The Organisation for Economic Cooperation and Development (OECD) was, in its own words, set up “to achieve the highest sustainable economic growth and employment and a rising standard of living in member countries”, while contributing to world trade and development generally.

To that end, one of the committees of its membership, comprising the governments of 30 countries in the higher income category, regularly surveys the economic situation and policies of member countries and offers ‘good practice' policy advice.

It is important to understand that the surveys are the responsibility of the member governments, not the Paris-based secretariat which does the preparatory work. Virtually by definition, they therefore reflect mainstream economic thinking acceptable to the ‘social market' countries of Europe as well as the Anglo-American world and Japan . The reports are diplomatic and restrained, not radical or leading-edge.

The latest OECD survey of New Zealand , released this month, reveals an interesting contrast between representative advanced country views and those of our government.

Prime minister Helen Clark has said the economy “marked time” in the 1990s. The OECD says that ” New Zealand has been one of the fastest growing economies within the OECD during the past decade” – in fact the 7th fastest.

The OECD says that “Underpinning this improved performance has been the programme of reforms that began almost 20 years ago.” The prime minister has described them as “failed policies”.

The OECD praises the government for having kept in place most of these so-called “failed policies”, which it says have delivered low inflation, fiscal surpluses, a flexible labour market and good public sector management, as well as faster growth in employment, productivity and output.

But it says the government has been going largely in the wrong directions – towards more ‘hands-on' intervention in industry, favouring particular sectors, renationalising enterprises, re-regulating the labour market, introducing an extra week's holiday which “is not consistent with the government's goal of raising per capita incomes”, increasing taxes and making welfare benefit rules more lenient.

Instead of ‘activist' government, the OECD advocates strengthening economic ‘fundamentals' – less government spending, lower taxes and tariffs, a resumed privatisation programme, better policies for infrastructure (including reforms to the Resource Management Act), less regulation of business, more respect for property rights and stronger work incentives in the welfare system.

The OECD's criticisms and advice are very much in line with those of New Zealand business organisations.

Like them, it points out that while the slide in New Zealand 's relative living standards has been arrested, an acceleration of growth to move back into the top half of the OECD rankings is “not in sight”. Last week's Budget Policy Statement confirms this assessment.

So, translating the OECD-speak, what does New Zealand 's report card look like? For past economic policies and performance, it looks like a creditable B. For the current directions and outlook, more like a failing D grade.

Most media have not given the OECD report the attention it deserves. It is a loud wake-up call to New Zealand .

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