From the Knowledge Wave to the Digital Age

  • Hon David Parker
Economic Development

Innovative Industries launch, Beehive Banquet Hall:  

 2 July 2019.

 Tēnā koutou katoa.

 Welcome to the launch of the Government’s Industry Strategy in this age of change – the fourth industrial revolution.

 This technological revolution the world is in the midst of is born of the confluence of affordable computing power, mobile positioning systems, sensors, robotics, big data and the internet of things, artificial intelligence and genetics.

 The breadth of these changes is vast, impacting on the majority of occupations and business models . Impacts are being felt across society. McKinsey estimate that by 2030/2040 60% of the tasks in the NZ economy could theoretically be automated, and that 30% will be.

 The changes are so profound that forward thinking governments around the world – including in New Zealand – have programmes devoted to the future of work.

 I begin this way because it also illustrates the scale of the opportunity. 

The flip side of the enormity of the 4th industrial revolution on the future of work, is the correspondingly huge potential for business.  

It is an exciting time. 

A myriad of new ways of new products and services are being made possible.  

Most improve productivity. 

Many are needed to decarbonise the world to avoid catastrophic climate change, or to combat pollution of our rivers and oceans. Others will overcome debilitating disease, improving the lives of millions.  

I believe that it is the duty of every government to address both the future of work, and to maximise the up-side by chasing down as many of these commercial opportunities as we can, so as to harness the new jobs and value. 

The global relevance and reach of these new innovations means many are very valuable.  

It is a race. Others want the prizes that we seek.  

I have asked you here today, because we must all work together to maximise our successes for our collective benefit. 

The title of this initiative is From the Knowledge Wave to the Digital Age. 

The choice of name was deliberate.  

While we are charting a new way forward today, we don’t start from scratch and the fundamentals are sound. Unemployment and inflation are low, the Government’s books are in surplus, wages are growing and growth is solid. 

Our journey is the continuation of a trip that started back in the 1970s when we lost preferential access to the UK after it joined the EEC. 

No one can miss the irony of today’s trade environment as we look to negotiate deals with the EU and with post-Brexit Britain. 

Since the 1970s successive governments have wrestled with our productivity challenges; how we add value, upskill and diversify our economy. 

We should acknowledge the important milestones and efforts of yesteryear. 

They show that when we together have a plan and chart a direction, our economy strides forward. 

Some economic signals can only be modified by the Government – it can adjust investment signals away from speculation to productive investment.  

Government can also fund or create incentives to stimulate private sector innovation (and we have).   

We both have a central role in skills training.  

Government can direct investment towards the regions, and champion sectors where we see a comparative advantage, but it is the mobilisation of the private sector which delivers the jobs the big gains. 

Various historical milestones are covered in the document released today. Some of these have been truly transformative. 

One was the Knowledge Wave conference of 2001 and the 2002 Growth and Innovation Framework that sprang from it.  

Our predecessors identified three priority areas. These were chosen because of their potential for export growth and because of the underlying importance that competence in the sector had to the wider economy. Spillover benefits. 

The crucial sectors identified were ICT, biotechnology (with a food and beverage bent) and, thirdly, the creative sector and design.  

They got it right and I am pleased to doff my cap to those who called it at the time.  

Major reforms of the telco sector followed. Number portability, the structural separation of Telecom, regulation of the monopoly services, competition in mobile, and support for ultrafast broadband mobilised billions of dollars of private investment. 

Despite the long skinny shape of our country – what Rhys Darby called a half-eaten chop - New Zealand is about to become one of the top five countries in the world for access to UFB.  

Our telco competence is a considerable achievement, and a prerequisite to the development of Xero, Vista, Coretex and a myriad of other companies that sell software as a service, which have flourished. 

And the other sectors have boomed too. 

Fisher and Paykel Healthcare. A2 Milk and a range of other food and beverage companies. Weta Workshops and its spinoffs. Now household names. Billions of dollars in enterprises that have helped build our country.  

The Growth and Innovation framework is the GIF that keeps on giving. Computer gaming, robotics, customer service avatars, nutrient monitoring software. 

The race is on.  

Our TIN200 companies are growing strongly, with technology exports now our third largest export sector (after tourism and agriculture). New hires abroad as well as export sales growth are described in the TIN200 report on the table.

Other initiatives not primarily seen through an economic lens have also improved our economy. 

Treaty settlements have energised the Maori economy. 

Kiwisaver and the Cullen Superannuation Fund have deepened our investment skills and capital markets.  

New Zealand Trade and Enterprise has been important in helping many exporters sector navigate their risky journey into new markets.  

Our seed or angel investment capital market has matured. The innovation ecosystem has strengthened as management capability and globalisation ambitions have both grown. 

We still suffer a gap in series A and B capital rounds, which this slide shows – something we have addressed in our latest Budget.  

The $300m boost, and lead being shown by our largest NZ investor – the Guardians of the NZ Superfund - will attract private sector investment and help our firms to achieve their potential.  

This will help to directly fill the current ‘capital gap’, and draw in other capital from NZ and abroad. 

There is no time for delay. The seemingly exponential growth in opportunities will within just a decade or two morph into the law of diminishing returns.  

At one level its simple, if we want these innovative parts of the economy to grow faster, we have to apply more of our precious resources to the task.  

That means more financial capital and more people.  And as the saying goes, people follow the money. 

