If the family is not well off, it will be enough for the basics. Even then, things can be tight.
If the family is a bit more affluent, there will be other discussions at the dinner table. The kids might want new mobile phones, whereas the parents might want to go on holiday.
But if the family is wealthy, they might not even have a mortgage left to pay, so they can buy those flashy new phones, go on holiday – and then save the rest.
Family choices always depend on your income.
In a way, countries are not too dissimilar from individual households – and election campaigns are just like those discussions at the dinner table.
Some political parties want to spend more on health and education. Others want to give people tax cuts. Still others want to protect the environment.
Let’s face it, the number of things the government could spend money on is endless. Roads and rail, defence, hospitals, universities, museums, you name it.
So, election debates, like discussions at the dinner table, are often discussions about how to spend the money we have. Or rather, how to balance tax revenue and expenditure.
But here’s the crux: Imagine if the family at our dinner table discovered a way to earn more money each month. Suddenly, options that were once off the table become possibilities.
The dinner discussion would change from “What can we afford?” to “What can we improve to be better off?”
For our country, this would be a good conversation to have. Rather than arguing about whether to tax foreign home buyers, take GST off fruit and vegies and offer free dental care, how about we look at the bigger picture?
That would mean asking how New Zealand could become a more prosperous place. Or, in economic parlance, how to improve our productivity.
Simply put, productivity is what you earn per hour of work. It hinges on skills and tools. The better the skills and tools, the higher the productivity.
Successful economies keep finding ways to make people more productive. They invest in education. They give workers more and better equipment. They manage companies more effectively.
But here is the sobering reality: New Zealand’s productivity growth has been sluggish for decades. Compared to other OECD countries, we have fallen behind.
Now, you might say, why should that matter? The OECD is the club of the world’s richest economies. We don’t have to be at the top to lead a happy life in New Zealand, right?
Well, not really. Our productivity story is now so poor it should be a national embarrassment.
Consider Lithuania: in 1990, we were more than three times as wealthy as they were. But by now, the former Soviet republic has overtaken us.
If this were rugby, it would be a scandal. But because it is productivity, it barely makes headlines.
New Zealand’s poor productivity performance also limits our options. Instead of seeking a higher-paying job or a promotion, it is as if the family is arguing endlessly about whether to cancel Netflix to save money.
Just as a family not getting raises will struggle to keep up with rising costs, a country with low productivity will find it difficult to maintain, let alone improve, public services.
It is high time to shift the election conversation from how we distribute our existing ‘income’ to how we can increase it.
Imagine an election in which the burning questions were about where to spend and how to earn more as a country.
So, how do we turn New Zealand around? Three topics deserve our attention, all backed by research from The New Zealand Initiative.
First, education. Just as a family might invest in tutoring for their kids, as a country we need to focus more on education.
Better-educated people are more productive. It is as simple as that. Focusing on quality teaching based on a strong, knowledge-rich curriculum can make a world of difference for students – and the whole country.
Second, let’s talk about capital, specifically foreign capital. Imagine if a family member abroad sent you money to start a business. Suddenly, you have more resources to be productive.
Foreign Direct Investment (FDI) works the same way. It brings in money and expertise, pushing our productivity up. We need to make New Zealand more attractive for this kind of investment. And that means removing the barriers facing foreign companies trying to enter New Zealand.
Last, consider our land-use regulations. Think of your family home. If you could not extend it or improve it because of local rules, you would be stuck in inefficiency.
The same applies to our cities, just on a bigger scale. Overly strict land-use regulations hold us back. As does the lack of infrastructure financing options for our cities.
As a nation, we must discuss not just what to spend, but how to earn more. By focusing on education, attracting foreign capital, and revising land-use policies, we can make New Zealand a more productive, higher-income place.
It would make for much better conversations at the dinner table, too.
Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was first published HERE.
But if the family is wealthy, they might not even have a mortgage left to pay, so they can buy those flashy new phones, go on holiday – and then save the rest.
Family choices always depend on your income.
In a way, countries are not too dissimilar from individual households – and election campaigns are just like those discussions at the dinner table.
Some political parties want to spend more on health and education. Others want to give people tax cuts. Still others want to protect the environment.
