The document discusses three main topics: 1. New Zealand's economic transition from commodity goods to differentiated goods and services to increase productivity and exports. There are opportunities in value-added food, niche manufacturing, ICT, and services. 2. Issues around youth disadvantage in New Zealand including poor economic outcomes, social issues, and disengaged students. Two proposals to address this are accelerating e-learning and improving school-to-work transitions. 3. Paradigm conflicts between traditional economic thinking and environmental thinking required for sustainability. The future will likely be different than the past due to resource and environmental constraints.

1. Navigation 101
Presentation to the
Leadership New Zealand
Future Thinking Workshop
Rick Boven
28 October 2011
www.nzinstitute.org
www.nzahead.org

2. Economic
Setting direction Social
Leadership Aligning Environmental
Motivating
2

3. LOW PRODUCTIVITY EXPORT SECTORS
Size of bubble reflects share of total workers
3%
2%
Agriculture, forestry,
fishing & mining
1%
Compound
annual growth Manufacturing
rate in output, Tourism
2000-2009 0%
-1%
NZ average
OECD $60 Australia $71
$49
-2%
20 30 40 50 60 70 80 90 100
Estimated 2009 output per hour worked, 2010 NZ$
Note: Data includes export and domestic. Sources: The Conference Board (2011) Total Economy Database. OECD datasets: Employment;
Hours worked. Statistics New Zealand: Tourism Satellite Account; Quarterly Employment Survey; Gross Domestic Product. 3

4. NEW ZEALAND’S ECONOMIC TRANSITION
International
markets
TARGET STATE
FOCUS
production
Domestic
CURRENT STATE
Commodity Differentiated
goods goods and services
EFFORT

5. MANY OPPORTUNITIES TO GROW HIGH VALUE
DIFFERENTIATED EXPORTS
Value-added food businesses that are anchored here
Niche manufacturing, including selected clean-tech, where a small exporter can
be a world leader, avoiding scale disadvantage
ICT, where distance and scale are less important barriers to success
• Lifting capability in these industries helps domestic productivity too
Services sectors where world class technology can be acquired and NZ labour
costs are relatively low
• Successes in engineering, education, financial, medical etc.
• Competitive advantage can be increased by legal innovation
TOP 100 INTERNATIONALLY ORIENTED TECHNOLOGY BUSINESSES
EXPORT AROUND $5b pa WITH VERY HIGH PRODUCTIVITY
5

6. PLUGGING THE GAP
6
Image courtesy of Lee ter Wal Design

7. TALENT AND CAPITAL VIRTUOUS CIRCLE
7

8. SUMMARY OF NEW ZEALAND YOUTH DISADVANTAGE
8

9. PERCENT AT EACH PROFICIENCY LEVEL ACROSS
READING, MATHEMATICS AND SCIENCE, 2009
30
25
20
15
10
5
New Zealand
OECD average
0
Below Level 1 Level 2 Level 3 Level 4 Level 5 Level 6
Level 1 (Highest)
Source: OECD (2010). 9

10. MEAN PISA RESULTS ACROSS READING, MATHEMATICS
AND SCIENCE BY ETHNICITY
560 2000
03 06 09
540
520
500
480
460
440
420
400
Pacific peoples Māori Asian Pākehā/European
Source: Education Counts (2000, 2003, 2006, 2009). 10

11. YOUTH AGED 15-24 AS PERCENT OF TOTAL
UNEMPLOYED, 2009
50
45
40
35
30
OECD average
25
20
15
10
5
0
Source: OECD (2010). 11

12. SHARE OF LABOUR FORCE COMPARED TO SHARE OF
UNEMPLOYED, AGED 15-19, 2010
30
New Zealand
Australia
20
UK
Sweden Netherlands
Share of Denmark
unemployed, % Canada
Finland
Chile Austria
10 USA Turkey
Israel Switzerland
Italy Ireland
Luxembourg
Germany
Japan
Hungary
0
0 10 20 30
Share of labour force, %
Source: OECD (2011). 12

