I do consider myself a numbers enthusiast – I do enjoy analysing, dissecting and interpreting numbers and the statistical gymnastics that can be performed with them. Consequently, I am forever grateful to the English who invented cricket and the Duckworth-Lewis algorithm especially for the likes of me.

Arguably, the larger the numbers, the more fun can be had. However, the larger the number then the fun can become complicated, as interpretation becomes blurred. For example, the World Bank estimates world GDP for 2005 at US$44.4 trillion. But there is some argument on actually what a trillion is – i.e. does a trillion have 12 zeroes or 18 zeros? Let’s just agree for the moment that it is a big number. Translating this figure to more ordinary numbers, this is about US$6,894 per capita. The US itself had GDP of US$12.5 trillion – or $42,078 per capita. Big numbers indeed.

However, we in NZ don’t usually have to worry precisely how many zeros in a trillion – in either the cricket or the economics world. But there are definitely a large number of zeros in some recently released NZ economic data. In particular, the government accounts for the year to June 2006 reported an $11 billion surplus – that’s nine zeros. But, I’m interested in an even bigger number.

The external accounts for the nation as a whole reported a bottom-line $15 billion balance. The problem is that not only is this a large number, it also has a negative sign in front of it!! An even bigger number is $131 billion. This is the nation’s net international asset position, and it also has a negative sign in front of it! Of course, an external deficit is not really news because we have had one, almost without exception, for the past fifty years (at least). But one of this size is newsworthy.

Furthermore, I would argue that this imbalance lies at the heart and soul of almost all NZ economic policy pronouncements and/or policy initiatives. You, no doubt, have heard it in many guises: we need to export more; or to Buy NZ (and/or Kiwi) made; to strengthen global market connections; or to pursue foreign market opportunities; to build networks abroad; or to improve competitiveness; to move up the value chain; or to add more value; to increase productivity; or to seek commercial applications for innovative ideas. More latterly, we are hearing about striving towards Economic Transformation.

I think I know about economics, but a cynic like me will inevitably ask: what is Economic Transformation? To answer, I follow the advice I perennially give to my son and head (no, not to google.com, but) to an ordinary household dictionary. The definition of transformation I find is “(n) – from transform (v), make a thorough or dramatic change in the form, appearance, character, etc”.

Wow, this could be big, I thought. A thorough or dramatic change may well be what is required for New Zealand to finally rectify a couple of those big numbers noted earlier. And the relationship to those external imbalances is clear from this year’s Budget, which states the government’s “… commitment to transform New Zealand into a high value, innovative export-led economy that can compete effectively in global markets”. I also note commonalities to phrases and words heard earlier, but I shouldn’t get too cynical.

Back to thorough or dramatic change. As a somewhat dull and tedious economist, I must say the idea of dramatic change doesn’t excite me much. But I am attracted by the word thorough. It implies a comprehensive approach, which should ensure the interactions between the many arms (and legs) of the economic body corporate are recognised. That should also suggest a veering away from piece-meal initiatives towards those that address widespread deficiencies or provide extensive, enduring, sustainable benefits.

So, how thorough are we about to be? Allocations of $2.1 billion for new operating spending and $1.6 billion for new capital spending on Economic Transformation were announced in Budget 2006. But both these numbers are for total new spending to be spread over the next four years. That translates to an average of $925 million each year. This number does pale when compared to the bigger numbers noted earlier.

But, perhaps, numbers aren’t everything. Perhaps the actual content of these programs are more significant. Within the Budget allocations are: an extra $34m to fund an additional 3,000 Modern Apprenticeships; $33.5 million to increase literacy, language and numeracy skills of low-skilled employees; an extra $15.6 million in the Industry Training Fund; and $8.1 million to expand the Gateway program that integrates school-based learning with structured workplace learning for senior students. Again, though, these funds are assigned to be spread over the next four years.

Promising signs from the Budget, and other recent pronouncements, are the focus on human capital and on infrastructure. I say promising because these are the two fundamental ingredients in the economic recipe. And, as is true for most recipes, the ingredients are the most important targets when aiming for transformation.  However, comparing the magnitudes of these numbers to some of the earlier numbers, I would suggest that we are perhaps being a tad too timid and tentative in our transformation efforts.

Recent numbers indicate there are close to three-quarters of a million New Zealanders with few (or less) skills or qualifications in the nation’s workforce. And then there are those in the workforce whose existing skills need refreshment and replenishment. Of course, these are in addition to the roughly 30,000 secondary school leavers each year.

The transformation that is already occurring within the labour force is exciting. The most thorough and, dare I say, dramatic change is the labour force participation rate for the population group aged 60 to 64, which has soared from 32% to 62% over the past twenty years. In a similar vein, the participation rate for the 65 and over age group is now at a twenty-year high of 11.9%, from only 6.5% just ten years ago.

Perhaps the ageing workforce scenario may not be as gloomy as is painted by some. But it does make the transformation task even more demanding. For human capital development doesn’t stop upon entering the workforce. This suggests we may have to get used to much bigger numbers being devoted to transformation, whether they be for human capital or for physical capital.

And, as I noted earlier, the larger the number the more the fun. But, again, the larger the number the fun becomes even more challenging. Just like cricket, isn’t it?