Catching Australia

Crumbs! Who would have thought, following the response Don Brash and his colleagues on the 2025 Taskforce received from critics - particularly from the left of the political spectrum - and the Government's own decidedly lukewarm reaction to its report, that the next person to come along and shovel dirt on the "catch-up-with-Australia" enterprise would be none other than Dr Brash's successor at the Reserve Bank, Alan Bollard.

One of the Government's primary aims is to narrow the gap between the Australian economy and New Zealand's - especially in growth and wage rates - but on Sunday, Dr Bollard told TV One's Q&A programme that he thought the objective was fanciful.

"I don't think we can catch Australia," he said.

"Australia is a most unusual country . . . blessed by God sprinkling minerals across the top of the surface in very easily accessible areas, but that's all good news for New Zealand because there's a lot of crumbs come off the Australian table that we can take advantage of."

Yesterday, Prime Minister John Key responded somewhat tersely that Dr Bollard's comments were "fairly negative" and he "just did not agree with them".

He pointed out that 30 years ago Australia had all its minerals but New Zealand enjoyed a comparable wage rate, and that there were other ways in which we could "turn our country around".

To suggest otherwise was "a fatalistic view that I just don't buy into".

And if there was a tone of understandable irritation in the Prime Minister's remarks betraying, perhaps, a hint of his having been bushwhacked, it should not have been so.

For Dr Bollard has played this tune before.

In November, in a speech to the TransTasman Business Circle and the wider financial community, the Reserve Bank governor highlighted the difference between the two economies, particularly with respect to resource endowments.

"We talk about catching up with Australia," he said, " but we have better chances of taking advantage of their growth."

His context appeared to be the difficulties it presented not only for monetary policy, but potentially to the entire New Zealand economy if world financial markets perceived Australia and New Zealand as being much the same.

He proceeded to tell his audience why this was not the case: Australia had avoided negative growth and its prospects were driven by strong terms of trade, vast mineral deposits, the Chinese market and rapid population growth.

New Zealand, on the other hand, had a recession, and while it too was looking to the Chinese market, particularly in the export of primary produce, the other factors did not apply.

In responding to Dr Bollard, Mr Key conceded that catching up with Australia is "an aspirational goal but I think it's also realistic".

Can it be both? Aspiration is the easy part.

Who would not want to enjoy the same wages and economic growth rates as their neighbours? But in this case there are also sound economic and social reasons for at least attempting to narrow the gap - primarily to raise living standards and prevent the loss of the country's best and brightest.

There has also been, however, an element of political rhetoric in the way the aspiration has been "sold".

The drums of Act New Zealand and the Business Roundtable, for instance, have long been beating in the political undergrowth the idea of catching up with Australia, and the manner in which this might be achieved.

Having Dr Brash head the taskforce was almost certainly a concession to these interests, but such was the straitjacket in which the resultant report was framed, it probably did the cause more harm than good.

Catching up with Australia is a good cause, and that country's economic performance a helpful gauge against which to measure our own.

This country's long-term economic fate is intricately linked to that of our larger neighbour.

If Mr Key is right to defend the aspiration, Dr Bollard's intervention is a timely entreaty for realistic expectations.

Regardless, in the debate about how far and how fast we are able to narrow the gap, it must be remembered that New Zealand has its own advantages: not least, an abundance of water and fertile land, as well as a well-educated, flexible and mobile population.

Back in November, Dr Bollard told his audience, "Australia is a lucky country, but we could be a lucky neighbour" if New Zealand manufacturers and services were geared to take advantage of the strong expected growth across the Tasman.

He appeared to be suggesting then, and again on Sunday: aspire first to get lucky, and the getting rich will take care of itself.