Nine forces of change will shape New Zealand

The key forces are described below:

Greater government involvement

In recovery, the Government will exert more influence over our lives and the economy than it has in decades; but what form will this take –  investor/owner, regulator, or reformer?

Debt and capital

Increased levels of government support lead to higher government debt and interest payments. Access to private capital may also be limited given the level of uncertainty and pricing or terms may be less attractive. We may have to contemplate a sovereign debt rating downgrade. In any event we will grow with a debt hangover that future generations will have to either live with or repay.

Consumption behaviour

The ‘new way of living’ will impact consumption behaviours with consumers becoming more cautious and digital. We have witnessed a step-change in online and digital behaviours. Consumption patterns will reflect changed priorities and new realities. There will be a new generation of cautious consumers emerging.

Industry consolidation

With such large changes to business models likely, industry structure changes will follow. Some businesses will survive, some will not, and some will fundamentally change – resetting the basis for competition.

Accelerated digitalisation and data reliance

Accelerated demand for e-commerce and e-services. Businesses that have or are rapidly able to build robust digital capabilities will be in an enviable position as technology is at the forefront of change.

Tax reform

The economic crisis has undermined the ability of governments to raise revenue in their traditional ways given the disruption to business and personal incomes, and changed consumption and saving behaviours. With additional government expenditures to support the economy, the Government will be challenged to find new ways of raising revenue without stifling economic growth.

Productive, flexible and distributed working

Unemployment will be high, and workplace flexibility will be the new norm. Increased technological competency means new high-tech skills will be required over traditional low-skill work and productivity must improve. There’s no going back.

Migration

New Zealand will be a more desirable destination to live and work due to our relatively successful management of COVID-19, but it is not clear to what extent we will remain open to recent migration levels. The quantum and ‘quality’ (skilled versus unskilled) of migrants will shape productivity outcomes, and affect demand for housing and infrastructure.

Resilient, secure supply chains

Significant disruption affected nearly all layers of the supply chain, highlighting vulnerabilities and revealing exposures of the current local, national, and global supply chains. Supply chains may need to be shorter and will certainly require greater resilience.