Boston Consulting Group report warns New Zealand must focus on developing new export industries as growth in dairy and tourism is unlikely to continue

New Zealand's key export industries have been maxed out and the country urgently needs a strategy to develop new sectors for future growth, a Boston Consulting Group report says.

In a report published Thursday, BCG NZ’s managing director Kelly Newton said export industries like dairy, film, and tourism have led the economy over the past 50 years but are running out of steam.

“The local dairy industry says that New Zealand has reached peak milk production, film and television production is limited to serving the outsourcing needs of US-based studios, and travellers are choosing more affordable and lower-carbon holiday options,” she wrote. 

Businesses, government, and researchers must collaborate to incubate new industries that can diversify and expand the economy, focusing on creating three to five "high-value ecosystems" to drive growth.

In the report, "ecosystem" refers to a region or city where businesses, research institutions, and government bodies concentrate on a specific industry. 

These areas offer benefits by sharing resources, attracting talent, and encouraging the exchange of ideas between startups, companies, universities, and investors, keeping everyone informed on new ideas and best practices.

Newton said New Zealand has often spread its limited investment across too many industries, many of which are too dispersed. For example, when she asked at Fieldays where a food-tech business would have the best chance of success, people suggested five different locations.

“That makes it really tough, because when you want to attract or retain talent, they need to know where to go to be the best in the industry and have options to move roles,” she said. 

Someone might start as a researcher, move into an industry job, and then join a startup — but that’s harder if those businesses are spread across different locations. Investors are more likely to seek opportunities in cities or regions known for innovation in a specific sector. 

Plus, the entire ecosystem becomes more efficient when the core industry is supported by related services and innovations.

A successful example of this strategy is Taiwan’s semiconductor industry. In the 1980s, the government established Hsinchu Science Park near top universities, offering tax breaks and connecting researchers, investors, and industry.

Now it’s home to over 500 manufacturers, including TSMC, the park drives a sector that contributes 15% of Taiwan’s GDP and supplies 60% of the world’s semiconductors.

BCG’s report suggested five potential target industries for New Zealand: agricultural technology, space and satellites, green technology, medical innovations, and creative industries.

Newton said these weren’t meant to be a definitive list but examples of large, growing markets where New Zealand already had a comparative advantage. 

Rocket Lab and Fisher & Paykel Healthcare are successful businesses already contributing to the space and medical ecosystems. 

The agricultural and renewable energy industries are already sizable and should be able to support ecosystems, though they are spread across the country. 

Film and animation studios in Auckland and Wellington, which mainly support subsidised Hollywood productions, could be encouraged to develop more original intellectual property, possibly in the gaming industry.

Critics might argue that government involvement would mean picking winners, but Newton said small countries need to focus their investments to compete with larger nations. 

"If we say we’re not going to make choices, or place bets, then we’re choosing not to be competitive," she said.