Gareth Morgan, director of Gareth Morgan Investments
The prospect of a sustained period of strong economic growth is one facing New Zealanders. While such a scenario might appear more comfortable than the alternative of scratching a living in an economy incapable of maintaining growth rates of any significance, this is a misconception. Economic growth is achieved because of discomfort, it doesn’t painlessly appear in order to provide comfort.
The discomfort referred to of course is that of competition, a fact of economic endeavour recognised by most as necessary for better economic performance, but one we curse privately insofar as it makes our daily lives more demanding. Whether we’re households, firms or policymakers, the prospect of sustained economic growth in NZ should he recognised as one demanding more rather than less of us individually.
Firstly the policymaker. Having implemented reforms over the last 10 years which have reduced the protection afforded industry, policymakers have already had some satisfaction in seeing substantial improvements in economic efficient result. From industries such as air transport and telecoms to financial services, efficiency has broken through. Ironically, the Reserve Bank Act has imposed a discipline on the economic policymaker. The Act ensures that, as a last resort, mortgage rates will be lifted to preserve price stability. Rising rnortgage rates are a difficult phenomenon to sell to an electorate and they cramp economic growth to boot, so policies which preserve price stability without leaving it to Reserve Bank tightening are becoming decidedly more attractive. In this respect politicians should be keener to continue the deregulatory attack they began in 1984, with the major objective of promoting competition in every last nook and cranny of business endeavour. This can be politically quite uncomfortable as regional hospital reformers are experiencing.
From the firm’s perspective, greater competition has to be seized upon as the spur to improved performance – necessary merely to survive. Competition severely reduces the ability to maintain abnormal profits without recourse to the innovation and product differentiation from which profits flow, being at the heart of any businesses’ mission. In a world where external protections against competition are being continually dismantled, the only “protection’ is internal improvement of the firm’s competitiveness. An intensely competitive domestic environment renders the firm a strong international competitive aspect, opening up growth opportunities the domestic market alone could never offer. For employees of our businesses this work environment is unrelentingly tough, not comfortable.
For the households that supply the labour, the competitive environment which spurs the growing economy, demands of labour a range of skills necessary to fuel thc modern business. These skills include the technical, work practice, interpersonal and innovative attributes which make a person valuable. Without the broader range of skills cited, an individual becomes increasingly confined in terms of their participation in the growing economy. Without any of the skills they simply do not participate.
In conclusion then, while we should celebrate the opportunity to sustain a higher growth performance and the higher average material living that provides, any belief that this makes daily working life more snug, should be readily dispelled.