|
|
|
Published on 4 July 2005
Executive summary
An Economic Survey is published every 1½-2 years for each OECD country. Read more about how Surveys are prepared.
The OECD assessment and recommendations on the main economic challenges faced by New Zealand are available by clicking on each chapter heading below. Chapter 1 identifies the challenges for which the subsequent chapters provide in-depth analysis and policy recommendations.
|
Chapter 1. Key challenges: consolidating economic success
This chapter discusses the major challenges facing New Zealand’s economy against the backdrop of several years of economic success. While the country is now reaping the benefits of earlier reforms and real GDP growth has been very strong, it cannot afford to rest on its laurels if it wishes to catch up to the living standards of the top half of the OECD. The first challenge is to realise more rapid productivity growth, which provides the basis for real income gains. The second challenge is to improve labour utilisation among under represented groups, not only to lift GDP per person but also to reduce the invidious social effects of benefit dependency. The third challenge is to manage public finances to focus spending on policies and programmes that yield the highest possible social return and contribute most to raising living standards over time.
Chapter 2. Product market competition and economic performance
The chapter examines the current state of competition and, because of the country’s small size and isolation, focuses on barriers to entry, investment and external trade, rather than standard indicators of competition stance. The competition law and institutions are generally well conceived, although attention from enforcement against price fixing may have been diverted. Overall, markets appear to function well, but progress towards liberalisation seems recently to have lost momentum. In particular, improvement could be made in three main areas: in the energy sector, lifting current barriers to investment and developing forward markets are necessary to ensure the economy will be able to cope with long term challenges; in telecommunications markets, concerns have been mounting regarding high prices and slow deployment of broadband; and in the public sector, there is scope for further use of private delivery for public services and reducing state ownership, especially in potentially competitive markets.
Read also: ECO Working Paper 437: Product market competition and economic performance in New Zealand
Chapter 3. Improving the setting for stronger productivity growth
This chapter considers a range of policy settings that could be tweaked to further enhance productivity growth. Tax rules have adversely affected some funding streams, raising the overall cost of capital. Use of road congestion pricing mechanisms would lead to more efficient utilisation of infrastructure and signal where new investment in warranted. Obstacles to the development of new funding and pricing arrangements need be addressed and new road projects should be systematically chosen according to highest net social return. Recent measures have reduced labour market flexibility, although it is too early to assess their full extent. Some mitigation could be obtained by relaxing rules on trial periods and fixed term contracts. The impact of the new wage bargaining rules will need monitoring. The innovation framework would benefit from simplifying government support programme. Stronger linkages between universities and the private sector and closer integration between education, immigration and labour market policies are needed.
Chapter 4. Human capital and labour utilisation
This chapter considers policies affecting human capital development and labour utilisation in New Zealand. Public funding in tertiary education could be more sharply focussed on labour market relevant and high-quality courses. The planned expansion of early childhood education and care is an important long term investment in human capital, but making optimal use of scarce pedagogical resources will be critical to its success. Increased availability of quality and more affordable childcare will also make it easier for mothers who wish to work, and reduce the current financial disincentives to work. The Working for Families package improves the incentives for some people to shift from benefits into work, but potentially discourages other from earning additional income: changing the rules could minimise these effects. The proposed single core benefit should encourage working-age beneficiaries to move into work. But its success will depend critically on effective case management tightly oriented towards re employment objectives.
Of special interest: Raising female labour force participation
Chapter 5. Enhancing public finances
Although New Zealand’s fiscal position is better than most in the OECD, the country faces ageing and other expenditure pressures. These demand a prudent approach to fiscal management in order to deliver a sustainable position over the long term. A more rigorous approach to prioritising expenditure by identifying and pruning low priority activities and by effectively implementing the government’s “managing for outcomes” strategy would help to improve effectiveness and minimise expenditure creep. More could be done to improve productivity in the public sector, especially in education and health care, where a lack of information makes it difficult to judge the real increase in outputs achieved as a result of the additional resources allocated over recent years. Investment in high quality information systems to monitor productivity across providers and through time is an important prerequisite to assessing efficiency gains, while the incentives facing providers to improve their performance merit further examination.
_____________________
A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
To access the full version of the OECD Economic Survey of New Zealand:
-
Readers at subscribing institutions can go to SourceOECD, our online library.
-
Non-subscribers can purchase the PDF e-book and/or printed book at our Online Bookshop.
-
Government officials can go to OLISnet's Publication Locator.
-
For further information please contact the New Zealand Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by Deborah Roseveare and Annabelle Mourougane under the supervision of Peter Jarrett.
-------------------------------------------------------
|
