How too many SMEs, cooperatives and immigrants are contributing to NZ's productivity woes

How too many SMEs, cooperatives and immigrants are contributing to NZ's productivity woes

For decades, New Zealand’s economic Achilles heel has been its low productivity.  

In a post-Global Financial Crisis (GFC) world, New Zealand’s economy has soldiered ahead many of its peers. In 2014, it was famously dubbed the “rock star economy” by HSBC’s chief economist.

But as headline growth raced forward, productivity – also referred to as GDP per capita – has stalled and has been lacking for years.

GDP per capita remained at just 0.1% in the last quarter.

It is an issue well canvased by politicians, with the finance-focused MPs on both sides of the political divide wading into the issue countless times.

The problem is so apparent that in 2011, the then National Government set up the Productivity Commission to figure out how to fix it.

“New Zealand’s poor long-run productivity performance has puzzled domestic economists and international observers for decades,” says its Director of Economics and Research Paul Conway.

Conway is the author of a new report that seeks to address this issue and work out what is holding New Zealand back from reaching its productivity potential.

And it is clear from his work that this is a multi-faceted issue.

Over the years, it's clear to see how far New Zealand has fallen.

In 1950, GDP per capita was roughly 125% of the OECD average. Today, it’s closer to 60% – less than half of what it once was.

New Zealand’s productivity levels have been well below the OECD average for some time now.

https://www.interest.co.nz/sites/default/files/styles/full_width/public/embedded_images/Productivity%20graph.JPG?itok=2MDEXRZj

In the 50s, colonial ties to the UK provided an easy, safe and secure market for New Zealand products, such as wool and lamb, at guaranteed prices.

But the UK’s entry into the European Union in 1972 changed that and, after more protectionist policies from successive New Zealand governments, per capita growth was down to 90% of the OECD average in the early 80s.

Subsequent recessions and market shocks saw that number slide over the following decades to where it stubbornly sits today.

But why has New Zealand failed to keep up with the rest of the world?

The business problem

One major issue, according to Conway, is the makeup of New Zealand’s business environment.

According to the Ministry of Business, Innovation and Employment (MBIE) 97%, almost 500,000, of all New Zealand enterprises are defined as “small businesses” – with 20 employees or fewer.

Conway says this is problematic, as many of these firms simply lack the size and the capital to justify investment into technology which would improve productivity.

But the problems don’t solely lie with small business owners; bigger companies have issues too.

“Among firms with $1 billion-plus turnover is a prevalence of farmer-owned cooperatives and partly-privatized state-owned enterprises,” Conway says.

These include the likes of Fonterra, which in March reported revenue of almost $10 billion.

“A common factor across these firms is a reluctance to provide capital for growth and a strong aversion to risk, especially associated with expansion into overseas markets,” Conway says.

As a result of both these issues, New Zealand businesses are well behind the eight ball when it comes to embracing productivity-enhancing technologies.

“New Zealand’s most productive firms struggle to learn from global frontier firms in the same industry,” Conway says.

Although manufacturing firms in New Zealand have done well to keep up, the services and constructions sectors – which make up a large chunk of the countries productive economy – are continuing to lag.

Conway also points the finger at “weak competition that allows low-productivity firms to survive.”

New Zealand’s relative size and geographic isolation also plays a part in its low productivity levels, he says.

In small economies, international connection is the only way of securing the benefits that come with large markets.

“For a small economy, New Zealand is not well connected internationally,” Conway says.

He adds that the intensity of international trade in both goods and services has declined over recent years and has become one of the lowest among economies of a similar or smaller size.

The Immigration factor

Independent economist Michael Reddell, who is cited in the Productivity Commission report, says New Zealand’s immigration policy is a key factor in its productivity issues.

He says the high level of net migration has been putting pressure on real interest rates, as large levels of investment have been needed to keep up with all the new people.

In a country with a fairly modest savings rate, Reddell says that puts persistent upward pressure on real interest rates. 

