NZ competitiveness ranking slips

New Zealand has dropped out of the world's top 20 rankings for competitiveness, but "still has a lot going for it", says the director of a Geneva-based world competitiveness centre, Professor Stephane Garelli.

The centre, run by business school IMD, today announced the United States had edged back into first place in world rankings -- passing last year's leader, Singapore -- to share the top spot with Hong Kong with each of the countries on a rating of 100 points.

But New Zealand dropped, with 79.79 points, from 20th place overall, to 21, to be replaced by the United Kingdom on 80.27 points. Australia was ninth, on 89.25 points.

Prof Garelli said that a drop in one overall ranking was not too significant, but last year's economic growth of 1.7 percent -- on figures collected before the September 2010 earthquake -- was "not extraordinary".

"It could be better," he said.

"There is some work needed to increase the efficiency and the productivity of the country."

But the nation's governance was "pretty lean", with government spending at 33 percent of GDP, while in Europe there were a dozen governments each spending more than 50 percent of GDP.

Globally, government spending had reached new highs since the recession and averaged 47 percent of GDP in the most advanced economies.

Prof Garelli said the 23 biggest spenders were all European governments, even though in a trend towards "state capitalism", government efficiency would become a key determinant to competitiveness.

New Zealand was also in good shape on the ease of doing business, ranked at 13 out of the 59 countries studied, and particularly good at ease of setting up new businesses, in which it ranked fourth-best in the world.

The main problem seemed to be difficulties in benefiting from exports to the rest of the world: the balance of the current account was -2.3 percent, compared with growth of between 5 percent and 10 percent in Asia, and even Australia, which grew 2.8 percent last year.

"It's really a matter of better integrating the New Zealand economy into the region and making sure that you can benefit from the big growth rates in the region. This kind of transition had been handled well by Australia."

New Zealand also needed to become better at attracting foreign investment, particularly by "selling" the nation to the rest of the world.

"I think you are the best-kept secret in the region.

"The image abroad is extremely important because it links to the attractiveness for foreign investment, and the image of products from the country," Prof Garelli said. South Korea and Qatar had done good work on this aspect.

A key challenge for New Zealand would be building a nation-wide ultra-fast broadband network, he said.

Prof Garelli said competitiveness was becoming characterised by greater self-reliance of countries in the face of rising commodity and transport prices and higher labour costs in emerging economies.

"Government spending has reached new highs since the recession: on average 47 percent of the GDP in the most advanced economies.

"Twelve European countries are already above the 50 percent threshold. The 23 biggest spenders are all European governments. How long can it last?"

In a new world of "state capitalism", government efficiency would become a key determinant to competitiveness.

"Alas, the time lag between government reforms and economic imperatives keeps on increasing," Prof Garelli said.