Nigel Latta tries his hand at milking on a dairy farm. But do we need to move our economy on from dairying?

As an economy, New Zealand seems to have done everything right. We're safe and secure, well-regulated, and our businesses aren't overly taxed. Low wages keep our exports competitively priced.

So why are times so lean? Kiwis are working longer hours for less money than countries in similar positions overseas.

Economists call this the New Zealand paradox. Despite ticking all the boxes, New Zealand's economy is not performing nearly as well as it should.

Could the technology industry be the future of New Zealand's economy?

And our standard of living is suffering because of it. According to the OECD, we should be about 40 per cent richer than we actually are.

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* Nigel Latta: Technology isn't the end of the world

It hasn't always been like this. In the 60s and 70s, New Zealand was the top of just about every quality of life index in the world. We had houses, good incomes, and plenty of leisure time to enjoy. Unemployment was almost nonexistent. What on earth has happened?

At the start of the 1990s, we were in a pretty similar position to Denmark. Our populations were roughly the same size and our quality of life was similar. They farmed pigs, we farmed sheep.

But since then our economies have parted ways. Denmark moved away from making bacon into skilled industries like technology and pharmaceuticals. We thought our golden ticket was dairying, and that's been the focus of our economy for the past 20-odd years.

Since then, Denmark has bolted away from us in economic growth. Some people would say that's a perk of geography; Denmark is connected to Europe, while we're marooned out in the South Pacific. That's definitely played a part, but I don't think it's the whole story.

I'm no expert on this stuff, but I've spent the better part of a year talking to people who are, and it seems to me that the main problem with our economy is that we rely too much on commodities.

Dairy, our biggest export, is a classic example. We pump out 21 million litres of milk each year, which accounts for nearly a third of our total export earnings. The issue is that most of that milk leaves our shores as milk powder. We aren't adding value to it by processing it into products like infant formula. The same could be said for our forestry exports - why do we send thousands of logs overseas to be turned into plywood instead of doing it here?

Milk solid prices have been so buoyant in recent years that there hasn't been much incentive to do things differently. Now they've slumped, though, it's high time Fonterra followed the global dairy industry's big players into those value-added markets.

Not only does adding value to our exports here create jobs, it also creates more opportunities for Kiwi businesses to increase their profit margins.

The other problem with our primary industries is there's a limit on how much they can grow. You only fit so many cows in a paddock, and the fact that Fonterra is now putting cattle overseas suggests we're running out of space.

I think our economy needs to look beyond milk and fish and trees and tourism, and start trying to nurture Kiwi businesses working in science and technology.

Fisher and Paykel Healthcare is the textbook example of a Kiwi business excelling in this area, but it's far from the only one. Take Pikpok Games, a Wellington company making games for mobile and computer. Their most popular game, Into the Dead, has been downloaded around 50 million times.

Companies like Pikpok are exciting because their potential for global sales is huge. Unlike dairying, they can make money without having to increase their costs; you can only sell a litre of milk once, but you can sell a game as many times as you want. Our tech companies are seeing massive growth and creating high-paying jobs.

But if we want to succeed in the tech industry, we need to make sure Kiwis have the required know-how. I think that's where we're letting ourselves down.

The Ministry of Education has just made coding part of the New Zealand curriculum, which is an enormously positive move. However, I have some real concerns around how we fund scientific research in this country.

Our government's annual investment in research and development is just half a per cent of GDP, which is around half of what other successful small countries - places like Finland or Israel - spend. We're ranked almost 30th in the world. To be fair, there has been an increase in funding over the last several years, but it's still not keeping up with the demand, and so we run the risk of losing our best scientists to other countries where the funding is better.

I'm also not convinced we're funding the right kind of research. Applied science aimed at supporting our primary industries - figuring out how to grow more grass and bigger cows. That stuff is important, but I'm a huge believer that the discoveries that will produce those major gear-shifts in our economy will come from "blue sky" research, where the scientists get to choose what they investigate. This isn't a luxury, instead I believe it's a fundamental necessity if we're going to turn the economic tide.

Because when Kiwis succeed on a global scale, it tends to be in areas that are hard to predict. If there's one thing successful Kiwi businesses - from Fisher and Paykel to Karen Walker - tend to have in common, it's that they find little niches in the world market and fill them.

Us Kiwis are a smart people who can come up with innovative and cool things. We just need to back ourselves to do that more.