That, in turn, has kept the kiwi dollar elevated for years making it harder to export from New Zealand – a major issue for Kiwi firms looking to sell their products to the world.

“The consistent pressure on the real interest rates and the exchange rate squeezes out the opportunities that might otherwise be here,” he says.

This means successful businesses choosing not to set up shop in New Zealand, given the increased costs.

Fewer successful businesses means less innovation, holding New Zealand back from productivity growth in the long term.

“There are plenty of really smart businesses that get going here but mostly they prove to be more viable to someone based overseas – Xero is a good example.”

Earlier this year, the cloud-based computing company transitioned from the New Zealand to the Australian stock market.

The company is moving toward the global market.

So, what can be done?

Reddell says the Government should curb immigration in a bid to keep more companies here.

“I think we should be cutting our residence programme from 45,000 a year to 15,000 – 10,000 a year,” he says.

“That would give us about as many migrants per capita as they have in the US.”

Conway says more work needs to be done by the public sector to lift New Zealand’s productivity game – he says the public sector has a “massive role to play” in terms of lifting New Zealand’s productivity levels.

“All the work the Productivity Commission has done over the last seven and a half years clearly points to room for significant improvement in how the public sector conducts itself and does policy,” he says.

“Inquiries by the New Zealand Productivity Commission have identified serious weakness in policymaking and regulatory governance.”

He says the Government needs to make it easier for our firms to connect internationally.

It also needs to make it easier for companies to compete in the market.

Finally, more investment needs to go into innovation.

“We can improve the way we do science and innovation and convert that into growth in New Zealand.”

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

54 Comments

22
up

But the government is doing so much to increase productivity, like bringing in foreign builders for kiwibuild, selling all the power companies, making it a crime to smack your children, as well as setting the fine example of having a baby 8 months into the job. It's confounding to me why we don't have the highest productivity in the world.

One of the few decent comments here.

making it a crime to smack your children

Wow...that's a blast from the past. I remember when I was a Leighton listener believing that schtick, before I actually read up on things.

selling all the power companies

Apart from that, it's fair that you're apportioning blame to the last 3-4 governments who have talked big on productivity (e.g. John Key) but continued to rely on the immigration sugar rush while quietly encouraging all investment into property, inflating their personal portfolios.

The commodity sectors have been our growth drivers for generations, and successive governments have found it easier to further this growth with high immigration than to work towards high productivity growth.

The inability of our major industries to do more with less is the reason we need to rely on a one-to-one population increase to fuel economic growth.

15 likes by 10.47 for that sad comment. Boy who is reading this page now?

The key word in this article is farmer. There is a large chunk of the economy that is a farmer, is derived from a farmer, is influenced by a farmer, has parents that are a farmer etc. The conservative influence and mindset of most farmers spreads like octopus tentacles right throughout this economy. It certainly affects the accessibility to capital from the banks thats for sure. That oft quoted phrase 'number 8 wire mentality' is for some reason celebrated from the Cape to the Bluff as if its a good thing not to have enough money or spend enough to buy the right tools. Its origins clearly lay in farming. Its a byword for innovation, making do etc....I see it as an embarrasing failure to invest in future growth by not spending capital on the right tools and equipment to deliver business growth. This sets a bad example for other SME's to follow, often they are offshoots of wealthy farmers who insist on keeping costs down, making do, cutting corners and before you know it there goes the growth down the gurgler. Immigration from the right Countries could be really useful in bringing in a new strata of business leaders who know how to grow businesses for the future instead of getting out the no.8 wire as usual....

State owned enterprises inefficient
Fonterra co op model inefficient
Immigration policy or lack of for years resulting in far more migrants per capita of population than even the UK has had to deal with over recent years
No there is no surprises in this article just bald faced facts

Whoa you got chip on your shoulder , so it’s fair game to attack producers because they try to protect their business by being involved in a cooperative? Never a thought about how most of the populas gets feed .
Oh that’s right it’s the super markets that produce that food isin it .

