The New Zealand Paradox Economics, Innovation and Prosperity

Paul Callaghan Alan MacDiarmid Professor of Physical Sciences Victoria University of

New Zealand performance

IilitIncome inequality 26/33

Unemployment 15/33

Level of democracy 3/33

Life expectancy 11/33

Prison population 26/33

Math score 9/33

Science score 6/33

Time magazine 2011 Adam Smith 1776 David Ricardo 1817 free market economies are more productive and beneficial to their societies. Adam Smith 1776 David Ricardo 1817

free market economies are more productive and beneficial to their societies.

Effective markets

Property rights

Legal frameworks

Free Trade

Lack of corruption Property Rights 135 countries (2011 International Property Rights Index 95% of world GDP Americans for Tax Reform Foundation/Property Rights Alliance )

New Zealand 6th in world

Bottom performers

Top performers Legal and Political Rights 135 countries (2011 International Property Rights Index 95% of world GDP Americans for Tax Reform Foundation/Property Rights Alliance )

New Zealand 2nd in world

Bottom performers

Top performers Free Trade (World Economic Forum) New Zealand 6th in world Corruption (Transparency International 2009 Review) New Zealand best in world New Zealand third lowest iOECDin OECD True effective personal tax

New Zealand third from low est in OECD The New Zealand Paradox

Strong property rights Low taxation Free, open markets Excellent legal frameworks Honest work ethic Incorruptible

…..but poor economic performance Adam Smith 1776 David Ricardo 1817

free market economies are more productive and beneficial to their societies.

Effective markets PtihtProperty rights Legal frameworks Free trade Lack of corruption

+ something else! Economic history

year Being behind has advantages

Terence Kealey The Economic Laws of Scientific Research Economic history

year Economic history

BiBrita in joins EU

year Economic history

1984- reforms

BiBrita in joins EU

year NZ has 1.3 million FTE of emppyloyment $500,000

$400,000 ployee

mm Fonterra

$300,000 Fisher and Paykel Healthcare ue per e nn NZ M anuf acturi ng E xports Total NZ Manufacturing

Reve $200,000 NddNeeded Food manufacturing for current per capita GDP $100,000 Wine Tourism

0 100,000200,000 300,000 FTE of employment PTC and audited by Business NZ 5. You can’t manufacture in New Zealand

Year ended December 2010 NZ$ 41 billion goods 10 NZ $9.5 billion tourism gg cturin llion) aa ii

8 Manuf ucts (NZ$ b dd

6 try pro etable arnings urism ss ss mm To Fore Metal nd veg troleu reign e 4 aa ee oo P F ELT Fruit airy eat ish ine

2 DD FF MM WW Al 0 NZ External Trade Statistics http://www.stats.govt.nz Global-nz-june-2010-tables-3 &Tourism Satellite Account: 2010 TIN100 F and P appliances Datacom New Zealand Technology Companies F and P Healthcare NDA 2010 Tait Electronics Ltd $1410m Temperzone Gallagher ) Douggplas pharmaceuticals $$ Rakon Moffat Ltd $500m Schneider electric Methven

ue (NZ Allied Telesis Glidepath $400m Dynamic controls Navman wireless NZ

l reven Weta Ltd aa Skope industries $300m TruTest

Annu NextWindow Orion Health $200m

NZ Pharmaceuticals

$100m

100 90 80 70 60 50 40 30 20 10 1 Rank Paradox: if it sounds unfamiliar, it may stand a chance

New Zealand Science Phase I New Zealand Science Phase II

Peter Hunter FRS, Engineer FRS, Pediatrician , Chemist DPhil, Oxford PDF, Un ivers ity o f Ca liforn ia, SF PhD, Southampton

Dan Walls FRS, Physicist , Biologist Rick Sibson FRS, Earth scientist PhD, Harvard PhD, Yale PhD, London New Zealand 10th in OECD New Zealand 21st in OECD New Zealand Science Phase III 2 MHz Halbach magnet rockcore analyzer

