1. BUILDING A CAPABLE NEW ZEALAND ECONOMY Productivity, Ownership and Growth: Towards an “NZ Inc.” Approach Hon David Cunliffe, MP for New Lynn

2. DEMUTUALISING THE NZSX  Pressures for demutualisation  Members bill  Timing: faciliatiating rebuild  Regulatory framework: Securities Markets and Institutions Act

3. BUILDING A CAPABLE NZ ECONOMY 1. The drivers of productivity 2. Globalisation and integration 3. Benefits of foreign investment 4. Risks of hollowing out 5. Towards an NZ-Inc approach

4. 1. DRIVERS OF PRODUCTIVITY GDP per capita Labour productivity Labour utilisation Capital per hour Multifactor productivity (MFP) Participation rate Unemployment rate Macroeconomic stability, business environment, innovation

5. GDP PER CAPITA GROWTH IS RECOVERING… (11-year moving average comparison with OECD countries)

6. …DRIVEN BY RISING LABOUR UTILISATION ….. (11-year moving averages growth in hours worked per capita comparisons with OECD countries)

7. …..MASKING POOR GROWTH IN CAPITAL-LABOUR RATIOS (Capital-labour ratios: New Zealand vs Australia, 1988-2002)

8. 2. GLOBALISATION AND THE CHALLENGE OF INTEGRATION  Globalisation: a fact not a philosophy  New Zealand is highly trade dependant  Integration therefore essential but terms vary  “Open up and hope”  “Head in the sand”  “Smart engagement”

9. 3. THE SAVINGS GAP AND FOREIGN INVESTMENT  Domestic savings gap requires capital inflow  Partial offset from government fiscal surplus  FDI brings potential spillover benefits  Technology, capital access, market access  Large net investment outflows on current account persist (~3-4% GDP)  High level of foreign investment in NZ  Lower returns on NZ investment abroad

10. 4. RISKS OF HOLLOWING OUT  Out-migration  Capital migration  Intellectual property  Risk of self-reinforcing processes  FDI composition  High levels (~85%) of M&A FDI  Low levels of “greenfields” investment  Historical investment and migration rules

11. 5. TOWARDS AN “NZ INC” APPROACH  Build on firm foundations  Target capital productivity drivers  Redefine “NZ’s economic space”

12. (i) BUILD ON FIRM FOUNDATIONS  Strong economic fundamentals  Easy, safe business environment  Increase labour participation and skills  Invest in innovation and technology  Active international trade policy

13. (ii) TARGET CAPITAL PRODUCTIVITY  Address the savings gap  Deepen domestic capital markets  Incubate and protect intellectual property  Leverage technology across sectors

14. (iii) REDEFINE “NEW ZEALAND’S ECONOMIC SPACE”  Recognise ownership matters  Maximise the benefits of FDI  Link with domestic sector strategy  Negotiate as “Team Kiwi”  (re)Brand NZ Inc