In the 1990s, critics of New Zealand's economic reforms often talked of failed policies. Outside economically illiterate quarters, such claims are now much rarer and Government ministers have toned down their rhetoric in the light of the economy's ongoing resilience. Facts have overtaken the debate.

The latest OECD in Figures report shows that New Zealand recorded real economic growth of 3.7 per cent a year on average between 1992 and 2002. This was the seventh fastest rate of growth in the OECD, only marginally behind Australia which recorded 3.9 per cent. This meant that the economy was 44 per cent larger by the end of that decade.

It is astounding to consider that Prime Minister Helen Clark told a London School of Economics audience only last year that, "in the 1990s the economy marked time".

Even more importantly, New Zealand achieved growth in real per capita gross domestic product (GDP), a measure of material living standards, of 2.5 per cent a year in the same period. In other words, average real incomes were 28 per cent higher in 2002 than a decade earlier and the better economic performance underpinned major increases in spending on health and education the so-called social wage.

The latest OECD report shows that New Zealand has moved up one notch in the rankings to 20th, having overtaken Spain. Those who talk about NZ's continuing economic decline - as though the turnaround following the earlier policy reforms never happened - are simply deluding themselves.

The improvement in economic growth owes much to significant improvements in NZ's productivity growth rate. Treasury, Department of Labour and other studies point to a significant jump in average multifactor productivity growth from 1993 on, after a generally sound overall economic framework was put in place.

When account is taken of the major improvements in employment growth, unemployment, inflation, public debt and New Zealand's credit rating, it is clear that the litany about failed policies of the past still emanating from some trade unions and other quarters is nonsense. The true failed policies were those of the pre-1984 period, which included high Government spending, higher tax rates, Government ownership of commercial enterprises and infrastructure, restrictive labour laws, a state monopoly ACC scheme and economically damaging business regulations.

Despite the Government's claim that it wants to move the economy to a higher growth plane (to regain a position in the top half of the OECD), it has been moving back towards failed policies on all these fronts.

The benefits of the 1984-88 and 1991-92 reforms showed up only from 1993 onward. Equally, the costs of recent mistaken policy changes will show in the real economy only over time.

But they are already showing up in economic projections. All medium-term forecasts, including those of the Government itself, show the economy's performance falling away to well below the average 2.5 per cent per capita GDP growth of the decade to 2002.

The Institute of Economic Research projects per capita income growth of only 1.4 per cent a year for the five years to 2008.

Finance Minister Michael Cullen has put his credibility on the line by saying that it will be apparent by mid-2004 whether the Government is achieving its growth objectives. Time is running out.

OECD GDP growth

Average annual real % change 1992-2002:

1. Ireland 7.9

2. Korea 5.6

3. Luxembourg 4.8

4. Poland 4.4

5. Slovak Republic 4

6. Australia 3.9

7. New Zealand 3.7

8. Canada 3.5

9. Norway 3.3

10. Finland 3.3

* OECD average 2.8

For more information, contact:

Roger Kerr
Executive Director
Ph: 04 499 0790
Email: rkerr@nzbr.org.nz

David Young
Communications Manager
Ph: 04 499 0790
Email: dyoung@nzbr.org.nz

Web: www.nzbr.org.nz