Let’s face it, the number of things the government could spend money on is endless. Roads and rail, defence, hospitals, universities, museums, you name it.
So, election debates, like discussions at the dinner table, are often discussions about how to spend the money we have. Or rather, how to balance tax revenue and expenditure.
But here’s the crux: Imagine if the family at our dinner table discovered a way to earn more money each month. Suddenly, options that were once off the table become possibilities.
The dinner discussion would change from “What can we afford?” to “What can we improve to be better off?”
For our country, this would be a good conversation to have. Rather than arguing about whether to tax foreign home buyers, take GST off fruit and vegies and offer free dental care, how about we look at the bigger picture?
That would mean asking how New Zealand could become a more prosperous place. Or, in economic parlance, how to improve our productivity.
Simply put, productivity is what you earn per hour of work. It hinges on skills and tools. The better the skills and tools, the higher the productivity.
Successful economies keep finding ways to make people more productive. They invest in education. They give workers more and better equipment. They manage companies more effectively.
But here is the sobering reality: New Zealand’s productivity growth has been sluggish for decades. Compared to other OECD countries, we have fallen behind.
Now, you might say, why should that matter? The OECD is the club of the world’s richest economies. We don’t have to be at the top to lead a happy life in New Zealand, right?
Well, not really. Our productivity story is now so poor it should be a national embarrassment.
Consider Lithuania: in 1990, we were more than three times as wealthy as they were. But by now, the former Soviet republic has overtaken us.
If this were rugby, it would be a scandal. But because it is productivity, it barely makes headlines.
New Zealand’s poor productivity performance also limits our options. Instead of seeking a higher-paying job or a promotion, it is as if the family is arguing endlessly about whether to cancel Netflix to save money.
Just as a family not getting raises will struggle to keep up with rising costs, a country with low productivity will find it difficult to maintain, let alone improve, public services.
It is high time to shift the election conversation from how we distribute our existing ‘income’ to how we can increase it.
Imagine an election in which the burning questions were about where to spend and how to earn more as a country.
So, how do we turn New Zealand around? Three topics deserve our attention, all backed by research from The New Zealand Initiative.
First, education. Just as a family might invest in tutoring for their kids, as a country we need to focus more on education.
Better-educated people are more productive. It is as simple as that. Focusing on quality teaching based on a strong, knowledge-rich curriculum can make a world of difference for students – and the whole country.
Second, let’s talk about capital, specifically foreign capital. Imagine if a family member abroad sent you money to start a business. Suddenly, you have more resources to be productive.
Foreign Direct Investment (FDI) works the same way. It brings in money and expertise, pushing our productivity up. We need to make New Zealand more attractive for this kind of investment. And that means removing the barriers facing foreign companies trying to enter New Zealand.
Last, consider our land-use regulations. Think of your family home. If you could not extend it or improve it because of local rules, you would be stuck in inefficiency.
The same applies to our cities, just on a bigger scale. Overly strict land-use regulations hold us back. As does the lack of infrastructure financing options for our cities.
As a nation, we must discuss not just what to spend, but how to earn more. By focusing on education, attracting foreign capital, and revising land-use policies, we can make New Zealand a more productive, higher-income place.
It would make for much better conversations at the dinner table, too.
Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was first published HERE.
4 comments:
I am not schooled in economics but it seems to me here is more to productivity thn the ration of value to hours input or whatever. The worth of the product matters; exportable milk powder, or cone shepherding and hobby te reo.
NZ needs a national seminar on productivity and good examples from other countries. Economic and financial literacy are vital subjects for schools
Singapore is the poster child for this.
PS A commentator mentions the booming Te Reo industry - no doubt productive for those being paid to promote this using tax payer money. Not productive from a nation -wide perspective about how any dynamic economy must work in a global world.
To pre-empt race-based comments - this would be the same if everyone studied
Art History or medieval basket weaving.
If we were to ban the following, our productivity would improve overnight.
Road Cones...Hard Hats...Visi Vests...Scaffolding.
Done!
Yet, at the same time as wanting increased productivity, Oliver also wants unfettered immigration. Why would any company bother about investing in getting better productivity when there is an abundance of cheap labour available? Oliver seems to like a very one sided dinner conversation.
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