Key: I don't buy into Bollard's 'fatalism' 

Source: NZPAJohn Key

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Prime Minister John Key has described comments made by Reserve Bank governor Alan Bollard that New Zealand is unable to compete with Australia as "negative".

Bollard, appearing on TV ONE's Q+A programme on Sunday, said New Zealand did not have the same advantages as Australia - such as its wealth of minerals - to be able to realistically compete with it, and should instead look to take advantage of Australia's good fortune.

"I don't think we can catch up with Australia. Australia is a most unusual country. Austarlia has been blessed by God sprinkling minerals across the top of the surface in very easily accessible areas in places where it doesn't annoy people to mine them," Bollard said on Sunday.

The government's goal is to catch up with Australia by 2025, and Key says he is not surprised by Bollard's comments.

"There are always people that share that view. It's a fairly negative view about New Zealand's future and I just don't agree with it. It's not to say that it's not difficult or challenging - everyone knows that," he says.

Key says OECD data shows New Zealand is mineral-rich too - though he acknowledges they are more difficult to access - and has other advantages Australia does not, such as an abundant water supply.

He says while the government's mission to catch up with Australia is an aspirational goal, it remains realistic. Wages in Australia are around one third more than in New Zealand, but he says that was not always the case.

"Thirty years ago, New Zealand had the same wage rates as Australia and they still had their minerals back then.

"To write off the future of New Zealand, to say we can never catch Australia is a fatalistic view that I just don't buy into," he says.

Phil Goff says Key's comments threaten the Reserve Bank's independence.
 
"I think it's good that the Reserve Bank governor speaks his mind and tells the truth as he sees it and is absolutely frank. John Key shouldn't be trying to bully him into shutting up. That's bad for our country and bad for the debate," says Goff

The origins of the debate lie in the post-election coalition deals. The Act Party won the right to set up a $500,000 investigation into how to match Australian incomes by 2025.
 
Rodney Hide is now scathing of National's economic policies 
 
"It's clear that on existing economic policies we haven't got a chance of catching Australia by 2025. Essentially we're still following Helen Clark and Michael Cullen's policies," he says.

Key says much is being done to benefit from Australia's success, such as advances in closer economic relations between the two countries

"(Progress has been made with) everything from making it easier to get across the Tasman to issuing a prospectus in this country and making money in Australia. So, I think the integration is happening," he says.

He says New Zealand has also made its own inroads in moving its economy forward, such as the increasing profile and success of its film industry.

Do you agree with Bollard's comments? Should NZ not try to compete economically with our trans-Tasman cousins? Comment below...

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John from Sydney ; 2010-02-09 @ 02:47 NZDT  

Figures show changes between Australia's and NZ's GDP (per capita PPP basis) over 30 years: In 1980, the AUS GDP per capita was $US 9819.53, NZ was $US 8267.21 (figures from economywatch.com). The NZ figure was 84.2% of AUS. In 1990, the AUS figure was $US 17539.06, NZ figure was $US 13487.37, the NZ GDP per capita being 76.9% of AUS. In 2000, the NZ GDP was 72.1% of AUS, and in 2008, 72.5%. Don't get me wrong: I'm an Aussie who believes that a prosperous NZ benefits AUS and vice versa

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andrewfun2bfit ; 2010-02-08 @ 15:25 NZDT  

Dr Bollard has come out with the most uninspiring economic message for all New Zealanders. David, give up on breaking the Tasman economic divide now because goliath has a greater amount of natural resources. For goodness sake Dr Bollard lets dominate the global stage and compete against Aussie. We are always settling for second best, lets grab the bull by the horns and deliver on the world scene! Shame on you Bollard...

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Parorchestia ; 2010-02-08 @ 10:32 NZDT  

Dr Bollard has fallen into the old fallacy of correlating natural resources with national wealth. There is no such correlation, otherwise Nigeria would be wealthy and Switzerland poor. As an economist he has ignored the old truism that politics subsumes economics, but culture subsumes politics. Our culture is not as conducive to wealth generation as is Australia's. Until we change, we are doomed to decline.

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benrebo ; 2010-02-08 @ 09:13 NZDT  

He is absolutely 100% correct. Australia is blessed. The only way we will catch is if food price growth outstrip mineral price growth. We could develop smarter, more advanced industry, except our human capital keeps leaving for a more secure future. Even if one had a good idea, it wouldn't get off the ground without taking reckless personal risk because banks won't fund anything other than rental properties. That said, while some are richer, a hell of a lot more are poorer

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Laurenceuk ; 2010-02-08 @ 06:27 NZDT  

Mr Bollard has failed to explain why other countries that are similar in size and resources to New Zealand have similar levels of GDP to Australia and even higher. I thought increasing GDP was all about technique,producing higher value goods,improving production methods,infrastructure,education,saving costs,studying our markets carefully etc etc. Of course it can be done but not with fatalist naive comentators such as Bollard.

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