Callaghan legacy a missed opportunity

If you’re interested about technology’s role in New Zealand’s economic growth, read Rowan Simpson’s April 4 post on the Callaghan legacy. It is a must-read.

Simpson has written an insightful analysis of Sir Paul Callaghan’s¹ vision. He examines how the advice has played out since his death nine years ago.

He runs through, and updates, the seven common myths Callaghan talked about in presentations. I was at a couple of these talks and found Callaghan’s approach to the subject matter resonated.

Callaghan didn’t pull his punches. Nor does Simpson.

Challaghan challenge, missed opportunities

In simple terms, New Zealand has failed to pick up the Callaghan challenge. There’s, at best, limited progress.

Or as Simpson says, there is a lot of work to do.

There’s a lot I could comment on here, but I want to pick out two issues for now.

Tourism

The first is tourism’s role in the New Zealand economy.

It’s a subject that has had a lot of coverage since New Zealand closed its borders at the start of the Covid pandemic.

Simpson writes: “…it’s a mistake to think that we could grow more prosperous on the back of more tourism. This is because each additional job in this sector, as it’s currently configured, drags the overall average (GDP per job) down.”

For New Zealand to prosper we need the average GDP per job to rise. And that means moving jobs out of tourism into more productive areas.

Yes, there are regions that depend on tourism. And while tourism does lift a group of people out of abject poverty, it doesn’t lift them up as much as other economic sectors.

The hand-wringing over the future of New Zealand tourism is well meant, but misplaced. We may see short-term gains, but public money could be better spent in almost any other sector.

Let’s do that.

Economic distortion

Simpson doesn’t mention my second point: New Zealand’s rocketing property prices. Yet property has diverted investment from productive innovative sectors.

Why risk investing $100k on a software-as-a-service start-up that might fail? You can earn a guaranteed 20 percent return using the money as a house deposit. That way you get leverage and preferential tax treatment.

This is not the place to discuss a capital gains tax or any other ideas. It is the place to speculate that an obsession with property hamstrings innovation and economic growth.

His name lives on with Callaghan Innovation. ↩︎