Kiwi economy takes a flight of fancy

Peter Griffin

The New Zealand government and businesses alike will have to invest heavily in research and development in the science and technology sectors and promote colloborative innovation, if they are to kick-start economic growth and keep up with their Australian neighbours.

It’s the statistic Prime Minister John Key’s political rivals wave at him every time his government’s track record on the economy is mentioned: 37 percent, the size of the gap in GDP per capita between New Zealand and Australia. Key’s National Party came to power in 2008 vowing to close this gap with the coun­try’s Aussie cousins by 2025. But the dispar­ity remains as Australia continues to prosper through a mineral boom driven by China’s in­satiable appetite for natural resources.

There is less talk of catching up with Australia these days, but plenty of discus­sion about the problems New Zealand faces in kick-starting growth in its sluggish econ­omy. Taxation, the obsession with property, unemployment, government spending and the challenge of rebuilding quake-ravaged Christchurch are exhaustively debated.

A belated realisation of the importance to the economy of science and commercialis­ing the output of research and development (R&D) efforts has seen Key promise to put science “at the heart of government”. Sci­ence was the only area of spending to re­ceive an unexpected top-up in last year’s budget and a newly re-organised Ministry of Science and Innovation has ambitious plans to stimulate private sector R&D, in which New Zealand businesses under-invest compared to OECD countries with a similar profile. But commentators are impatient for results and some argue that Kiwis (named after the nocturnal, flightless bird that clings to existence in pockets of bush) are compla­cent about their economic position.

“It’s been a long-standing problem that New Zealand is not investing enough in sci­ence and innovation,” says Professor Shaun Hendy, a theoretical physicist and deputy director of the MacDiarmid Institute for Advanced Materials and Nanotechnology. Hendy has become an influential commen­tator on innovation, comparing the coun­try’s performance on the R&D front with hi-tech hotspots like Finland, Israel and the USA. New Zealand has neither experienced financial pain, as Finland did when the So­viet Union broke up, nor knows what it’s like to work and live surrounded by hostile neighbours, as is the case with the Israelis. It hasn’t had the shock that often spurs eco­nomic transformation, though the Canter­bury earthquakes have created a repair bill for the country in excess of NZD20 billion.

Hendy’s research into innovation eco­systems suggests collaboration is key to an innovative economy – and the problem is that New Zealanders are not working to­gether enough. More patents are secured in countries that have extensive cooperation between scientists and where their findings are published in peer-reviewed journals and cited by other researchers.

Geography also has a role in shaping the extent of collaboration. “The Australians are ahead on patents per capita because they have large cities,” says Hendy. “Syd­ney and Melbourne are the most collabo­rative cities in Australasia, not Wellington and not Auckland.” Innovation, then, is harder to do in a small, isolated country, though Hendy says New Zealand can sub­stantially improve its collaboration efforts if it increasingly views itself as a city of 4.4 million people. The biggest cooperative network in New Zealand features 450 sci­entists clustered, perhaps unsurprisingly, in research organisations in and around dairy giant Fonterra, the country’s largest com­pany and major foreign exchange earner. New Zealand thus needs larger networks of collaborators and also an R&D focus on hi-tech industries.

In his book Wool to Weta, one of the country’s most respected scientists, Pro­fessor Sir Paul Callaghan, argues that the country needs to stop relying on its natural resources to generate wealth and focus on “brain-based” businesses, like Weta Digital, the film and animation house behind the highly successful Lord of the Rings trilogy. “Forty years ago, our meat exports paid for our pharmaceuticals bill eighteen times over. Now it pays for it four times over,” writes Sir Paul. “Even in the past few years, while we have enjoyed a commodity boom, that ratio has stayed fairly flat. The long-term pros­pects are clear: relentless decline.”

Promise, he says, lies in knowledge-based industries, but also in spin-off com­panies that come from science done at public research institutions, particularly in the physical sciences. His own company, Magritek, which makes products based on Nuclear Magnetic Resonance (NMR) tech­nology, is a prime example. It grew out of research undertaken at Victoria and Massey universities and now exports around the world. Nurturing these types of businesses and the science underpinning them should be our focus, insists Sir Paul.

If New Zealand is failing to innovate ef­fectively and struggling in its transition to become a knowledge-based economy, it also has a real problem with the productiv­ity of its workforce. Kiwis work long hours, but their output per hour worked is very poor, Hendy insists, especially compared to countries like France and Germany.

The message from him and his mentor and friend, Sir Paul, is that productivity springs from innovation; but this requires investment in scientific collaboration. De­spite the lessons from decades of overseas success stories, the national discussion continues to focus on the country’s macro-economic pet subjects. “You turn on the radio and you have daily updates about the housing market, or unemployment or sav­ings. But the long-term driver of economic growth is innovation,” says Hendy.

About the author:

Peter Griffin is the technology columnist for the New Zealand Listener and the founding editor of Sciblogs, Australasia's largest science blog network


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