10
up

Strange that 150 years ago NZ had sufficient population and was so well geographically connected that we became No1 country for wealth and that wealth was shared equitably compared to other countries. Race forward to today and somehow our population is too small and we are now badly connected to the rest of the world and inequality is increasing.
At least some commentators are treating this issue seriously instead of just demanding more of the same with preferably Asian investors (do they assume Asian investors prefer risk compared to Kiwis?).
Setting our immigration in line with other countries would help - of course it would still be way above Taiwan, South Korea, Japan and China all who are doing fairly well at growing their GDP per capita. The issue is largely immigration but not the immigration numbers but the overall standard of who we bring in. Despite all the noise about skill (and I know many very skilled immigrants) it is clear that the average recent immigrant is earning way below our national average wage - that is just insane. Of course setting immigration to a level Barak Obama felt was sensible would be a major shock to our economy - like a heroin addict going cold turkey - with bus companies actually training bus drivers and farm labourers getting a bigger share of farm profits.

Ah back when the tax take was 5% of GDP.
https://teara.govt.nz/files/g-21525-enz.gif

What happens when the state controls industries and stifles competition:
https://www.aei.org/wp-content/uploads/2018/07/cpichart2018a.png

15
up

The last few governments have done very little to encourage and help SMEs to innovate and grow. They have instead created an economy built on building more houses and importing tenants. So Glad to hear that someone else thinks that turning NZ into a nation of landlords and poorly paid tenants is unproductive.

I was a sub-contractor to a small NZ business that exported machine parts. It had been in business for over 30 years and the owner/boss used to say that with all sales in US dollars and with 10,000 international competitor businesses registered online the main issue for getting sales was price and that when the NZ$ returned below 0.60 he would start making profits. Two years ago he closed down with most of the 100,000 parts sold as scrap metal. Maybe Mr Reddell has a good point?

I was involved with helping out a similar operation that eventually closed. If you are contracting to supply parts to global companies where they have multiple suppliers for the same thing, you are competing on price (quality is a given).

Yes price does matter. Also interestingly location was not a disadvantage and occasionally an advantage - NZ can respond to requests for a quote overnight USA time and talk in real time to East Asia - shipments by air courier - makes little difference getting from Auckland to Florida or Auckland to Seattle than doing the same from say Texas.
Modern internet connections has made trade from NZ to almost anywhere in the world as simple as cross town in LA - admittedly you do have to know something about the USA and their customs documentation but on the other hand many of those 10,000 competitors deliberately never sold outside the USA - too much hassle from their point of view.
My conclusion differs from the author - it is not the small size of NZ business that is holding them back; it is the govt with exchange rates and their obsession with property (would it help if all MPs owned shares in Small exporting Businesses and held no investment properties? This subject is making me cynical) .

Location wasn’t a disadvantage with the defunct business either. Effectively the US importer sourced from a geographically diverse set of suppliers, and each year allocated supply contracts based on price. In effect, they held the suppliers in a very competitive environment until some made losses. Smart business except if you are supplying.

In that context for these exporters, FX rates must be have a major impact on the future viability of a business - a weak NZD would mean a NZ manufacturer could offer lower prices in USD terms to a USD based buyer so likely to result in increased orders and improved profitability.

Conversely a strong NZD would potentially force margin squeezes for NZ manufacturers as the USD selling price remains unchanged.

Also not sure how much of the cost of sales is imported which would potentially impact the profitability of the business for the NZ manufacturer.

Don't worry slapping on fuel taxes and dolling money out to your mates/good looking horses in the regions will fix it.

Is it likely the current governments policies will improve GDP per capital?

No. And same answer for previous govt.
Of course if they kept to the announced policy pre-election of bring immigration down from world leading to say average that might help but the shock might kill their backers: property investors and exploiters of cheap immigrant workers.

I thought neo-liberalism was supposed to enhance productivity? That chart shows that it's been steadily dropping since the 1980s...

GDP has increased. As was once said 'world leading'. Look at all those cranes putting up apartments. Economy thriving but we are all getting poorer. Neo-liberalism enhances those who are already wealthy.

