The Finance Minister has been lambasted from several quarters for saying New Zealand's wage gap with Australia could be an advantage. But those doing the criticising were intent on scoring points, rather than acknowledging the economic truth at the heart of Bill English's statement. The manner in which the minister laid himself open to all sorts of interpretation was, clearly, politically clumsy. But that does not extinguish the validity of the point he was seeking to make.
Mr English said the fact that New Zealand's workforce was better educated, as productive and 30 per cent cheaper than that of Australia was an advantage in the competition for capital, including that from across the Tasman. He did not say the wage differential was desirable or that it should be sustained. Indeed, the Government has spoken fondly, if increasingly forlornly, of having the country's living standards matching those of Australia by 2025. Mr English was merely suggesting that the present differential represented a competitive benefit that could be exploited.
That is as much a fact of life as other features that he said gave New Zealand an edge over Australia. These included a better regulatory environment and a "more coherent" political system, which avoided the travails of federalism. There is also a bipartisan approach to the reregulation of financial services and to pricing carbon, through an emissions trading scheme. Mr English might have mentioned, further, that New Zealand has a more business-friendly industrial relations environment than Australia, which eases potential investors' concerns about trade union excesses.
In many ways, the country finds itself in a situation similar to that of the early 1990s. Then, rapid restructuring had propelled it well ahead of Australia in efficiency and competitiveness. The Australians, to their credit, were quick to recognise their tardiness and to learn from New Zealand. They embarked on a lengthy period of consistent and steady reform until this petered out about a decade ago.
"They were better at it. Now they are not, while we are getting better at it," noted Mr English.
His comments were designed to underpin the notion that more competition, rather than collaboration, should be driving the transtasman economic relationship.
"One way to close that gap is to compete," he said. "If I go to Australia and talk to Australians, I want to put to them a positive case for investment in New Zealand because while we are saving more, we're not saving more fast enough to get the capital we need to close the gap with Australia." He is right. That capital and increased Australian company activity in New Zealand would, quite obviously, create jobs and lift incomes closer to those across the Tasman.
But competition need not be restricted to attracting capital or portraying our country as a better deal for Australian tourists. The unshackling of the New Zealand and Australian currencies gives New Zealand's exporters a prime opportunity. The dollar remains uncomfortably high against the greenback, the euro and the pound, but the cross-rate with the currency of a country that escaped much of the impact of the global recession and is performing strongly on the back of mineral exports to China is now highly favourable and likely to remain so.
This is a factor that should be exploited, as much as a wage gap which, in the long term, can help to lift New Zealand's living standards closer to those of Australia. It is simply realistic to recognise and harness such competitive advantages. It should not be out of bounds for a Finance Minister to say as much.