Lessons from the Celtic Tiger

Roger Partridge
Insights Newsletter
26 August, 2022

Last month, Ireland taught the All Blacks a thing or two about rugby. Yet New Zealand has even more to learn from the Irish about productivity and prosperity.
Until the early 1990s, we were running neck and neck with the Emerald Isle in prosperity’s most meaningful measure: GDP per capita.
Now, Ireland ranks near the top of the OECD league tables. We languish in the bottom half. Ireland’s GDP per hour worked is US$120. The OECD average is US$54, and New Zealand sits at just US$42. Since 2010, Ireland’s labour productivity has increased by more than 66%. NZ’s has increased by just 8%. Earlier this week, Xero reported Kiwis would need to work 10 more hours per day to match Ireland’s output.
With tepid productivity growth, Kiwis have had to find other ways to eke out improvements in their standards of living. Working longer hours, improving labour market participation and strong immigration flows have all played a role.
But as the Xero statistics show, we cannot catch Ireland by hard work alone. There aren’t enough hours in the day. And with record low unemployment levels, our labour market participation rate is already among the highest in the world.
The immigration tap has also been turned off. The Government appears to believe it can force productivity improvements by constraining the supply of labour and encouraging firms to invest more in their existing workforces. Yet there is no economic evidence for this belief.
Nor are there any signs the policy is working. Instead, the policy is contributing to a trifecta of economic woes. It is choking economic growth. It is fuelling an inflationary wage-price spiral. And it is harming the country’s international competitiveness.
Ireland’s economic success was not achieved by such wishful thinking. Instead, the Irish have relied on attracting foreign direct investment to turbocharge their economy.
A recent survey of offshore investors cites Ireland’s business environment, education system, quality of life, and tax regimes as the top drivers of Ireland’s attractiveness to foreign investors.
In contrast, New Zealand has one of the most hostile FDI regimes in the world. Meanwhile, our education system is in long-term decline, business labours under a growing regulatory burden, and housing affordability has tarnished our once-vaunted quality of life.
The Celtic Tiger may be a mythical creature, but to emulate Ireland’s economic transformation requires real solutions to New Zealand’s problems, not imaginary ones.
In June next year, The New Zealand Initiative will be leading a delegation of business leaders to Ireland to see first-hand the ingredients of Ireland’s economic success

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