One of our companies a couple of years ago launched a nifty product that is far ahead of the clunky alternatives pedalled by a dominant global player and priced at around half what they charge. Immediate reaction was this competitor reducing prices to match but once we began to achieve traction they then cut their price in half again in a blatant move to drive us out. Clearly predatory pricing but our legal advice is that NZs competition laws are so weak and officials largely disinterested in such complaints that we'd be wasting our time.

We have great fun carving profitable chunks out of the side of a few of the lumbering corporate behemoths that dominate NZ's economy but you need to be very selective about the segments in which you choose to compete. To do so at any scale is almost impossible and few attempt it, not just because of capital constraints or risk appetite but also because of the ability of the big boys to snuff you out. Conway is on the money with his comment that NZ has “weak competition that allows low-productivity firms to survive.” Part of that is due to our timid anti competitive laws.

I make the same comment here as on the other ' productivity' thread.

Things are only mined, transported, processed and proffered, is work has been done. No work, no product, no product no consumption. Work requires the expenditure (near enough, it's actual;y the alteration to low-grade heat) of energy. Human energy is less than 1% of globally-used energy, and a large portion of that is fossil-fuelled food-sourced anyway. So measuring human output is to measure less than noise, in stats terms.

But energy-use efficiencies will indeed give you 'productivity-gains'. They follow a law of diminishing returns, of course. And the productivity gains that economists blither on about are percentage-quoted. So conform to doubling-time. On a finite planet, that process ceases half-way through the energy resource.

Sorry folks, but physics is real and can give you real answers. Economics ignores the inconvenient - bit like religions did/do.

In terms of energy resource efficiencies of use and rates of depletion, it doesn't matter what political style does the depleting. Neoliberal mining reduces the total remaining resource just the same as communist mining or islamic mining or......

Productivity gains globally, are trending to zero and this must be a permanent state of affairs. Until things start to collapse, the imminence of which Brexit, Greece, Trump and a lot of other things are pointing to. To worry about them at this point, is to worry about increasing the speed at which you are assembling deckchairs on the Titanic - you're likely to be washed away by the bigger event. The overriding reality.

Sorry, economists. Sorry, too, to those who believed their mantra.

Just trying to restate that, pdk, to make sure I understand your points.

You are saying that it is futile at this stage in the cycle of the depletion of fossil-fuel resources to worry about/do anything regarding seeking further productivity gains/energy-use efficiencies with respect to those resources.

And this is because the benefit from those efficiency gains ceases half-way through the [use/depletion of] those energy resources - and we have already passed that half-way mark with respect to full global depletion of those fossil fuel resources.

Am I right so far?

Just like there are terms such as Jevons Paradox, and Tragedy of the Commons, there are others that apply to the situation we are in. We have spent 250 years inventing ways to use energy, now that we are approaching, or past, the halfway point, we are now trying to invent energy. It simply won't work because of another psychological term that is mine: "The answer to a shortage is not more complexity". Complex systems are a result of the surplus, and start to fail as the energy, or other resource shortage, runs out.

Kate - nope.

Aiming for efficiency in energy-use is a perfectly valid goal. Indeed, if we're going to try and keep a cohesive society together on renewable energy, we sure as hell will need to be efficient.

But don't expect efficiencies to displace the drop-off in net energy available from fossil fuels. We've already got engines up near the thermodynamic limits.

Our problems compound through debt being a forward demand for energy to be available - ever more every tomorrow. That ain't possible, so debt at this stage is unrepayable - Steve Keen gets that but not quite for the right reason I think.

Also we are carrying a never-bigger collection of decaying infrastructure - just watch and look around you - which we'll increasingly triage. Cuba is the best example of a well-led society enduring energy poverty long-term and coping. Some countries will be well led through the bottleneck phase, some won't, and I'm resigned to the fact that many will go to war.

