No one really doubts that over the longer term a better performing New Zealand economy – absolutely or relative to the rest of the advanced world – would be likely to involve faster growth in exports. It isn’t that exports are a special or unique type of product, or that tax breaks or other regulatory distortions should be put in place specifically to target exports. It is simply that the rest of the world is a big place, and New Zealand is a small one. The best prospects for high living standards here, at least for any given size of population, involves successfully selling more stuff to the rest of the world (which enables us to consume lots of stuff produced efficiently in other places). The idea is implicit in the government’s own target to see exports as a share of GDP rise from around 30 per cent to around 40 per cent over the next decade or so. But the general notion isn’t original to this government – it has been a feature of New Zealand economic debate, and aspirations, for decades.
New Zealand hasn’t done particularly well on that score – nominal exports as a share of nominal share have barely changed over the last 25 years.
Nominal export values are, of course, thrown around by fluctuations in export prices – a particularly important consideration for a commodity exporting country.
But what about export volumes? I dug out the OECD’s quarterly data on real export volumes. I had a look at what had happened to export volumes for OECD countries (plus Latvia and Lithuania) since the end of 2007. There is no ideal starting date, but the end of 2007 is just prior to the widespread recession of 2008/09, and in many countries export volumes slumped during the recession and subsequently recovered and I wanted to avoid those short-term fluctuations..
If we look at total export volume growth since the end of 2007, New Zealand doesn’t look too bad. Total export volume growth was a little faster than for the G7 countries taken together, although a little slower than the EU countries or the euro area. When one allows for the rising role of global value chains, which have boosted gross cross-border trade in many European countries (and which aren’t a feature of commodity trade), perhaps New Zealand’s performance doesn’t look too bad.
But, of course, New Zealand has had much faster population growth than most OECD countries – in some sense then we’ve needed more export growth than, say, a country with no population growth might have needed. The OECD doesn’t have quarterly per capita data, and tracking down quarterly population estimates for many countries would take more effort than I have time for at present.
Instead, this chart simply subtracts the growth rate of real GDP since 2007 from the growth rate of real exports over the same period. On this indicator, we are right back towards the bottom of the OECD.
It isn’t necessarily a surprising result. On the one hand, we’ve had to divert real resources from other activities to undertake the repairs and rebuilding in Christchurch. And on the other hand we have chosen – as a matter of active policy – to increase the population quite rapidly, which meant that resources that might otherwise have been able to be used to grow export businesses (at a probable lower real exchange rate) have had to be used to build the domestic capital stock (public and private) a higher population needs.
But if it shouldn’t be a surprising result – just a logical outcome of shocks and choices – it certainly isn’t one suggesting we’ve made any progress towards positioning New Zealand to begin to close the gap between our productivity and material living standards and those in the rest of the advanced world.