- New Zealand is ranked as the easiest country in the world to do business and the least corrupt.
- Business environment, government and culture make New Zealand attractive.
- New Zealand’s international rankings and success are a wake-up call for Australia.
It’s the easiest country in the world in which to do business, according to World Bank rankings.
New Zealand also offers a stable business environment with ease of collaboration, free trade agreements and a fair degree of certainty about tax. These are measures that other countries may eye with envy. As a comparison, even New Zealand’s nearest cousin Australia ranks in 15th place for ease of doing business.
Climbing up the world rankings over the years, New Zealand has also risen to 13th place, nine ahead of Australia in the World Economic Forum’s “Global Competitiveness Index Rankings”. In terms of transparency (lack of corruption) New Zealand is ranked first equal with Denmark, and Australia is again in 15th place.
Foundations of Kiwi success
But why the rise up the business ladder for the Kiwis? To start with, whereas corporate tax rates are similar to those of Australia, some input costs are less in New Zealand. Salaries are 20-30% lower and there is no payroll tax, superannuation or capital gains tax for companies to pay.
Experts say it is actually the ease of doing business in New Zealand that translates to significantly lower costs, and importantly, shorter times needed to build to critical scale.
Businesses were forced to sink or swim under deregulation measures, including the withdrawal of subsidies, introduced by Roger Douglas, New Zealand’s finance minister in the mid-1980s. Kiwis are now reaping an efficiency dividend.
“Over a few decades…the country (New Zealand) has radically transformed to become one of the most globalised economies around,” says Genome’s 2017 Global Startup Ecosystem Report. By contrast, Australia poses some challenges: “Melbourne…has relatively high costs – a circumstance that makes it challenging for many of the…local start-ups.”
Kiwi businesses demanded government became efficient and it accepted the challenge. “Beyond admin hurdles, New Zealand is an easy place to collaborate,” says Brett Holland, head of acceleration at Wellington-based Creative HQ. "Networks are accessible. It’s not difficult to get the right people together, including government and the single regulatory body (unlike the US or Australia, where there could be multiple regulators). Clients love the intensity of engagement in New Zealand.”
Whereas New Zealand is smaller than Australia, size and momentum no longer rule. “It’s speed, agility, and the ability to adapt that are keys to success,” says Holland.
The acceleration of digitisation and the fulcrum effect it is having on success is helping Kiwis overcome the tyranny of distance from markets.
Perceived greener grass across the ditch has also reversed a net trans-Tasman migration of 38,796 people to Australia in 2012, to a net annual gain to New Zealand of 1,563 in 2016, according to Statistics New Zealand.
New Zealand has a stable environment with lots of certainty about business and taxIn terms of government, Aotearoa has a single house of parliament. The “unbridled power,” and short three-year terms have brought innovation and stability to New Zealand. The country is not burdened with the costs of bureaucracy.
In contrast, change in Australia comes slowly, and recently there have been multiple governments and prime ministers.
“New Zealand has a stable environment with lots of certainty about business and tax,” says Brian Bilas CA, a partner in Hamilton firm RPG Limited. Policies are balanced in terms of being business-friendly and encouraging labour participation. Businesses love stability as it makes strategic planning easier and less risky.”
“Many businesses we work with who relocate to New Zealand are surprised how easy it is to access government, have discussions with ministers, and participate in effective law making,” observes David Snell FCA (ICAEW), executive director at EY in Wellington.
New Zealand has a culture of adventure, beating Australia to pavlova, votes for women; electing the first female prime minister, chief justice, and governor general; GST; FBT; marriage equality; a space agency, a treaty with the first peoples; and free trade agreements (FTAs). New Zealand struck an FTA with China in 2008, whereas Australia’s FTA with China did not come into force until 2015.
“FTAs have given Kiwi exporters – constrained by a small home market, easy and inexpensive access to huge and lucrative overseas markets,” says Bilas. “In contrast, the protectionist Queensland policy ignores trade agreements and favours Queensland businesses over interstate and international suppliers, even if local suppliers’ prices are higher.”
Few companies have actually relocated from Australia, says Snell. However some, like ANZ Bank or Fairfax have set up call centres to access lower wage costs. Others like merino apparel maker Icebreaker have chosen to consolidate Australasian operations in New Zealand.
Investment in New Zealand by overseas interests has skyrocketed to NZ$2.7b so far this year – up NZ$1b compared to last year. One of the bigger deals is Vero Insurance New Zealand acquiring up to 100 per cent of the shares of Tower Limited, worth NZ$174m. Vero is 74 per cent Australian-owned.
Many entrepreneurs are also choosing to set up in New Zealand, with “tech capital” Wellington a favourite. “New Zealand has long been used as a testbed and launch pad. If something works, albeit on a small scale, in a developed country like New Zealand, it will probably work in key markets like the US,” says Snell.
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NZ Finance Minister Steven Joyce says a successful economy looks a bit like New Zealand.
“Companies use New Zealand to start up and base operations but their sales targets are overseas. Xero is well-known but there are others like 8i.com which plays in the augmented reality segment,” agrees Holland.
“They started in Wellington and have expertise here but their sales presence is in California. The executives love the social and business culture, the ready supply of great well-priced talent, and that many of their overseas hires are happy to relocate to Wellington.”
It is much easier to attract skilled migrants to New Zealand than other countries, he adds. “The bonus of a great Kiwi lifestyle helps.”
Other government schemes complete the picture. New Zealand’s Global Impact Visas (GIVs), introduced in 2017, in partnership with the Edmund Hillary Fellowship (EHF) provide 400 places designed to attract those with the drive and capability to launch global ventures from New Zealand. Similarly Wellington City’s “Looksee” program aimed to fund a few hundred talented people to have a look at Wellington, as a place to live and work, but attracted 60,000 applications.
So it’s true to say that New Zealand may be a cheaper place to do business, but more than that it is also an easy place to do business.
Paul M Southwick CA is a Melbourne based journalist, former ASX listed company CFO, communications consultant, and pilot.