But the benefits from efficiency-gains don't cease half-way through getting the oil out, they just tail off exponentially (as we nudge up against the laws of thermodynamics - cars still need radiators) and the depletion falls off exponentially too. So it's an inevitable coincidentality. And of course, a lot of what we do is discretionary - jetting off to Europe, say - so there's room to triage in existential terms but not in economic terms (the system would collapse if you took flying out of GDP's, no? Too many knock-on expectations.....

This is why the Productivity Commission was commissioned - ironically a socialising by neoliberals of the effort needed to try and keep growth going in the face of insurmountable physical limits.

Good books are Will Catton's 'Overshoot' (downloadable), Steven Emmott's '10 Billion' (13 dollars form fishpond last time I checked, the 3rd last page is one of the most amazing pieces of literature that human-kind has ever produced), then try Hickel's 'Divide', Kunstler's 'Long Emergency', Heinberg's 'Powerdown' (a bit dated now), Jared Diamond's 'Collapse', Tainter's 'Collapse of complex societies', Wright's 'Short history of Progress', if you want it lighter try Daniel Quinn's 'Ishmael' and better yet 'My Ishmael'. Come back and I'll give you another list...... :)

I've just read this - puts it rather well:
https://ourfiniteworld.com/2018/07/11/the-worlds-weird-self-organizing-e...

I think everything is pointing to war. It is how we will deal with overpopulation, ageing infrastructure and the need for growth if things are to continue as they have. We could adjust our way out of it, using technology to allow us to reduce population but we are just too stupid.

Sadly our immigration policy has put as in a vulnerable position. If automation increases you're left with a bunch of unemployable predominantly male "chefs" - crime will go up. If China comes over to claim their food basket we've got the likes of Jiang Yang, and Raymond Huo in our very parliament to shake things up. They even control the Wellington electricity network.

Steve Keen gets that but not quite for the right reason I think.
Nice backhanded compliment, there. An economist understands the debt problem, but not correctly.
You really think economists cannot understand the perspectives you propose? Or is it perhaps that they have more robust explanations for the dynamic that is occuring?

The problem that all you Gail Tverberg groupies seem to have in common is that you don't have training in economics. If you did, you would understand the importance of developing models to explain and prove the perspectives you adhere to.
Not once have I seen any rigorous economic models provided by such groupies. Nor is she (Gail) at all published on the topics she preaches.
That should be alarm bells for anyone. Funny that the economics and bio sciences literature has moved in a direction where basic diagrams and spurious correlations are accepted as 'proof'.

What she talks about is a real problem. Resource depletion is very real - you will not find any economist who disagrees. And the effects will be very real, also. But the real flaw is believing that there is no replacement for the resources we are depleting - which there is. And, there will be transitory issues, for sure (perhaps linked to debt/forward expectations).

Energy demands are universally decreasing in economic development - we can see this in all western economies. Whatsmore, like with horse s**t in 19th century, the the market is doing a great job of transferring us away from reliance on non renewable sources of energy and resource.

Sorry nymad - you're wrong.

Trying to replace finite resources runs into two problems. The first is that we cherry-pick the best, first. So every replacement is sequentially less convenient. Takes more effort to get, is less compact, has more downsides, whatever.

Energy demand is only reducing in the west, because so much of our stuff is now made elsewhere. We aren't clean and green - that whiteware you bought at the big-box store caused that overseas pollution. That's yours.

Yes we will end up with renewables. It's where you end up after burning your way through all the other options. But we are doing everything at such a pace, now, that renewables won't scale in mass or in time, to continue BAU. And we're drawing down even the renewable resources faster than they can replenish - even now.

And I challenge you on the ' rigorous economic models' comment. No economic modelling accounts in advance for ultimate, no-replacement scarcity. I can tell you what happens to the debt overhang, though. It can't be repaid in meaningful terms, so it won't be. If those who just - and only just - kept it together in 07/8, try to keep it together through the next stagger, money will be worth a great deal less. Maybe so much less that it loses the faith of those who would transact.

