of the gap in our per capita income compared to the oecd average. but this is not the whole story. despite our high international rankings in key areas, the latest world economic forum ’ s global competitiveness report ranks new zealand ’ s overall competitiveness at 25th out of 142 countries. besides market size, we perform poorly on our macroeconomic environment, and especially on our budget deficit and low national savings. but regulatory and performance - related factors also diminish our growth potential. many of the remedies to substantially improve our ranking lie in our own hands, and groups such as the 2025 task force, the savings working group, and the productivity commission, emphasised reforms that can raise our living standards. three areas seem particularly important. the first, is to raise our level of saving and investment, and improve the quality and productivity of our investment. in 2007, the world bank analysed the stylised characteristics of the 13 economies that had grown at an average rate of seven percent per annum or more for a 25 year period since the 1950s. eight of the countries were in asia. 1 we share many of the characteristics of these countries in terms of openness of the economy, macroeconomic stability, and market based resource allocation. one key difference however, is that all these countries had savings and investment ratios in excess of 25 percent of gdp and often over 30 percent. over the past three decades our net national savings rate averaged only three percent of gdp – almost five percentage points below the oecd median. for the past 25 years, our net household savings as a percentage of household disposable income averaged minus two and a quarter percent – the lowest in the oecd ( where data are available ), and 10 percentage points below the oecd median. our desire for such high levels of consumption was met by borrowing the savings of foreigners. as a consequence, our net foreign liability position is 73 percent of gdp, one of the highest ratios in the oecd, and not much different from some countries that have been at the centre of the financial crisis in the euro area. the build - up in external debt increases our vulnerability to economic shocks and the high propensity of new zealanders to borrow means that higher interest rates than elsewhere are required to achieve similar inflation outcomes. the growth report, strategies for sustained growth and inclusive development. bis central bankers ’ speeches although, our national savings ratio is low, our investment rate over the past three decades

instruments. these instruments, which include the counter cyclical capital buffer, sectoral capital requirements, the core funding ratio, and quantitative restrictions on high loan - to - value ratio lending, are designed to increase the resilience of the financial threshold effects in the relationship between inflation and growth. imf staff papers, vol 48, 2001. bis central bankers ’ speeches system to shocks, and dampen the financial cycle when concerns increase about systemic risk. conclusion to a considerable extent our destiny largely lies in our own hands. we don ’ t have the luxury that many developing countries enjoy of relying on catch up technology to propel growth. we operate much closer to the technological frontier, and if we are to attract new capital, entrepreneurship and investment in innovation, our policies have to stand out internationally. there ’ s no simple generic formula for raising growth rates, but the more prosperous countries and the economies that are growing rapidly all built strong linkages with the global economy, and created an environment that fostered strong productivity growth, and high rates of investment from domestic and foreign sources. we ’ ve much to do in continuing to build our global linkages and addressing government spending and regulatory issues that diminish productivity and competitiveness. but addressing these will create valuable payoffs for our future given our major resource endowments, our impressive agricultural and primary production engine, and the potential in our education, tourism and other sectors. in most situations the comments made almost a century ago by william bryan, the 41st us secretary of state remain relevant : “ destiny is not a matter of chance ; it is a matter of choice ”. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches