BNZ economist Paul Conway says the overarching objective of rebuilding the economy in the wake of COVID-19 must be to improve productivity and ensure the benefits are widely spread

BNZ economist Paul Conway says the overarching objective of rebuilding the economy in the wake of COVID-19 must be to improve productivity and ensure the benefits are widely spread

Paul Conway*

Is now our moment to upgrade the New Zealand economy? Rebuilding in the wake of COVID-19 is a huge challenge that will take years. But this rebuild is also a once-in-a-lifetime opportunity to go all out for a stronger economy that delivers for all New Zealanders.

The overarching objective of the rebuild must be to improve productivity and ensure the benefits are widely spread. Productivity growth is about making better use of our resources to create greater value. By delivering ‘more for less’, better productivity is the key to higher living standards and wellbeing.

New Zealand’s productivity performance leaves much to be desired – the value created from an hour of work here is well down the OECD rankings and more than a quarter lower than in Australia. This productivity gap has shown no sign of closing for decades, suggesting that Kiwi firms tend not to use productivity-enhancing technologies that are commonplace elsewhere.

On average, New Zealand businesses also do not invest much in capital equipment compared to firms in more advanced OECD economies. Instead, with rapid migration inflows until very recently and a strong Kiwi work ethic, economic growth has come from adding more labour into the production mix, rather than from adopting new technologies and investing.

The upshot is that many Kiwis work long hours for household incomes that are below the OECD average.

For years, the underlying reasons for New Zealand’s poor productivity performance were not well understood. Because our economic policies were considered close to best practice, this poor performance was unhelpfully labelled a “productivity paradox”. But after decades of research and debate, we now have a good idea of what a high-productivity, high-wage New Zealand economy would look like.

First, a productive New Zealand economy would have deep clusters of firms working in areas of economic activity where we have proven strengths in global markets. These clusters would be centred around large, innovative, skills-intensive firms that are among the most productive in their industry globally. These firms would be deeply integrated into the global economy and act as conduits for new technologies and better ways of doing things to flow into our economy.

Second, a productive New Zealand economy would have dynamic and competitive domestic markets. Healthy competition and well-developed firm networks would encourage the flow of information and the diffusion of technology, including to firms operating in isolated regional markets. Productive firms would have the scope to grow. Less productive firms would be incentivised to lift their performance or to exit the market, releasing their resources to more productive uses elsewhere.

These features of a high-productivity, high-wage New Zealand economy would be self-reinforcing. Leading Kiwi firms operating internationally would encourage productivity improvements in their domestic supply chains. And dynamic, competitive domestic markets would be a source of comparative advantage for New Zealand firms facing into the global economy.

Regrettably, when COVID-19 struck, our economy bore little resemblance to this ideal New Zealand economy. Although we have areas of strength that could be developed into centres of excellence, New Zealand has produced very few world-leading, globally engaged firms. Businesses serving our small domestic markets are often insulated from competition, learning opportunities, and the incentive to invest and scale up.

These clear and obvious differences between the actual and the ideal Kiwi economy highlight a long history of failure in our efforts to address New Zealand’s poor productivity performance. Rebuilding our economy in the wake of the pandemic presents us with a rare opportunity to substantially narrow this gap.

COVID-19 is forcing us to change, to reassess and to adapt. We know there is no going back to our old economy and the lockdown has given us space to consider the type of future we want to work towards. As we emerge from a crisis, we are more open to change.

So how can we use the rebuild as the basis for a serious economic upgrade? Last week’s Budget was, rightly, all about preserving and creating jobs. But as we work through the initial impacts of the virus, attention is turning to the longer-run effects and how we can make the best of it for New Zealand.

There is much to consider. For a start, we need to rethink our approach to international connection. As a small economy with limited resources, we cannot afford to “let a thousand flowers bloom” and must, instead, focus on developing our existing strengths in global markets. Instead of a “level playing field”, the Government needs to work with the private sector to help build critical mass in a small number of clusters orientated to the global economy.

This is not about picking winners. It is about identifying and removing constraints to international connection in specific areas of activity. This could include information sharing, regulatory improvements, and investing in world-class infrastructure. Of course, this would all need to be subject to commercial disciplines and to regular monitoring and evaluation.