Models - the best and most robust on the planet - have been around since '72 and updated every decade. Jay Forrester's crowd from MIT - the no1 uni on the planet, note - and the Limits to Growth, with ten year updates. Much derided, decried and misquited by folk who fear, folk who are in denial, folk with vested interests. till tracking as predicted, but......

PDK it is a green myth energy demand and pollution is reducing in the west because so much of our stuff is made elsewhere. Do a bit more back ground reading before lecturing people perhaps?

"Here's an environmental story not many people know about. Between 1990 and 2008, US manufacturing output grew by one-third. Yet air pollution from US factories fell by about two-thirds. How did this happen?

One possibility is that by cracking down on air pollution, we simply pushed our dirtiest factories overseas to countries like China. If so, that would be bad news — it would mean we're offloading pollution elsewhere rather than cleaning it up.

In a recent NBER working paper, Georgetown economist Arik Levinson estimated that more than 90 percent of the drop in US factory pollution since 1990 was due to companies adopting cleaner production techniques — things like switching fuels, becoming more efficient, recycling, or adopting pollution-capture technology."

https://www.vox.com/2015/2/8/7999417/US-factory-pollution-offshoring

Same goes for Europe but for different reasons.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2447679

Energy intensity has been declining for the past 200 years...
ttps://www.businessinsider.com.au/bernstein-says-peak-energy-per-capita-is-here...

ah, come in spinner.

Yes, pollution has been reduced, mostly as a result of lobbying by folk with no skin in the game, from the 1960's on. If industry did it voluntarily it was only when costs of lower-pollution processes outweighed existing costs.

But I said that the pollution from the whiteware we buy has been offshored. And it has. And until recently we were quite happy to offshore our waste (like plastic) too.

Your last link is interesting, thank you for that. Pretty much how I see energy intensity, population and the ever-reducing optimism of the IEA myself.

Not spin PDK, just facts.

All the offshoring of plastics was done at the behest of the greens who insisted on "recycling" and banned waste to energy plants like the one planed for Meremere. Instead of burning waste for energy we were forced to "recycle" it/ship it to Asia or truck it long distance to vested interest council dumps. With predictable results. Good one greens.

"A substantial fraction of marine plastic debris originates from land-based sources and rivers potentially act as a major transport pathway for all sizes of plastic debris. We analyzed a global compilation of data on plastic debris in the water column across a wide range of river sizes. Plastic debris loads, both microplastic (particles <5 mm) and macroplastic (particles >5 mm) are positively related to the mismanaged plastic waste (MMPW) generated in the river catchments. This relationship is nonlinear where large rivers with population-rich catchments delivering a disproportionately higher fraction of MMPW into the sea. The 10 top-ranked rivers transport 88–95% of the global load into the sea."

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=15021

https://pubs.acs.org/doi/abs/10.1021/acs.est.7b02368

Again. My original comment. If you are going to challenge the economics, understand some fundamentals.

So every replacement is sequentially less convenient
Less convenient? How does that factor in economic terms? You mean utility is decreasing in energy requirement/production?
Because it isn't. If we look at marginal energy production, it is heavily weighted towards renewable generation. Not fossil fuel. So, if anything, new technology energy is more 'convenient'.

But we are doing everything at such a pace, now, that renewables won't scale in mass or in time
Ahh...what?
You know how much resource we have, right.
I'll give you a hint - it's a metric shit tonne. More than enough to keep going at current levels for 50 or so years. Which is an ample time frame to transition.
It reminds me of your silly comment a few months ago that by 2030 air travel would not be possible.

No economic modelling accounts in advance for ultimate, no-replacement scarcity.
Even the most basic of these models account for this. Inter-temporal models of supply and optimal extraction paths are not possible without a finite limit.

It's where you end up after burning your way through all the other options.
No. Wrong.
It is where you end up as a function of technology.
Same reason we transitioned from human power to coal power, to oil, and to nuclear.

