Friday, April 12, 2024

NZ needs to work smarter not harder, study finds

Neal Wallace
Billions could be unlocked with just 1% increase in productivity, report says.
Reading Time: 2 minutes

Increasing productivity growth by just 1% would unlock tens of billions of dollars in economic value for New Zealand, with gains from the primary sector central to achieving that.

That is according to research released by ASB, which also found that businesses, not the government, need to lead that charge.

The NZ Institute of Economic Research (NZIER) report shows NZ productivity continues to lag behind international peers –  meaning New Zealanders work harder but produce less.

The report looked at growth opportunities and what business, the government and banks can do to grow productivity and found lifting productivity growth from 1.5% to 2.5% would see real GDP hit $500 billion by 2045, an increase of about 5% on current projections.

Despite agriculture, forestry and mining contributing more to value-added products than the OECD average, the report found the sector is not highly productive.

NZIER principal economist Christina Leung said investment in capital, knowledge, research and development to improve productivity in NZ has been low, but any change has to come from business, not the government.

“When we look at other more productive small, advanced economies, business is leading the way with support from government and the finance sector,” she said.

“NZ business needs to be more ambitious, embrace innovation and invest in capital, knowledge and research and development as an engine for growth and sustainability.

“The country’s economic growth over the past two decades has been largely driven by adding more people to the workforce, and this needs to change, we need to work smarter.”

Leung said NZ’s exports have grown in the past 30 years, but relative to other small, advanced economies, still remain low with earnings accounting for less than a quarter of gross domestic product.

Of the top 20 companies in the 2023 Deloitte Top 200, only seven are exporters or have international operations: Fonterra, EBOS Group, Air NZ, Mainfreight, Zespri, Silver Fern Farms and Alliance Group.

The report cites the kiwifruit industry as an example of an industry that has improved productivity by using its scale and exports built on a partnership between growers, processors, researchers and Zespri.

“Since the changes in the industry that led to the formation of Zespri in 1997, the industry has been transformed and is a textbook case of how to turn a worthless food commodity into a high-value product.”

This model allows growers to adopt new, protected varieties and quickly develop and share growing and vine management practice across the industry.

This has been supported by an estimated $800 million investment in automated post-harvest infrastructure and technology.

The report notes that NZ research is heavily oriented towards agriculture.

“Outside the agriculture (primary) sector, the linkages are limited, so access to research funding is often very competitive and proprietary.”

The report concluded that NZ businesses rather than the government need to take the lead in increasing productivity by treating innovation as an engine for growth and sustainability.

“If the business cannot or does not recognise the need to innovate its products or processes, then no government incentives will make a difference.”

The report suggests business, researchers, government agencies and financiers work together to support innovation, identify opportunities and develop plans.

This can require a shift in the attitude of managers to embrace new ideas and technology for the government to remove any policy and regulatory obstacles.

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