David Hisco: Pluck gets you further than luck

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New Zealand has adapted better than Australia to the new world economic order.

Partnership: The New Zealand flag, left, alongside Australia's on Anzac day. Australia and New Zealand may have to work together to make the most of what we both have. Photo / Getty Images
Partnership: The New Zealand flag, left, alongside Australia's on Anzac day. Australia and New Zealand may have to work together to make the most of what we both have. Photo / Getty Images

If Australia is "the lucky country" then New Zealand must be "the plucky country".

"The lucky country" comes from a 1964 book by Donald Horne who said: "Australia is a lucky country run by second-rate people who share its luck." Australia "showed less enterprise than almost any other prosperous industrial society" because it relied on its rich natural resources.

Kiwis, on the other hand, have had to make the most of what they have. They've had to be plucky.

There is a message in how a country of 4.4 million people can survive with a 33 per cent top tax rate, no capital gains tax, no payroll tax and a GST rate only five percentage points higher than Australia's.

"New Zealanders are also more sympathetic to the concept that a government has to do what's right for everyone in the long run.

They are more cynical and alert to politicians bearing gifts."

ANZ Bank NZ chief executive David Hisco

Australia has more than 23 million people, a 47.5 per cent top personal tax rate, capital gains tax, stamp duties and a raft of other taxes. Yet Australia is about to deliver an A$47 billion budget deficit, the third highest in its history. New Zealand is close to being back in surplus.

Australia has ridden a resources boom for many years - the longest economic expansion, the largest rise in incomes that a developed country has ever known. But what does Australia have to show for it?

Unlike New Zealand, Australia might be said to have been asleep at the wheel. I'm not sure Australians yet have the sense of urgency they need in the face of a new game that both countries face.

What's going on globally is not business as usual. It's a period of great global transition.

Our nations are facing complex issues such as climate change and funding an ageing population. We are trying to move from some of the traditional industries to new ones in which we can be internationally competitive such as education, tourism, medicine, high-value manufacturing and value-added agricultural products.

It's a world where we have to really understand how to be part of the Asian century and take advantage of our close proximity to the fastest growing economies.

And right now, New Zealand is leading its big brother.

New Zealand is ahead of Australia in the World Economic Forum's Global Competitiveness Report. It recently jumped five places to 18th. Australia declined one place to 21st. That drop, the report says, was because of higher cost structures, large regulatory burdens and labour market rigidity.

It sounds like pre-1980s New Zealand.

The Australian public need a strong narrative in front of them, a clear view that there is a need for significant economic change and tough decisions, rather than business as usual with the belt done up a few notches.

New Zealanders are also more sympathetic to the concept that a government has to do what's right for everyone in the long run. They are more cynical and alert to politicians bearing gifts.

And New Zealand is still fine-tuning itself. For example, New Zealand has a 2017 target of reducing by 25 per cent the costs for business in dealing with government.

"A great education system will be important to our future. But I doubt we can compete with the number of PhDs coming out of Chinese universities. Instead we should focus on producing adults who have a worldly, positive and creative outlook."
David Hisco

In New Zealand we've had the quadruple-whammy of the financial crisis, a collapsed non-bank financial sector, a dollar at record highs and the Christchurch quakes. Yet the economy is bouncing back strongly because of some tough budgetary decisions that have helped to improve our financial foundations. But the country can't rest on its laurels.

A great education system will be important to our future. But I doubt we can compete with the number of PhDs coming out of Chinese universities. Instead we should focus on producing adults who have a worldly, positive and creative outlook.

Sir Peter Jackson, Sir Richard Taylor, the Finn brothers, Eleanor Catton, Lorde and many others prove we can. Then there are the clever high-tech manufacturers and entrepreneurs.

It's creativity more than being able to reproduce the next widget at a cheap price that will see New Zealand prosper. Future governments need to focus on how to foster, support and monetise that.

But if New Zealand is to continue to stand tall Kiwis also need to acknowledge and accept that over a 200-year period the country has always prospered as a result of foreign investment and by being an attractive trading partner.

A recent ANZ study showed there was a potential $1.3 trillion increase in agricultural exports by 2050 but that would require some $340 billion in additional investments.

Sadly, as poor savers, all that investment isn't going to come from within New Zealand.

Taking on the world and embracing it will make New Zealand stronger and sustain its sovereignty. Our Aussie mates will then have to try even harder to catch up with us.

But we should also be ready to help them out. The world's population is growing far faster than ours so we may need to work together - as we have throughout history - to ensure we protect and make the most of what we both have.

David Hisco, who was born in Adelaide but now lives in Auckland, is chief executive of ANZ Bank New Zealand and was part of Prime Minister John Key's recent trade mission to Australia.

- NZ Herald

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