How good is your productivity?
-Ian Walsh, Partner, Argon & Co ANZ As I have covered previously, New Zealand’s GDP has been declining relative to other OECD countries for over 40 years, sitting at 21st out of 38 countries as of 2021. This concerning situation affects our quality of life, our ability to invest and the provision of the services and amenities we have come to expect. The root causes for this have been provided over many years: geographical separation, access to capital and, of course, productivity. To quote American economist Paul Krugman, ‘productivity isn’t everything, but in the long run, it’s almost everything’. We currently lag significantly behind many OECD countries in output and hours worked. It is simply not possible to work more hours. We are now in a tight labour market, with lack of skills and availability of resources and rising wages as a result and we can no longer rely on the number 8 wire, she’ll be right and just harden up attitude. To keep up with the Irish we would need an extra 10 hours a day! This is our climate change moment. The house is burning and throwing a bucket of water at it won’t fix it. A frontier study comparing us to similar countries in size and scale, and allowing for the geographic differences, found that the key shortfalls are: Industry, government and research/university collaboration Focus on key sectors which there is a natural advantage or capability Support through appropriate technology and capital investment Development of human capital through training, mentoring and adoption of best practices The outcome of having these things has been outstanding performance for Scandinavian countries, Singapore, Ireland and Denmark, amongst others. By contrast, in NZ we have: Underinvested in capital, as it is easier to use flexible labour and avoid the spend Underinvested in […]