NZ 'needs population of 15 million for growth'

NICK KRAUSE
Last updated 05:00 16/11/2012

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The country's economic performance can be resurrected only by building more scale, including increasing our current 4.4 million population, a new report on boosting Kiwi exports said.

Prepared by NZIER for Export New Zealand, the Lifting Export Performance report said New Zealand's smallness and isolation stifled export growth.

Increasing the population by easing immigration rules would create bigger domestic companies which could translate into expansion into overseas markets, it said.

NZIER is on record as saying a starting point would be a population of 15 million by 2050, which would require a 2.5 per cent average annual growth rate compared with the average of 1 per cent over the past five years.

"If you've got large domestic markets to sell to, then you can create more scale and more efficiency before you launch into overseas markets," said John Ballingall, New Zealand Institute of Economic Research's deputy chief executive.

"Launching into overseas markets can be expensive and it can be risky and both are a lot easier to address if you're a bigger firm with a bigger balance sheet."

ExportNZ executive director Catherine Beard said the report was a "shining light" on what is holding New Zealand back and was a "sobering reality check" in showing how vital it was to get a policy framework in place.

"You can't fake scale. We need to grow the population through immigration and build companies of scale," she said.

"Once grown, the challenge is then keeping these companies in New Zealand so the country benefits from them." Export growth, which has been below par in recent decades, was vital to lifting New Zealand's overall economic performance, the report said.

Its key recommendations included stronger collaboration between businesses to build export capability and a review of the effectiveness of existing grants and government assistance programmes to exporters.

It also suggested investigating rewarding high performers, which would incentivise Kiwi companies, and therefore jobs, to stay.

The Government's task now was to rebalance the economy away from domestic demand, public services and the non-tradeable sector and steer it back towards private investment and export growth. It suggested scaling back areas such as interest free student loans and Working for Families tax credits.

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