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Meeting of National Economic Research Organisations, OECD Headquarters, 21 June 2013
New Zealand’s key challenges are to achieve sustainable and equitable growth while reducing macroeconomic vulnerabilities. Policies are on the right track, and reforms should focus on improving productivity and the distribution of skills.
Consumer prices in the OECD area rose by 1.3% in the year to April 2013, the lowest annual inflation rate since October 2009. Energy prices fell to 1.3% in the year to April, compared with an increase of 0.9% in the year to March. On the other hand, annual food price inflation rose by 2.0% in April, up from 1.7% in March. Excluding food and energy, the OECD annual inflation rate slowed to 1.4% in April, compared with 1.6% in March.
The problems of Japanese agriculture – in particular low productivity and the prevalence of part-time farmers and small plots have been evident for the past 50 years.
Income inequality and relative poverty in the United States are among the highest in the OECD and have substantially increased over the past decades. These developments have been associated with a number of other worrying statistics, including low intergenerational social mobility and weak real income growth for many households.
Intergovernmental fiscal frameworks usually reflect fundamental societal choices and history and are not foremost geared towards achieving economic policy objectives. Yet, like most institutional arrangements, fiscal relations affect the behaviour of firms, households and governments and thereby economic activity.
The global economy is moving forward, but divergence between countries and regions reflects the uneven progress made toward recovery from the economic crisis, according to the OECD’s latest Economic Outlook. Historically high unemployment remains the most serious challenge facing governments.
With gross government debt surpassing 200% of GDP, Japan’s fiscal situation is in uncharted territory. In addition to robust nominal GDP growth, correcting two decades of budget deficits requires a large and sustained fiscal consolidation based on a detailed and credible multi-year plan that includes measures to control spending and raise revenue.
Investment in knowledge-based capital (KBC) – assets that lack physical embodiment, such as computerised information, innovative property and economic competencies – has been rising significantly. This has implications for innovation and productivity growth and requires new thinking on policy.
Technological advances, less costly shipping and trade liberalisation have transformed the way in which companies make products and distribute them worldwide. Governments that become more open to trade and investment, and encourage innovation will help firms better integrate the global value chains that are driving growth in increasingly interconnected economies, according to new OECD research.