• Industry Market (R&D groups) •Both NMR and MRI applications •High value and high gross margin sales • Product $150k • 22 staff: existing products selling well • Growth rate ~50% per annum • ~ $3m sales in 2011 • Significant pipeline of new products NZ Taxpayer investment in Callaghan 1993 to 2009

Magritek export sales TIN100 F and P appliances Datacom New Zealand Technology Companies F and P Healthcare NDA 2010 Tait Electronics Ltd $1410m Temperzone Gallagher ) Douggplas pharmaceuticals $$ Rakon Moffat Ltd $500m Schneider electric Methven

ue (NZ Allied Telesis Glidepath $400m Dynamic controls Navman wireless NZ

l reven Weta Ltd aa Skope industries $300m TruTest

Annu NextWindow Orion Health $200m

NZ Pharmaceuticals

$100m

100 90 80 70 60 50 40 30 20 10 1 Rank TIN 100 exports

NZ$ millions (2000 do llars )

year TIN 100 exports

NZ high tech NZ$ millions exports (2000 do llars ) World Bank

New Zealand High Tech sector has grown 11% per annum in real terms over past two decades

year United Nations, Comtrade database (http://www.indexmundi.com/facts/new-zealand/high-technology-exports) 100 Power Law fit TIN100 TIN100 , 2011

(X>x) New Zealand Technology Companies rr

P 2010

10-1

10-2 100 101 102 103 x 105 103 ar]

ee Tree diameters in 4 Earthquakes 10 Columbian forest 103 102 quakes/y hh 102

1 10 101 >m) [eart 0 MM 10

M( Unified scaling law for earthquakes 10-1 Christensen, Danon, Scanlon and Bak PNAS February 19, 2002 vol. 99 Suppl 1 2509 100 10-2 1 10 0 1 2 3 4 7 5 6 The fractal nature of nature: power laws, ecological complexity and Magnitude m=log10(S) Brown, Gupta, Li, Milne. Restrepo and West. Trans. R. Soc. Lond. B (2002) 357,619 TIN100 F and P appliances Datacom New Zealand Technology Companies F and P Healthcare NDA 2010 Tait Electronics Ltd $1410m Temperzone Gallagher ) Douggplas pharmaceuticals $$ Rakon Moffat Ltd $500m ue (NZ

$400m

l reven Our top 10 technology Companies aa

$300m $3.5 bn Annu

$200m

$100m

100 90 80 70 60 50 40 30 20 10 1 Rank 100 companies, 100 inspired entrepreneurs An additional $40 bn per annum in exports (double our present exports) Ask the question: why would such a business want to stay in New Zealand? 100 companies, 100 inspired entrepreneurs An additional $40 bn per annum in exports (double our present exports) Ask the question: why would such a business want to stay in New Zealand?

“A place where talent wants to live” New Zealand has Diaspora 2005 highest rate of graduate migration

Expatriates as a percentage of all native born OECD countries 25 Total population Highly skilled 20

15

10

5

0

16 % of New Zealanders migrate abroad 24% of N ew Z eal and’ s ter tiary gra dua tes m igra te a broa d

International mobility of the highly skilled : a new perspective, OECD 2005

Education problems we must fix

555 541 530 Science 537 529 Maths Reading 522 OECD OECD 500 487 OECD 476 478

441 446 448

400

Pakeha 71% of students Asian 14% Maori 19% Pasifika 10%

PISA 2009: our 21st century learners at age 15 Comparative Education Research Unit Research Division Ministry of Education New Zealand Transit of Venus 2004

Dexter Waru, Hana Parata Walker, Sara Pethybridge

Nori Parata

Tolaga Bay Area School

Unrelenting achievement with attitude Using all our creative power Water Renewable energy MlilMultiple c limat ic zones Abundant outdoor and natural environments Excellent education Civil Society

“A place where talent can thrive”