country we tend to knock success and failure on the sports field and in business.
    New Zealanders are very creative but the lack of aggression and desire for growth sees us working in businesses, too busy to look beyond and not greatly motivated to do so.
    The Australian personality makes them very good people to do business with. They can make quick decisions and I’d rather take their money and bring it back to the NZ economy, than make it and spend it there:)

  6. HI Simon,

    Great article Simon, as an Irishman living in Melbourne, Australia with a Kiwi wife it certainly got me thinking! I agree with your point on cities – younger innovative knowledge workers congregate to large cities – from what I observe the words they use (in no particular order) to describe the environments they like are exciting, fast-moving, sustainable, eco-friendly, nightlife, arts and culture, access to the outdoors, sports, ability to collaborate and innovate, diversity, multi-cultural. As we get a little older we probably put less emphasis on the fast-moving and this is where New Zealand (and Ireland and AUstralia for that matter can attract people to what is a slower moving life style.

    It is natural for young people to go move to the major hubs (think London and New York) – we should encourage it – what countries like Ireland and New Zealand (and Australia for that matter) need to do is encourage people to come back home with the experiences they have gained and be incentivised to share their experiences and to set up businesses where applicable . I know KEA New Zealand are doing a lot of work on connecting up with their diaspora and Ireland has certainly looked at it in recent times given the currrent economy – have a read of http://www.irlfunds.org/news/ffund/diaspora.asp

    Attracting these people back to their home countries will help create better societies. Having lived away from Ireland for almost 10 years I can see a lot more clearly the great things about it as a country, but also its weaknesses. When I lived in ireland the waeknesses weren’t so apparent to me (or maybe I refused to acknowledge them).

  7. Thought-provoking indeed!
    My immediate thought was that the only way the gap with Australia will get closed is in 400 mm increments every time Christchurch has an earthquake.
    That gets followed by things like our beloved government taking firm steps to encourage NZ to be bold. IFor example:
    – building trains here, not China: that’s 70 jobs gone last week, not to mention the loss of opportunities to develop skills here
    – add value to our primary produce, especially trees, here in NZ, not selling the ‘cutting rights’ or exporting rough logs

    If we must put policy up for sale, then sell it for something constructive, not for more pokie machines and roulette wheels. Winning at the gambling table does not cultivate the sort of ‘winners’ that we need!

    My rant for the day!

  8. Hi Simon
    Great article. My take on this is that we are increasingly closing the gap by becoming part of the Australian economy. New Zealand is a great place to be based for companies seeking to address Australasian market opportunities. The old saying that Australia is littered with the corpses of failed NZ attempts to enter the market is long outdated. Despite the global financial crisis in 2010 a raft of iconic TIN100 companies such as Tait Radio, Datacom, Methven Temperzone and Skope all enjoyed good growth in Australia.
    The efficiencies required to survive in the small narrow market verticals of NZ stand Kiwi companies in good stead when they cross the ditch. Exchange rate movements have generally been far more conducive to growth in the Australian market as opposed to the US in recent years. I therefore think the growth trend for NZ companies in Australia will continue.
    So may successful TIN100 companies have heard the call “Go West Young Man” and they are. NZ and Australia will be better for this for all the right reasons.

    Regards

    Greg

    P.S. Purchase the TIN100 Report at

    http://www.tinetwork.com

    particularly if you are Australian!

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