What's in store for New Zealand's exports?
VBS researcher and academic Dr Eldrede Kahiya looks at the impacts the new government could have on New Zealand's exports, which have been flatlining for years.
New Zealand's ratio of exports to gross domestic product (GDP) peaked at 36 percent in 2000, before dipping to just below 30 percent three years later. It has largely flat-lined ever since.
There was as much concern 10 years ago as there is today regarding slow export growth. To their credit, successive governments have attempted to jump-start exports.
The last Labour-led government designated 2007 the export year and, over its three terms in office, the National Party had a number of initiatives targeted at stimulating trade with 16 trade agreements under negotiation, or coming into effect, during the period 2008-2016.
Creating access for New Zealand exports was the point of emphasis—and through government-to-government transfer of know-how initiative, even the government became an exporter.
In retrospect, the 'export growth agenda' has been by far the most comprehensive, if not ambitious, national export strategy of the last 20 years. Launched in 2012, its goal is to push exports to 40 percent of GDP by 2025.
All else being equal, this implies doubling exports from NZ$65 billion (i.e. the 2012 rate) to NZ$130 billion, but the reality is that exports are not growing at the required rate of about five percent a year to reach this target.
Aside from the success of the TIN (Technical Investment Network) 200 companies (i.e. top 200 technology firms), where revenue hit NZ$10 billion this year comprising nearly 75 percent from exports, there has not been much to celebrate. For the first time in 50 years, OECD and world averages for exports-to-GDP ratios have caught up with New Zealand’s.
Already $7 billion off-pace, New Zealand policymakers have refrained from making direct references to the export goal for much of this year.
New government takes office at a critical juncture
Meanwhile, Trade Agenda 2030, announced in March as a complement to the 'export growth agenda', is big on promise but not so much on deliverables. The new government could not have taken office at a more critical juncture.
From conversations with some key players in the export sector, there is unease about how the next three or more years might play out. There is a presumption the new government will be less proactive on trade, pivot toward limiting the movement of capital and skilled labour, and increase compliance-related costs of doing business.
None of this bodes well for exporters who seem to be saying "If it ain’t fixed, don’t break it". However, there is also a subdued sense of cautious optimism stemming from the new government's commitment to innovation and productivity, which will likely create trickle-down benefits for exporting manufacturers.
An even more optimistic view is that the raft of social and environmental policies will help forge a stronger New Zealand brand internationally, which is a reasonable position to take if one supposes the 'New Zealandness' of our goods and services is a key differentiator in the global marketplace.
Others are hopeful the elevation of 'export growth' to ministerial appointment (i.e. Minister of Trade and Export Growth), a portfolio assigned to David Parker, will bring much-needed attention to this sector.
Still, there is much work to be done.
An excerpt from the 2009 Budget speech by then-Finance Minister Bill English, stating "Indeed export volumes have on average grown by less than two percent annually over the past five years. It has been hard being an exporter in recent times", still rings true today.
The new government has its work cut out for it and the upcoming APEC summit, where Parker will join Prime Minister Jacinda Ardern and Deputy Prime Minister Winston Peters, is crucial. It is the grand stage from which to send the right signals to an apprehensive export sector.