13. VICIOUS CYCLE
Poor Many
Serious
economic
social issues disadvantaged
outcomes
5 year olds
Many Disengaged
unemployed students
Unsuccessful Leaving school
school to work early with low
transition qualifications
13

14. TWO PROPOSALS TO REDUCE YOUTH DISADVANTAGE
Accelerate roll-out Improve the
of e-learning school-to-work
to low decile schools transition
14

15. E-LEARNING DELIVERS ENGAGEMENT,
BETTER LEARNING AND LOWER UNEMPLOYMENT
Staying at
Engagement
school
E-learning
Less youth
unemployment
Better
Better learning
qualifications
15

16. VALUE ADDED SNAPSHOT FOR READING AT
PT. ENGLAND SCHOOL
9
8
7
6 2009
Stanine 2008 2010
NZ average
5
2007
4
3
2
1
0 1 2 3 4 5 6 7
School year
Source: Pt. England School (2010). 16

17. CO2 CONCENTRATION IN ATMOSPHERE, JULY
1990-2011, PPM
400
390
380
370
360
350
340
330
Source: National Oceanic and Atmospheric Administration (2011) Atmospheric CO2.
17

18. AVERAGE OF COMMODITY PRICES, 2000 = 100
600
500
400
300
200
100
0
Note: Commodities include aluminium, copper, crude petroleum, gold, iron ore, maize, rice, silver and wheat.
Source: The World Bank (2011) Commodity Price Data. 18

19. THE COBB-DOUGLAS PRODUCTION FUNCTION
Output = TQ Lα Kβ
TQ represents the effectiveness of the technology of production
L and K represent the amounts of input of labour and capital
respectively
The parameters α and β indicate how much the output changes with
changes in the inputs
19

20. EVERYTHING WE FOCUS ON MEANS WE MISS
SOMETHING ELSE
20

21. PARADIGM CONFLICT
Economic – 20th Century thinking Environmental – 21st Century thinking
Economy is small relative to environment Economy is large relative to environment
With limited exceptions, resources can Resource and waste sink
be taken from the environment and constraints, and accumulated
wastes can be released to the environmental damage threaten output
environment without adverse growth and human well-being
consequences
Environmental issues resolved by Environmental threats increasing and
substitutes, technologies and market responses are insufficient
instruments
The future will be an extension of the The future will be different from the past
past
Societal objective should be to maximise Societal objective should be to avoid risk
GDP
21

22. WHAT HAPPENS NEXT?
Commodity prices will continue to increase
Countries will manage supply chain risks and become more self-
sufficient
Globalisation may slow or even reverse
Societal management will become more complex and difficult
Power may be more centralised initially and fragmentation may develop
later
22

23. IMPLICATIONS FOR NEW ZEALAND
Increasing prices for commodity exports
Increasing attractiveness to migrants and investors as a relatively safe
haven
Strategy to grow exports of high value goods and services
Investment in innovation and skills
New performance metrics to emphasise the quality and effects of
economic growth
Risk management will become a more important priority
23

24. WHEN GOVERNMENTS FAIL, WHY DO THEY
FAIL?
“In the first stage, mental standstill fixes the principles and boundaries governing a political
problem.
In the second stage, when dissonances and failing function begin to appear, the initial
principles rigidify.
This is a period when, if wisdom were operative, re-examination and rethinking and a change
of course are possible, but they are as rare as rubies in a backyard.
Rigidifying leads to increase of investment and the need to protect egos; policy formed on error
multiplies, never retreats. The greater the investment and the more involved in it the sponsor’s
ego, the more unacceptable is disengagement.
In the third stage, pursuit of failure enlarges the damages until it causes the fall of Troy, the
defection from the Papacy, the loss of a trans-Atlantic empire, the classic humiliation in
Vietnam.
...
Persistence in error is the problem.” - Barbara Tuchman
The March of Folly: From Troy to Vietnam
(1984) 24