As its workforce ages and major economies shift towards producing higher value-added goods and services, New Zealand will face increasing challenges to remain globally competitive and maintain high living standards. Future growth will need to come increasingly from productivity gains, and resources will have to shift towards activities that rely more on skills, technology and intangible assets. Strengthening international linkages will be crucial to overcoming geographic disadvantages and will require improvements in the information and communications technology infrastructure, together with innovation leveraged off the country’s strong primary industry knowledge base. Continuing to raise skill levels and the pensionable age will also help counter the effects of ageing. Lifting national saving, partly by targeting a higher public saving rate, will reduce the persistently high relative real interest rates and the sustained overvaluation of the real exchange rate, which potentially harm economic activity. To improve the sustainability of growth, revenues from non-renewable resource extraction need to be invested for the benefit of future generations and greater efforts devoted to mitigate the damage to natural capital from economic activity, particularly with respect to water quality. This Working Paper relates to the 2013 OECD Economic Review of New Zealand (www.oecd.org/eco/surveys/New Zealand).
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