New Zealand has gone from being one of the most productive economies in the OECD to being one of the least productive, according to the New Zealand Productivity Commission Te Kōmihana Whai Hua o Aotearoa.
That is not because productivity has fallen - there was little change in the trend - but other countries' productivity has grown faster.
This information has come in a new publication called "Productivity by the Numbers." This report does not break new ground but pulls together large amounts of research done over many years and puts them under one roof.
Some of the statistics date back 50 years or more, or even into the 19th century, and are designed to show how historic trends have developed over a long period of time.
"The numbers show that the productivity record of Aotearoa New Zealand leaves a lot to be desired," says the Productivity Commission Chairman Ganesh Nana.
He says working more hours and putting more people into work has been the main way that production and income have grown over the last decades.
“New Zealand has a relatively defensible record in producing more goods and services. But this has come from.....more New Zealanders working more hours."
Nana says productivity matters for wellbeing, because it enables investment in public goods and services that benefit everyone, such as schools, hospitals, and infrastructure.
The Commission's research contains information dating back to 1870. It shows New Zealand's economy was one of the most productive in the world, alongside Australia and the US, at the end of the 19th century.
But gross domestic product (GDP) per capita largely stagnated between 1970 and 1990, at a time when other countries were shooting ahead. Since 1990, New Zealand's productivity growth has improved but not by enough to catch up with the pack.
As usual, insufficient research and development (R&D) gets a lot of the blame. One graph shows New Zealand spending just a small fraction of its wealth, relatively speaking, on R&D compared with the OECD leaders, Israel and South Korea. New Zealand is also left in the rear by like minded countries such as the UK, Canada and Australia.
To make matters worse, New Zealand is "capital shallow." In other words, not enough money is put into products and structures that will be used for production in future years. In addition, New Zealand is near the bottom of the list in terms of how much machinery is used per worker.
The Productivity Commission report makes another point. The New Zealand population is reasonably well educated with a similar proportion of graduates here as in overseas countries. But the impact of this is diluted by the fact that a lot of New Zealanders live overseas, and have taken their skills with them.
The report finds some good things to say about New Zealand. There is a lot of trust in government by its citizens, relative to the OECD average, and this is important because people are confident that the results of their hard work will not be taken from them.
On the downside, the degree of trust has slipped in the last decade. On the other hand, the business environment is relatively good, with the amount of state regulation slightly lower than for other small developed economies like Denmark or Sweden. And the administrative burden on start-ups is relatively low.
In releasing its report, the Commission calls for a long term commitment to innovation and technological change.
"The Government’s efforts need to be focused, aligned, well connected to businesses, iwi, Māori, researchers, and workers," Nana says.
"Improving productivity requires investments to maintain, enhance, and improve the capabilities and qualities of the range of productive factors, institutional arrangements, and resources."
“As for any investment, this needs to be sustained and exercised over a longer term – across years, decades, and generations," says Nana.
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