Productivity Commission targets our weak labour productivity
New Zealand has enjoyed good growth in average income since the global financial crisis. Labour participation is strong and our public finances are in relatively good shape. But one area holding the economy back is our persistently weak labour productivity, with the OECD estimating that New Zealand had the fourth lowest labour productivity growth of OECD countries between 1995 and 2014. Fortunately New Zealand is in a good position to address this area of persistent weakness. Achieving New Zealand’s productivity potential is the Productivity Commission’s commentary on New Zealand’s productivity performance. The report shows that New Zealand needs to shift from a model based on working more hours per person to one that is focused on generating more value from time spent at work. “With labour force participation forecast to decline with population ageing, the focus now needs to go on lifting productivity” says Paul Conway, Director of Economics and Research at the Productivity Commission. The report draws on powerful new data (the Longitudinal Business Database) to provide a fresh and practical insight on New Zealand’s productivity performance. “There is a view that some businesses stop growing once the owners achieve ‘the three Bs – a bach, boat and BMW’. But new evidence means we can look beyond this and better understand what in the business environment is holding back some Kiwi firms. We can measure the impact of small domestic markets, low levels of competition in services, and the role of barriers to export success, like market knowledge and financing.” says Mr Conway. With technology creating new opportunities for small and remotely-located firms, an important challenge is to improve the flexibility and resilience of the economy to make the most of important changes in the global economy. The Government has implemented a Business Growth Agenda (BGA) with the aim […]