The document we are launching today opens with a quote from Nobel laureate economist Paul Krugman –“Productivity isn’t everything, but in the long run it is almost everything.” 

So that must be a focus. 

I am not making many comments on political economy today, but I do need to make the important link between imbalances in the recent New Zealand growth model and underinvestment in the productive economy. 

I believe there is no doubt we inherited an economy based on excessive property speculation and high rates of immigration driving consumption led growth. The latest OECD report on New Zealand confirms this. 

The infrastructure deficit left behind – not just schools, hospital, roads and public transport, but also private and public housing – will take a decade to catch up.  

This is serious, but the adverse effect on productive investment was also profound. 

Low per capita investment in our productive businesses has inhibited the diffusion of technology, and the development of innovative new products and services. 

We’ve already made important changes to redress these imbalances like the R&D tax credit, its recent extension to pre-profit companies, the ring fencing of losses on rental properties and extending the bright line test from 2 to 5 years.  

These all weight investment towards the productive sectors.  

Other government policies in the areas of trade, regional economic development, skills and the future of work, are important too.  

They all work together. 

There are other important touchstones too. 

We must maximise our comparative advantages that include our people, our soils and our temperate climate. 

Which brings me back to the opportunities born of the 4th industrial revolution. 

Many emerging niches – so called verticals in the jargon of today - are narrow in breadth but have global reach. These global characteristics, mean the journey to scale takes substantial financial capital and expertise.  

What makes them hugely valuable also makes them costly to scale. The capital markets and dominant ecosystems needed are more naturally found in larger economies. 

I am determined that we do our utmost to help successful New Zealand businesses to scale and seize these opportunities.  

We should look to technology opportunities in sectors adjacent to the areas where we already excel – agriculture and horticultural production, fisheries and forestry are obvious examples. It’s not rocket science - but we are good at that too! 

There will be those successes that spring from left field – what Sir Paul Callaghan called “weird stuff” – such as the stand out achievements of Rocketlab. Who would have predicted that our small country would boast a space industry based completely in the private sector. That we would have our own Space Agency?  

Today we’ll be hearing from some of New Zealand’s industry leaders, including Sir Stephen Tindall, about our economic journey of the last 20 years and what the future holds. 

We’ll be talking about how we come together via industry transformation plans, an idea borrowed from our outstandingly successful partners in Singapore.  

Plus we’ll be shining a bright light on new opportunities in the agritech sector – a sector that meets the test of playing to our comparative advantage.  

It’s a hugely exciting sector. We already have world class expertise. Gallagher Group, Hamilton Jet, Scott Technology, Robotics Plus, Invert Robotics, Zespri – all have strong roots in agritech.  

Agritech give us the opportunity to clean up our rivers, improve land-use, and reduce our methane, nitrus oxide and CO2 emissions, all the while prospering in the world. 

Some work has already been done on the draft agritech strategy and action plan. The booklet launched on agritech today is - very deliberately – a work in progress. It’s good to have the impetus of a draft, but as with the Knowledge Wave conference, we need your help, your ideas and your guidance to carry the country with us. 

This is a call to action. 

The agritech sector is attracting attention worldwide. It’s time to redouble our efforts.  

Agritech already contributes significantly to NZ exports and has the potential to grow significantly. 

Agritech improves yields, efficiency, profitability, sustainability and quality.  

Automation in horticulture is especially important. 

And it cuts both ways. 

In addition to driving productivity the new goods and services in new businesses create jobs and better environmental outcomes.  

These complementary outcomes help us climb up the value chain as we move the economy from volume to value, within environmental limits.  

Industry Transformation Plans 

An important part of our agritech focus is the development of an industry transformation plan.  

These describe an agreed vision for the future of a sector, and set out actions required to realise this vision.  

Industry Transformation Plans are in train across large sectors of our economy – in agriculture with the Primary Sector Council for example. 

Our first Industry Transformation Plan was the Construction Sector Accord. It was co-developed by an industry Accord Development Group. Industry leaders working with the Government. 

Our next Industry Transformation Plans focus on four other priority sectors: food and beverage, digital technology, forestry and wood processing, and – as I have said - agritech. 

The Prime Minister’s Business Advisory Council and the Future of Work Tripartite Forum will provide strategic leadership. 

Key components of each plan will include assessments of the opportunities and risks from digitalisation, the future of work and skills training.  

Risk sharing between government, businesses and labour to enable skills training to upskill existing workforces will be crucial to avoid the rising inequality which will otherwise flow from the future of work. 

Each plan will also set out decarbonisation pathways, ways to increase exports, as well as an assessment of capital constraints. Partnerships are needed.  

Business, workers and government all have a stake in every industry and we need to partner to make a real difference for New Zealand.  

Today we’ll be hearing from a variety of industry leaders about emerging opportunities for New Zealand and how we can work together to back the industries of the future.  

Industry Transformation Plans will be sector-led and government-supported, so it’s great to see the enthusiasm in the room for engaging in this work. I know Phil Twyford is keen to carry this forward. 

We need to harness the Maori economy, international capital, and utilise the links brought by recent migrants and by NZ’s diaspora to take our innovation to the world.  

Together, we can build an economy that is more productive, sustainable and inclusive for all New Zealanders. 

I now hand over to Sir Stephen Tindall, a man whose many qualities include a sophisticated view of the intersection of commercial, environmental and social outcomes. He is a leader of wisdom and generosity, and I ask you to welcome him to the podium.