New Zealand punches above its weight in many areas: breathtaking landscapes, world-class agricultural exports, and innovative small businesses. But when it comes to productivity, the country falls behind global peers. For years, we've heard the same statistics: New Zealand's productivity levels lag behind OECD averages, and this gap hinders economic growth, wage improvements, and overall prosperity.
So, how do we solve New Zealand's productivity problem?
It requires bold thinking, targeted action, and collective effort across government, businesses, and individuals. Here are the key areas we need to address:
1. Investment in Technology and Innovation
New Zealand businesses often under-invest in technology and innovation. Many small and medium enterprises (SMEs) rely on manual processes or outdated systems, which limit their potential.
Solutions:
Encourage R&D spending through tax incentives and grants.
Improve access to advanced tools like AI, automation, and cloud-based platforms for SMEs.
Foster collaboration between businesses and research institutions to develop commercialized innovations.
Example: Agri-tech companies leading the way in precision farming demonstrate how investment in innovation can boost productivity and sustainability. Expanding these efforts into other industries like construction, logistics, and retail could deliver significant results.
2. Prioritising Skills and Education for the Future
The workforce needs to keep pace with modern demands. While Kiwis are resourceful, there's a skills gap in areas like technology, management, and digital literacy.
Solutions:
Strengthen vocational education to match industry needs.
Offer lifelong learning incentives to upskill workers, especially in technology and leadership.
Invest in digital education from an early age to prepare future generations for high-value work.
Example: A plumber or carpenter with strong digital skills could use software to plan projects, reduce wastage, and improve client communication, thereby boosting efficiency.
3. Reducing Red Tape and Improving Infrastructure
Unnecessary regulatory burdens and weak infrastructure slow businesses down. From slow internet connections in rural areas to cumbersome compliance processes, these issues create unnecessary costs.
Solutions:
Streamline regulatory processes for businesses, especially in consenting and compliance.
Invest in infrastructure: high-speed internet, modern transport networks, and affordable energy.
Reduce barriers to exporting by simplifying trade processes.
Example: Faster digital infrastructure could empower rural businesses to compete globally, while improving transport networks would reduce wasted hours in traffic or supply chain delays.
4. A Focus on High-Value Industries
New Zealand relies heavily on low-productivity sectors, like tourism and commodity-based agriculture. While these are essential, we must also support industries that deliver higher returns for time and capital invested.
Solutions:
Prioritise technology-driven sectors, such as software development, biotech, and advanced manufacturing.
Support value-added industries within agriculture, forestry, and fisheries to increase margins.
Foster New Zealand's reputation as an exporter of intellectual property (e.g., software, education platforms).
Example: Companies like Xero have proven that high-value, scalable businesses can thrive on a global stage. Supporting more ventures like these could redefine New Zealand's economic landscape.
5. Enhancing Management Practices
Research has shown that New Zealand's management practices can hold businesses back. Better leadership and processes can improve team efficiency, innovation, and outputs.
Solutions:
Promote leadership training programmes for SMEs.
Encourage mentorship and knowledge-sharing between high-performing businesses and others.
Measure and reward productivity improvements, not just growth.
Example: Businesses that implement agile practices or Lean methodologies often experience significant productivity gains with minimal investment. Ironically NZ's R&D tax incentive does not well support agile and lean practices as iterations post beta are not considered R&D.