And we're drawing down even the renewable resources faster than they can replenish - even now.
Wasn't there a certain US Senator that believed that if wind farms were built, we would get less wind?
That's who you sound like...
What do you mean renewable resources don't replenish?
The rain stops because of too much hydro usage?
The wind stops due to too many wind farms?
The sun implodes due to too much solar?
Gravity ceases to exist because of too much tidal generation?

Obviously return is decreasing in quantity as crowding occurs. However, we have so much natural generation potential and new technology development that I doubt we will run into the doomsday issues to predict.

Try removing the econospeak.

By less convenient I mean having to lug an LPG tank in your boot, or a ton of batteries, instead of a tankful of oil. What few folk realise is that one component of fossil-fuel usage - oxygen - doesn't have to be lugged around at all - it's everywhere. No other fuel component can make that claim. Imagine lugging that contribution to the burn, on every airliner from takeoff. Wouldn't happen, and I don't expect battery airliners for the same reason.

.Timeframe to transition? We are using all the FF we can process and burn, now. And it's reducing in EOREI. So less net energy available per effort put in. So no, you don't have '50 years od so'. Somewhere between ten and none, is what it looks like.

I repeat - ultimate scarcity (and if you increase demand exponentially, no finite replacement does many doubling-times, and a third one wouldn't do any. Don't they teach you exponential numbers in economics?

Technology can only allow us to use energy, and to use it more efficiently. ]

I don't care what you ' think I sound like' - I note that renewable resources - fish-stocks globally, old-growth timber, topsoil, are all being used beyond replenishment rates. That's why we're down to radiata pine instead of thousand year-lod kauri. It's why balsa is getting heavier - you name it, we're over-using it. Atlantic cod are gone.

Actually, some of your examples do indeed have limits - why the need to avoid, the need to choose the wrong variable? For instance, it's not a lack of rain that limits hydro, it's a finite list of dammable sites, the best of which have been chosen already. Which means the next-best site is next on the list, but won't be as optimal (depth, proximity, flow, access) as the previous one. And tidal will probably never scale - the sites are few, the flow slows too fast with your intrusion and there is too much null time. Solar isn't curtailed by lack of sun, but is curtailed by lack of rare earths etc. Same with wind-farms - why choose the wind as your curtailing variable when it isn't one? Why not the finite number of windy sites within range of a grid? And again, the component scarcity?

New technology is what a lot of folk choose to believe in, and I wonder whether those same folk were the fervent religious types of yore - a need to feel safe and saved. But thank you for showing the exatitude of economic measures - a metric shit tonne eh? I'll check it out.

You're the fervent religious type PDK, LOL.

An informative read in the AFR yesterday ( re A2 Milk)

Sitting in a corporate box at Carisbrook..... Cook didn't realise that he had been part of a conversation that would transform his life, his wealth and his business empire forever.
While John Eales led the Wallabies to victory, Cook was engrossed in a conversation with Howard Paterson, a Dunedin farmer turned businessman who made his fortune in dairy and eggs. "Howard told me he was in something that was going to change the world," Cook recalls."

I thought Howard made his initial pile from renters to students in 1980's Dunedin, but regardless..... a good read!
https://www.afr.com/business/retail/fmcg/a2-milk-the-rags-to-riches-tale...

Certainly a great read.

This quote ""...was told by the major investment banks in New Zealand it would be impossible to raise the kind of cash they needed. Again Australia came to the rescue. UBS in Sydney backed the company."" There you have the NZ problem summed up; we have cash for property investment in Auckland but not for A2 milk.
How do we get NZ cash out of property and into business? How about reduce business taxes and introduce capital gains on property - won't make much difference to the govt tax take but would nudge investment into business productivity?

11
up

Yep, this is one of the fundamental issues - this country's obsession of success through property. The whole system is rigged to support property and f&$k everything else. And then we all wonder why we're falling down the OECD rankings. To add to your example, the founder of 42Below Vodka had no choice but to raise capital abroad after utter frustration trying get any local investors on board.

We'll go nowhere fast until the government, the banking industry and the reserve bank tilt policy and practice in favour of productive activities.

