The opportunities New Zealand companies can derive from the internet are worth more than the competition threat it presents to local firms, says an economist.

Advocacy group internetNZ released two reports yesterday on the web's impact on the economy from the New Zealand Institute of Economic Research (NZIER) and Infometrics.

While it is difficult to quantify the internet's contribution to local growth, NZIER says it has opened up new markets and sets of consumers for companies to target.

NZIER also says the internet allows for the outsourcing of work to countries like New Zealand which could see local software developers make deals with "significant foreign companies".


However, this door swings both ways and could also see jobs move out of New Zealand.

Infometrics economist David Grimmond says the internet exposes some New Zealand firms to more intense global competition.

"Part of what the internet does is increasing who you're competing against. It's not just companies from within [your] town," he says. But in balancing the opportunities the internet offers against this increase in competition, Grimmond says New Zealand is likely to benefit.

"One of the things the internet allows is for small firms to upscale very fast. New Zealand is a country of small companies, relatively speaking it's probably got a lot of scope to gain from that.'

Grimmond says another economic benefit of the internet is the shrinking gap between buyers and sellers, allowing companies to more closely meet consumer demands.

"The people producing types of goods that meet [customers'] desires are more likely to make a higher profit than they would have otherwise ... those companies become more successful, they attract more investment and there is more growth."

Grimmond also points out the benefits the internet presents for consumers, who now have far more choice when purchasing goods.

As well as this, NZIER says the internet lets companies create more consumer-focused products.


NZIER and Infometrics will present the reports to the Nethui internet conference in Auckland on Friday.