WELLINGTON, NEW ZEALAND
NEW Zealand is undergoing major structural changes to its economy. Since 1984 the country has ended import protection, deregulated business and labor, and privatized government agencies. Recently staff writer Ron Scherer interviewed Ruth Richardson, the country's minister of finance. Excerpts from the interview follow:
What are the key features of the government's economic policies?
From where I sit we have to get four things right if we want strong sustainable growth.
The first thing is the macroeconomic policy. So, you saw when the National government came in , we really took hold of public expenditures and signed up to an independent central bank that was committed to price stability.
Secondly, we had to get skill levels increased very substantially. So the policies to do with education have become quite central....
The third thing we had to get right was an entrepreneurial business sector, which involved a whole range of microeconomic policies such as deregulation, to insure we had infrastructure that was internationally competitive, shipping and port reform, and a whole raft of policies that were crucial to send signals to our enterprises.
The fourth thing to get right is our international linkages. It's no use being all dressed up if you have nowhere to go. So we had to have a huge amount of input, not just on GATT [world trade negotiations], but an activism on the government's part to get a very substantial connection with Asia. Sitting at the heart of all this is sustainable economic growth.
When are you going to get it?
Every indication is that the economy turned at about the time we presented the budget last year [July 1991]. Now it's a matter of insuring that we reinforce that recovery consistently.
Aren't real interest rates still very high considering your progress?
They reflect our history as an extremely indebted nation. Real interest rates are really telling you a story about risk, and as one of the most heavily indebted countries out[side] of the third world, it's not surprising there's a risk premium in spite of the fact that we have now the lowest inflation rate in the OECD [industrial nations].
You need to generate capital investment.
There is some improvement in investment.... We know we need investment now because we want to move the economy now and there just hasn't been the capital accumulation in New Zealand for quite a long time.
Is there evidence New Zealand is becoming more competitive in the world?
Huge, huge amount of evidence.... [With] many of our trading partners in recession, we are still expanding market share in those economies. Our penetration ... is not just in ... agricultural, forestry products, it is particularly in manufactured products, or some of your software-type industry, your smart industries. We've just had our first balance-of-payments surplus in 20 years.