Wellington: Lifting our Sights

October 2008

What do these two men have in common?

NZ’s GDP per capita is sliding rapidly relative to other nations

1950

1. Qatar2. Kuwait3. United Arab Emirates4. United States5. Switzerland6. New Zealand7. Luxembourg8. Venezuela9. Australia10.Canada

2007

1. Qatar 2. Luxembourg 3. Norway 4. Brunei Darussalam 5. Singapore 6. United States 7. Ireland 8. Hong Kong SAR 9. Switzerland 10.Kuwait …32.New Zealand

2025 (Projected)

1. Luxembourg 2. Singapore 3. Qatar 4. Hong Kong SAR 5. Norway 6. Bahrain 7. Ireland 8. Kuwait 9. United States 10.Oman …33.Botswana …42.Kazakhstan …47.New Zealand

Sources: 1950 GDP per capita rankings from The Conference Board & Groningen Growth and Development Centre, Total Economy Database (Sept 2008)2007 GDP per capita rankings from IMF World Economic Outlook Database (April 2008) 2025 projections based on extrapolation of long term real GDP per capita growth forecasts from IMF World Economic Outlook Database (April 2008) IMF rankings are adjusted for purchasing power parity Morrison & Co analysis

World Rankings: GDP per Capita (PPP)

We are working long hours, but our productivity is falling behind our peers

7th Highest

20th Highest

21st Highest

12th Highest

GDP perHour Worked

Hours WorkedPer Worker

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NZ’s Ranking Amongst 24 OECD Countries: 1960 – 2007 (1)

(1) Includes all OECD countries that existed as independent states in 1960 (ie excludes Germany, Czech Republic, Hungary, Poland & Slovakia)

Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, September 2008

“New Zealand needs a vision that will excite and motivate every

citizen to reach new and heretofore unheard of heights.

There is no reason why this country cannot be one of the

most prosperous nations in the world and a model for others.”

Dr Michael Porter, 1998

It’s time to lift our sights

We should aim to be back in the World’s GDP per Capita Top 10 by 2025

198027th Wealthiest

2007

32nd Wealthiest

2025?

2025?

1980-20071.4% pa real growth in GDP per capita,

slipping further down the international rankings

2007-2025More of the same,

or change the game?

“Back Where We Belong”• 4.5% pa growth in GDP per capita• Return to the Top 10 by 2025

“Beaten by Borat”• 1.5% pa growth in GDP per capita (in line with IMF forecasts)• 47th Wealthiest Nation by 2025• Fall below Botswana and Kazakhstan

NZ’s World Ranking in GDP per Capita (PPP)

Sources: 1980 to 2007 data from IMF World Economic Outlook Database (April 2008) 2025 projection based on extrapolation of long term real GDP per capita growth forecasts from IMF World Economic Outlook Database (April 2008)

Korea, Ireland, Taiwan and Singapore have all shown this level of growth is possible

0.30.4

0.70.8

1.21.4

1.51.61.61.61.61.71.71.7

1.81.8

1.91.9

2.02.02.12.1

2.22.32.3

2.52.52.5

2.62.8

3.03.2

3.84.5

4.95.25.2

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Real GDP per Capita growthrate required for NZ

to return to Top 10 by 2025

Real Annual Growth in GDP per Capita of the World’s Wealthiest Nations: 1987-2007

Source: IMF World Economic Outlook Database (April 2008)Sample is world’s 40 wealthiest countries by GDP per capita (PPP), excluding

those that did not exist as independent states in 1987

What role can Wellington play?

“Since many of the essential determinants of

economic performance appear to reside in regions,

national policies will be necessary but not sufficient.”

- Michael Porter

Successful cities set a virtuous cycle in motion

Source: The Boston Consulting Group

BusinessActivity

Increases

Wealth Is Created+

Tax Base Grows

Civic AmenitiesAnd Infrastructure

Improve

Quality OfLife Improves

Skilled LabourSupply Grows

New Businesses Emerge,Established Business Grow

Well-paid JobsAre Created

wild at heart Wellington Airport

Insert image of Wellington Airport today

Working together to connect Wellington to the world

12

3,1233,454

4,418

373

446

603

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*

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WIAL Passenger Numbers: 1998-08(Thousands of Pax, Year to March)

- NBR, October 2, 2008

• The Public Transport Management Act will allow councils to redefine

“partnership” as a “Victorian marriage” with the councils as “father”

• Councils will determine what consumers need and design services and

fares to meet these perceived needs

• They will then tender closely-specified service contracts to private operators

• Operators will win contracts by offering minimum compliance at least cost

• Councils (i.e. ratepayers) will carry revenue risk from patronage fluctuations

• Councils will attempt to ensure contract compliance with a battery of “sticks

and carrots” and costly systems to monitor performance.

In closing…

The time has come for New Zealand to commit to an ambitious, measurable goal

Wellington needs to set its own ambitious, measurable goal- Given what we have to work with, we should set ourselves a growth

target higher than the overall New Zealand goal

The community needs to understand the virtuous cycle - We need economic growth so we can afford the social,

environmental and cultural elements of our vision for Wellington

All sectors have a role to play, we need a spirit of genuine partnership- Public and private sector pursuing the same goal…- …But recognising and respecting each others’ respective roles