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www.nzinstitute.orgwww.nzahead.org
Navigation 101
Presentation to the
Leadership New Zealand
Future Thinking Workshop
Rick Boven
28 October 2011
2
Leadership
Setting direction
Aligning
Motivating
Environmental
Social
Economic
LOW PRODUCTIVITY EXPORT SECTORS
Note: Data includes export and domestic. Sources: The Conference Board (2011) Total Economy Database. OECD datasets: Employment; Hours worked. Statistics New Zealand: Tourism Satellite Account; Quarterly Employment Survey; Gross Domestic Product. 3
Size of bubble reflects share of total workers
Australia $71NZ average
$49 OECD $60
20 30 40 50 60 70 80 90 100-2%
-1%
0%
1%
2%
3%
Agriculture, forestry, fishing &
mining
TourismManufacturing
Estimated 2009 output per hour worked, 2010 NZ$
Compound annual growth rate in output,
2000-2009
NEW ZEALAND’S ECONOMIC TRANSITION
TARGET STATE
CURRENT STATE
Commodity goods
Differentiated goods and services
EFFORT
FOCUS
Inte
rnat
ion
al
mar
kets
Do
me
stic
p
rod
uct
ion
5
MANY OPPORTUNITIES TO GROW HIGH VALUE DIFFERENTIATED EXPORTS
Value-added food businesses that are anchored here
Niche manufacturing, including selected clean-tech, where a small exporter can be a world leader, avoiding scale disadvantage
ICT, where distance and scale are less important barriers to success• Lifting capability in these industries helps domestic productivity too
Services sectors where world class technology can be acquired and NZ labour costs are relatively low• Successes in engineering, education, financial, medical etc.• Competitive advantage can be increased by legal innovation
TOP 100 INTERNATIONALLY ORIENTED TECHNOLOGY BUSINESSES EXPORT AROUND $5b pa WITH VERY HIGH PRODUCTIVITY
PLUGGING THE GAP
6Image courtesy of Lee ter Wal Design
TALENT AND CAPITAL VIRTUOUS CIRCLE
7
8
SUMMARY OF NEW ZEALAND YOUTH DISADVANTAGE
BelowLevel 1
Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 (Highest)
0
5
10
15
20
25
30
OECD average
New Zealand
9Source: OECD (2010).
PERCENT AT EACH PROFICIENCY LEVEL ACROSS READING, MATHEMATICS AND SCIENCE, 2009
Pacific peoples Māori Asian Pākehā/European400
420
440
460
480
500
520
540
560
09
200003 06
10Source: Education Counts (2000, 2003, 2006, 2009).
MEAN PISA RESULTS ACROSS READING, MATHEMATICS AND SCIENCE BY ETHNICITY
New
Zea
land
Mex
ico
Aus
tralia
Icel
and
Fin
land
Den
mar
kC
anad
aS
witz
erla
ndF
ranc
eP
olan
d
Italy
Est
onia
Spa
inG
reec
eP
ortu
gal
Ger
man
y
0
5
10
15
20
25
30
35
40
45
50
OECD average
11
YOUTH AGED 15-24 AS PERCENT OF TOTAL UNEMPLOYED, 2009
Source: OECD (2010).
12
SHARE OF LABOUR FORCE COMPARED TO SHARE OF UNEMPLOYED, AGED 15-19, 2010
Australia
Austria
Canada
Chile
Denmark
Finland
Germany
Hungary
Ireland
IsraelItaly
Japan
Luxembourg
Netherlands
New Zealand
Sweden
Switzerland
Turkey
UK
USA
0
10
20
30
0 10 20 30
Share of unemployed, %
Share of labour force, %Source: OECD (2011).
13
VICIOUS CYCLE
Many disadvantaged 5
year olds
Disengaged students
Leaving school early with low qualifications
Unsuccessful school to work
transition
Many unemployed
Serious social issues
Poor economic outcomes
TWO PROPOSALS TO REDUCE YOUTH DISADVANTAGE
14
Accelerate roll-out of e-learning
to low decile schools
Improve the school-to-work
transition
15
E-LEARNING DELIVERS ENGAGEMENT, BETTER LEARNING AND LOWER UNEMPLOYMENT
Engagement
Better learning
Staying at school
Better qualifications
Less youth unemployment
E-learning
16
VALUE ADDED SNAPSHOT FOR READING AT PT. ENGLAND SCHOOL
Source: Pt. England School (2010).
1
2
3
4
5
6
7
8
9
0 1 2 3 4 5 6 7
Stanine
School year
201020092008
2007
NZ average
CO2 CONCENTRATION IN ATMOSPHERE, JULY 1990-2011, PPM
17
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
330
340
350
360
370
380
390
400
Source: National Oceanic and Atmospheric Administration (2011) Atmospheric CO2.
AVERAGE OF COMMODITY PRICES, 2000 = 10019
6019
6219
6419
6619
6819
7019
7219
7419
7619
7819
8019
8219
8419
8619
8819
9019
9219
9419
9619
9820
0020
0220
0420
0620
0820
10
0
100
200
300
400
500
600
18Note: Commodities include aluminium, copper, crude petroleum, gold, iron ore, maize, rice, silver and wheat.
Source: The World Bank (2011) Commodity Price Data.
THE COBB-DOUGLAS PRODUCTION FUNCTION
Output = TQ Lα Kβ
TQ represents the effectiveness of the technology of production
L and K represent the amounts of input of labour and capital
respectively
The parameters α and β indicate how much the output changes with
changes in the inputs
19
EVERYTHING WE FOCUS ON MEANS WE MISS SOMETHING ELSE
20
PARADIGM CONFLICT
Economic – 20th Century thinking
Economy is small relative to environment
With limited exceptions, resources can be taken from the environment and wastes can be released to the environment without adverse consequences
Environmental issues resolved by substitutes, technologies and market instruments
The future will be an extension of the past
Societal objective should be to maximise GDP
Environmental – 21st Century thinking
Economy is large relative to environment
Resource and waste sink constraints, and accumulated environmental damage threaten output growth and human well-being
Environmental threats increasing and responses are insufficient
The future will be different from the past
Societal objective should be to avoid risk
21
WHAT HAPPENS NEXT?
Commodity prices will continue to increase
Countries will manage supply chain risks and become more self-
sufficient
Globalisation may slow or even reverse
Societal management will become more complex and difficult
Power may be more centralised initially and fragmentation may
develop later
22
IMPLICATIONS FOR NEW ZEALAND
Increasing prices for commodity exports
Increasing attractiveness to migrants and investors as a relatively safe
haven
Strategy to grow exports of high value goods and services
Investment in innovation and skills
New performance metrics to emphasise the quality and effects of
economic growth
Risk management will become a more important priority23
WHEN GOVERNMENTS FAIL, WHY DO THEY FAIL?
“In the first stage, mental standstill fixes the principles and boundaries governing a political
problem.
In the second stage, when dissonances and failing function begin to appear, the initial
principles rigidify.
This is a period when, if wisdom were operative, re-examination and rethinking and a change
of course are possible, but they are as rare as rubies in a backyard.
Rigidifying leads to increase of investment and the need to protect egos; policy formed on
error multiplies, never retreats. The greater the investment and the more involved in it the
sponsor’s ego, the more unacceptable is disengagement.
In the third stage, pursuit of failure enlarges the damages until it causes the fall of Troy, the
defection from the Papacy, the loss of a trans-Atlantic empire, the classic humiliation in
Vietnam.
...
Persistence in error is the problem.”
24
- Barbara TuchmanThe March of Folly: From Troy to Vietnam (1984)