From July issue NZ Manufacturer www.nzmanufacturer.co.nz

Ian Walsh, Partner, Argon & Co

It is great to see that finally we are talking as a nation about the need to be more productive. Our poor performance in productivity terms is not a new issue or problem, but given the current economic environment, it has become clear to everyone that we have a significant gap to countries with which we compare ourselves.

The consequences of this are significant, with many young New Zealanders leaving for foreign shores for better pay, conditions and quality of life.

This problem has been disguised for decades by global financial crises, pandemics, earthquakes and media misdirection (“We are the most liveable country!”, “Auckland is one of the top 10 cities!” etc.).

Like climate change it has been possible to ignore for a long time. However, most of us are aware that our infrastructure is creaking. We can’t invest in health education, police, transport and other programs to the extent that we would like to, as we can’t afford it.

Productivity is essential for economic growth, competitiveness, profitability, job creation, resource efficiency, and work-life balance. Focusing on productivity improvements at individual, organizational, and national levels can lead to numerous benefits and contribute to overall prosperity.

I have been to many business meetings, and the focus for any improvement drive is return on investment – they are asking whether investing in an activity makes the business more profitable, more competitive and ultimately whether it will result in better return for shareholders, so they can invest in future programs to improve the product or service, grow the business and offer better products or services.

The same is true at a national level, the government can only spend what the economy generates (balanced budgets and low debt). Profit (or in more political termianology, surplus) needs to be re-invested in productive infrastructure, skills and aassets that allow for future returns in societal benefits.

Just like a business, when profit is not generated by a government, we see job cuts in the form of unemployment, and a cheapening of the product (NZ inc.) in the form of inflation.

So what do we do about New Zealand’s poor productivity? The main causes for the differences between us and those much more productive countries are:

• Low levels of investment: One major factor contributing to New Zealand’s productivity gap is the historically low levels of investment in physical capital, research and development, and innovation.

To address this, there needs to be a shift in mindset towards long-term investment, both by businesses and the government. Encouraging increased investment in technology, infrastructure, and skills development will help boost productivity levels.

• Small and fragmented market: New Zealand’s small domestic market makes it challenging for businesses to achieve economies of scale, hindering their ability to compete globally.

To counteract this, businesses should focus on exporting and expanding into international markets. The government can also support businesses by promoting trade agreements, providing export incentives, and investing in marketing campaigns to raise New Zealand’s profile abroad.

• Skills and education gaps: A skilled workforce is vital for productivity growth. Addressing the skills and education gaps in New Zealand is essential. Initiatives such asvocational training programs, apprenticeships, and partnerships between businesses and educational institutions can help bridge these gaps.

Encouraging lifelong learning and upskilling will also ensure that workers have the necessary skills to adapt to changing work environments.

• Innovation and technology adoption: New Zealand has been slow in adopting new technologies and embracing innovation compared to other countries. Encouraging a culture of innovation, providing support for research anddevelopment, and fostering collaboration between industry and academia can help drive technological advancements.

Additionally, providing businesses with access to funding and resources to adopt new technologies will contribute to increased productivity.

Regulatory environment: Streamlining regulations and reducing bureaucracy         can significantly improve productivity. Creating a business-friendly environment by reducing red tape, simplifying compliance processes, and removing barriers to entry will support entrepreneurship and innovation.

• Workplace culture and management practices: Improving productivity also requires a focus on workplace culture and management practices. Encouraging flexible work arrangements, promoting employee engagement, and investing in employee well-being will lead to increased productivity and better business outcomes.

It’s important to note that addressing these challenges requires a collaborative effort from businesses, government, and other stakeholders.

By prioritising investment, innovation, skills development, and fostering a supportive business environment, we can start to work towards closing the productivity gap and providing the quality of life that we used to treasure. I’m already working on it – what will you do today?