An occasional reader pointed out to me a government economic target that I wasn’t aware of. Late last year, Communications Minister Clare Curran announced that
“The Chief Technology Officer will be responsible for preparing and overseeing a national digital architecture, or roadmap, for the next five to ten years,” Ms Curran says.
“This Government intends to close the digital divides by 2020, and to make ICT the second largest contributor to GDP by 2025.
At least one tech firm seems to think that goal is in the coalition agreement, although I couldn’t see it there.
There doesn’t seem to be much around on this goal, which is perhaps not surprising as it doesn’t seem a particularly realistic or well thought-through goal. There are no obvious definitions or compators. Would such an outcome even be desirable? How would we know?
But I did find this chart in an MBIE report from last year, using data that isn’t readily available to the public.
Which looks like a reasonable aount of activity, except of course that GDP in 2015 was $230 billion. so these ICT sectors in total account for about 4 per cent of GDP.
The OECD doesn’t seem to have data for all member countries, but I found this chart.
New Zealand’s ICT share doesn’t seem out of line with (although perhaps a bit less than) the median OECD country.
But then I went to Infoshare to look at the breakdown of GDP by production sector. These are the sectors that were bigger than MBIE’s ICT number in the year to March 2016 (which presumably aligns most closely with the 2015 data they quote).
|GDP in year ending March 2016|
|Transport, Postal and Warehousing||12,377|
|Financial and Insurance Services||14,604|
|Rental, Hiring and Real Estate Services||18,021|
|Owner-Occupied Property Operation (National Accounts Only)||16,429|
|Professional, Scientific and Technical Services||19,935|
|Education and Training||11,436|
|Health Care and Social Assistance||15,095|
Which industries, I wondered, did the government envisage being displaced by the ICT sector? For example, the government also seemed to be aiming to build a lot more houses, and encouraging more people into education and training. Which industry do you expect will still be ahead of ICT by 2025 (only seven years away now)?
And how realistic is any of this anyway? That MBIE chart above looks quite impressive at first glance. But as a share of total GDP, those ICT subsectors in total did not change from 2007 to 2015. What policy changes, already announced or in the works, are likely to transform the prospects of these sub-sectors in just a few years?
In a post last year, I pointed to some other indicators of how these technology sectors just haven’t been growing to anything like the extent the boosters would like us to believe (although of course there are individual firm success stories). Sadly, of course, that is really the story of our tradables sector as a whole – which has managed no per capita growth at all this century.
UPDATE: From some digging around it appears that the government’s target, championed by Clare Curran is even flakier than I imagined. Apparently at a recent select committee hearing she claimed that the technology sector was New Zealand’s third largest exporter and that she hoped it would become the “second largest contributor to the economy”. This “third largest exporter” claim appears to come from last year’s TIN report (critiqued here), where the total foreign sales of NZ-owned tech firms are treated as New Zealand exports (for comparisons with official export data of other sectors). As I noted in my critique, this is a nonsense claim: much of the value in many of these foreign sales is generated abroad (eg both F&P companies have large manufacturing operations abroad). In their 2017 ICT report, MBIE talk of ICT exports of around $1 billion per annum (about 0.3 per cent of GDP). As I showed in my earlier post, tech-like services exports as a share of GDP has barely changed this century (and the profitability of New Zealand firms operating abroad also seemed pretty weak).
To put the numbers in perspective, here is an extract from a recent SNZ table
|By top 30 categories|
|Year ended March|
|Commodity / service||Exports (fob)|
|NZ$(million)||% of total||NZ$(million)||% of total|
|Milk powder, butter, and cheese||11,547||16.5||14,174||18.2|
|Business and other personal travel||10,012||14.3||10,879||14.0|
|Meat and edible offal||5,983||8.5||6,797||8.7|
|Logs, wood, and wood articles||4,133||5.9||4,828||6.2|
|Mechanical machinery and equipment||1,596||2.3||1,683||2.2|
|Fish, crustaceans, and molluscs||1,586||2.3||1,619||2.1|
|Preparations of milk, cereals, flour, and starch||1,213||1.7||1,558||2.0|
|Miscellaneous edible preparations||1,162||1.7||1,305||1.7|
|Aluminium and aluminium articles||982||1.4||1,152||1.5|
|Electrical machinery and equipment||999||1.4||1,071||1.4|
|Casein and caseinates||826||1.2||904||1.2|
|Optical, medical, and measuring equipment||829||1.2||873||1.1|
|Wood pulp and waste paper||721||1.0||858||1.1|
|Telecommunications, computer, and information services||875||1.2||848||1.1|