My personal opinion is that the only way that the "buying lots of property to get ahead" mantra will change will be for New Zealand to experience a significant market correction. Yes there will be losers - there always are. There will be buying opportunities for some - again there always are.
The stock market is seen as risky, remember 1987 along with the Finance Company collapses earlier this decade. Fantastic gains were made / could be made until it all went horribly wrong. Perhaps we need something similar to happen in the housing market.
The root causes of very low interest rates and the availability of credit have driven this property boom. We shall have to see what happens when the Banks start increasing mortgage rates.

MikeM - the problem with that is that housing is where all the other stuff is stored, eaten and otherwise used.

What other 'productive activities' are you suggesting, other than those consumed by people who live in houses? That is where Bill English fell over, not thinking past the rhetoric.

I enjoyed the article and comments. Unfortunately much of this isn't new and similarly many of these ideas are politically unpalatable. These are likely proposals you'll see advanced subsequent to the next recession, as with so many things it's only during a crisis we seem capable of advancing unpopular agendas.

Sad, but true.

What will robotics do...robot tree felling, farming systems, milking systems. NZ simply wont need to bring in immigrant workers.

Built and run and serviced with which energy-type, Averageman?

Rainwater stored in lakes.

Woe is me, why co-operate, say "Cheese"......buy the Barrel Load. ??.

https://www.marketwatch.com/story/cheese-prices-crumble-but-the-global-t...

Why do we pay per block....??. Font-error?.

Something I notice as my working life progresses is the huge amount of extra staff, general work hours and money now being devoted to the useless compliance activities of health and safety.

This is particularly prevalent in industries of a 1-off nature, where locations/activities change frequently, but the cancer is spreading. When a friends Au Pair is being required to fill in daily health and safety checklists at the home she works in, school trips now have hours of forms to fill in for health and safety to a petting zoo or beach, and more than half the staff on a cable laying job are health and safety and a significant portion of the cost of building a house is health and safety impost (look at the massive surge in the scaffolding industry size due to health and safety), and worst of all the overhead on infrastructure projects is a large fraction on the total cost and time taken (armies of road-cone wranglers and clip-board warriors monitoring them), you know the system is out of control. It is a massive drag on NZ productivity, ballooning with costs that massively outstrip cost of small number of accidents averted.

The Safety Elves need to be taken out into a field and shot, and an attempt should be made to revert to the regulatory environments of 20-30 years back, that would create a massive boost to NZ productivity and our ability to get desperately needed infrastructure built.

.

Dysgenic policies like working for families - paying dumb people to breed and taxing smart people. There are two ways to make easy money in NZ .... 1) Having kids for cash 2) Property investment.

A single parent with six kids can earn the equivalent of a $35k salary plus a $3k bonus for each new kid. A professional breeder doesn't incur any of the usual expenses most professionals are burdened with; Hard work, commuting, loss of income while in training, student loan payments and best of all there is need to live in expensive locations to get work. On top of this they'll probably get benefits and child support.

The top graduates could stick around and look forward to spending all their hard earned money on breeders, bureaucrats and monopolies while losing 90% of their friends to high productivity countries. Or they could just join their mates and enjoy high living standards.
As if that's not enough to damage the country we then bring in migrants with joke qualifications like "chefs" and "retail managers" from the third world.

So when the productivity commission says there is a knowledge gap what they're really talking about is a drop in IQ.

Its psychological.

Software is cheap as chips! ROI is magical.
Less so some of the hapless folk selling and claiming expert status. Beware the new new zealander in those cases.

Why bag Fonterra. Look at the increase in farmland values!

Why not ask the Australian banks why they only accept 1st mortgage landed secuirty.

"Conway says this is problematic, as many of these firms simply lack the size and the capital to justify investment into technology which would improve productivity" Agreed but the tax laws are so anti investment. $600 max instant write off is a nonsense.

Having to deprecate items over several years that cost such small amounts makes the case for regular investment uncompelling for an SME.

Australia has a $20k instant write off, why cant NZ ?