Yuwa Hedrick-Wing

A brain drain of talent could be New Zealand's Achilles heel in its continued economic recovery, according to the latest MasterCard Worldwide Insights Report.

The report's author, Dr Yuwa Hedrick-Wong, Economic Advisor, Asia/Pacific, MasterCard Worldwide, said the combination of New Zealand's strong entrepreneurial focus and its positive business environment may not be enough for a full recovery, unless the loss of talent across the Tasman is addressed.

The findings are contained in the most recent MasterCard Worldwide Insights report, 'Growth Prospects of Australia and New Zealand in the Post-Recovery Global Economy' which identifies areas of strength and potential growth for recovery post global financial crisis.

"New Zealand's "Achilles heel" is the persistent out-migration to Australia with more than 20,000 New Zealanders migrating to Australia annually in recent times," Dr Hedrick-Wong said.

"These are a particularly self-selecting group of people. They often represent younger, well-educated New Zealanders, typically with a greater risk-taking attitude which tends to result in their being more entrepreneurial.

"This is a damaging drain on the intellectual and entrepreneurial 'gene pool' of the country. It is not an exaggeration to say that New Zealand can reach its true potential, only if it can stop this haemorrhaging of talent," says Dr Hedrick-Wong.

According to the Insights Report, one way of keeping this group in the local economy lies with investing in their talent and out-sourcing of the professional service sector.

"New Zealand's workforce is highly educated and technologically savvy. Domestic services in health, education and technology all hold promising potential."

New Zealand's relationship with China

The report also shows that China's imports from New Zealand are growing slightly faster than overall growth in China's imports. This indicates that New Zealand was steadily expanding its market share in China over the 2000 to 2008 period.

New Zealand's exports to China grew from US$400 million in 2000 to US$1.8 billion in 2008 with the share of exports subsequently growing from 3.2% in 2000 to 5.9% in 2008.

"China's strong demand for New Zealand imports has been particularly beneficial during this quiet economic period. So, while continued growth in exports to Asia is one way to assist recovery, fostering domestic entrepreneurism is a significant opportunity to further accelerate New Zealand's recovery," said Dr. Hedrick-Wong.

Opportunities and challenges facing New Zealand

"To ratchet up economic growth, 'brute force' in the form of more capital and more labour will not be sufficient. What is needed is a combination of innovation and creative ideas," said Dr Hedrick-Wong.

The report identifies that Total Factor Productivity (TFP) - which refers to how capital and labour can be combined in ever more efficient ways to produce more without necessarily increasing production inputs - will need to be raised.

"TFP is the essence of what is referred to as the knowledge economy and the future of New Zealand lies with expanding in this area."

Based on research and analysis, the report uncovers New Zealand as an encouraging environment for entrepreneurs, citing the World Bank's 2010 'Ease of Doing Business' report which placed New Zealand's overall business environment second only to Singapore.

"According to the World Bank, it's estimated that it takes only three days to start a business in New Zealand, so the country should be thriving with start up businesses.

"Social mobility is strong in New Zealand, with 74% of individuals with a net worth of over $10 million being self-made; which compares very favourably with 66% in Australia, 61% in the UK and 59% in the US," says Dr Hedrick-Wong.