2025 Taskforce's Brash says political courage needed to close gap with Australia

Former Reserve Bank Governor and National Party Leader Don Brash has given his first speech since being appointed as the chairman of the Government's 2025 Taskforce to improve productivity and close the economic gap with Australia. Speaking to a group of around 100 people at the AUT Business School in Auckland, where he is Adjunct Professor of Banking, Brash said political courage would be needed for New Zealand to make the major changes in tax structures and investment policies to close the gap with Australia and improve our productivity. Brash steered clear of proposing solutions immediately, given the members of the taskforce have yet to be appointed. But he made some interesting points on the some of the 'myths' around the gaps between Australia and New Zealand. He said Australia's mining sector did not give it a natural advantage, given it produced only 5% of Australian GDP and 1% of employment. Brash pointed out that New Zealand's distance from its markets appeared a natural disadvantage, but was shared with Australia. Surprisingly, he said that New Zealand appeared not to have over-invested in property. He also said a higher savings rate did not necessarily lead to higher productivity, pointing to the experience in Japan over the last 20 years despite a high savings rate. He also suggested that one of New Zealand's problems is that capital is taxed too heavily, which might explain our relatively low investment in technology and infrastructure by the private sector. Brash said he had recommended one person from the Labour side of politics to be a member of the taskforce. The taskforce membership is due to be finalised next month. Here's the final section of the speech. The full speech is reproduced in full below that.

So finally we get back to the question: can we ever catch Australia? I've no doubt at all that we can, if there's the political will to do so. There's nothing inevitable about our relative decline: if it continues, it'll be because New Zealanders choose policies which give us that result. But note well: given the gap which emerged from the mid-seventies to the early nineties, it will not be sufficient to lift our growth rate to the average of other developed countries, or to Australia's growth rate. We will have to grow consistently faster than Australia for many years, and that means we will need to have better policies than Australia, and better institutions across a broad range of policy areas. This is arguably the biggest challenge New Zealand has faced since the Second World War. Small policy changes here and there won't cut the mustard. Substantial changes will be needed in government spending, in the regulatory framework, in investment, and in tax structures. As an aside, I hope that the tax advisory group which the Minister of Finance has set up with some of the best tax experts in the country will see one of its primary goals as advising how the tax system can help eliminate the gap in living standards between New Zealand and Australia. Some of the choices required to reach Australian living standards by 2025 won't be easy, and will require political courage of the highest order. But if we flunk those decisions, we have to accept that our grandchildren will grow up cheering for the Wallabies. I am greatly encouraged by the Prime Minister's personal commitment not to let that happen.

Can We Ever Catch Australia(Final)-Don Brash- AUT 30 July