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A CHANGE of attitude among New Zealanders and a public policy overhaul by politicians were essential for the country to climb back into the ranks of the wealthy, Reserve Bank governor Don Brash said.
In a provocative speech to the Knowledge Wave conference in Auckland, he called for a debate about whether New Zealand should enter a currency union, podered a substantial cut in the company tax rate to encourage investment, and mulled tougher policies to encourage beneficiaries into paid work.
New Zealand's economy would have to grow by about 3.6 per cent a year for the next decade - roughly double the growth of the 1990s - for New Zealand incomes to return to the top half of developed countries.
"To have any chance of doubling our per capita growth rate, we will need to see quite radical changes in people's attitude and behaviour, and quite radical changes in people's attitude and behaviour, and quite radical changes in public policy to encourage those changes in attitude and behaviour," Dr Brash said.
"Minor changes at the margin simply won't do the trick."
Even big changes might not work, because New Zealanders had "deeply ingrained cultural characteristics" that were not conducive to fast economic growth, disdain for commercial success, no strong passion for education and a tendency for immediate "gratification" as reflected in a low savings rate and a strong interest in leisure.
For New Zealand to attract the investment necessary for its infrastructure, it needed to consider a free-trade arrangement and greater economic integration with a bigger market such as the United.
"It is in this context that the time may have arrived when we need to give serious consideration to the pros and cons of alternative currency arrangements," Dr Brash said.
The tax regime was an important ingredient in encouraging capital investment. It was disturbing that New Zealand's 33 cent company tax rate was the highest in the Asia-Pacific region. Dr Brash asked if change to the tax regime was needed.
More New Zealanders needed to be in paid work and increasing their productivity if New Zealand was to rate higher internationally - not an easy task.
"Getting more people into employment may involve making some difficult social and political trade-offs," Dr Brash said.
"For example, does the present welfare system, with largely unrestricted access to benefits of indefinite duration and with a very high effective marginal tax rate for those moving from benefits into paid employment, provide appropriate incentives to acquire education and skills to find employment?"