Policy also needs to help New Zealand businesses build comparative advantage. Knowledge is fast becoming the key driver of growth in 21st century economies. For New Zealand, knowledge has the attractive properties of being weightless and codifiable, meaning it can be traded down fibre-optic cables, making distance to market less of an issue. So, building comparative advantage means getting much better at investing in science and innovation.

Digital technologies are the infrastructure of knowledge and clearly need to be front and centre in our economic upgrade. Digital tools and data encourage innovation, generate efficiencies, and improve products. These tools are steadily reducing the cost of being far away and making it more likely that Kiwi innovations get noticed internationally.

In turn, improving digital skills is critical in ensuring that the gains from productivity improvements are spread widely across the population and that Kiwi workers are future proofed for ongoing technological change.

There is also much for New Zealand businesses to consider as part of this rebuild. An honest assessment of governance arrangements and managerial capability may well reveal considerable room for improvement. It is telling, for example, that Fonterra has struggled to expand internationally, despite dairy being an obvious area of comparative advantage for New Zealand.

There is no law of nature mandating that New Zealand be a low-productivity, low-wage economy, with significant deprivation and poverty. Those outcomes are the result of choices we have made. Yes, our economy is complex and unique in many ways. But we can and we must do much better. Now is the moment to build a stronger New Zealand economy that delivers for all.

*Paul Conway is an economist working at the Bank of New Zealand. He was previously the Director of Economics & Research at the New Zealand Productivity Commission. Paul has also worked internationally at the OECD and with the World Bank.

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Yes higher living standards and wellbeing to all New Zealanders, not just a few to be proud about themselves about their own success.


Surely those who work harder or are just more gifted deserve more rewards than the average person. If a good brick layer is twice as productive as an average one then up to double salary seems fair. What I can't understand is how anyone deserves much more than double average. So assuming average annual income is $60k then CEOs, Mayors, MPs may deserve $100k and the really exceptional the PM or the captain of the All Blacks should get $120k. That is all they need to establish their superior status. For example they can drive a slightly bigger car than the rest of us or buy the first round of drinks. What is unproductive for society is to have such a gap between the elite and the unfortunate that they live in two different societies. A gap that is only crossed when the PM lifts her feet to allow the cleaner to mop under the chair.
It is getting harder to say "all New Zealanders"; we are becoming a collection of castes.

Perhaps the CEOs, Mayors, MPs, PM and captain of the all blacks are taking on substantially more than 'double the risk' that the average person does.

If the CEO makes a wrong call, that could be curtains for the business and dozens or hundreds of jobs lost. If the PM makes the wrong call, that could result in thousands of deaths from a pandemic illness.

Paying high amounts of money for these roles ensures competition for them, which should result in only competent people holding the position (see ya, Simon) which should help to ensure that the best decisions are made and best outcomes are obtained.


Ha good joke.. there is no accountability in the public sector certainly not "double the risk". The public sector is so out of touch with the private it is obscene. And the pay for for the hierarchy is unbalanced and unfair.

So PM's and MP's should all be paid more and we'll get better ones?
The PM should be paid more - thousands of deaths compared to a couple hundred employees jobs?

I wish your analogy worked.

Employees are taking more of a risk than the high paid CEO. I haven't seen many CEO's suffer the same degree of hardship from making wrong decisions let alone care about the fate of the employees.

In some cultures the more gifted, more "successful" have a higher responsibility to help and provide for the less fortunate. Greed, excessive self enrichment and idolisation of same are looked down upon as the lowest forms of human nature. Says a lot about our culture...


I think instead of competition resulting in competent people holding those higher positions of power, it often results in narcissistic psychopaths turning into monsters in order to get to the top, not caring about the destruction of character, relationships, health and family.

I've seen a number of good people leave organisations at the middle management point because they're unwilling to destroy themselves for the company, while those who don't care about their character stay and end up at the top - then have influence over others...destroying the values and principles of the firm.

This explains a lot

A lot of truth in this, evidenced by comments by some on this website...

I was a computer programmer and in my day could easily produce working code twice the average speed (and I know some better than me) however pay me more but not double or triple etc - just enough to give me status.
Most CEO making a wrong call means unemployment but recently the cleaners in our rest homes and our supermarkets could make life and death mistakes - they were never rewarded for that risk.
Pay more money is only a way of assigning status - you appear to be claiming that UK firms with CEOs earning 100 times the wages of the workers on the production line would be more successful than German firms where they earn about 8 times. The reverse is true.
All the many places I worked where bosses socialised with staff were more productive - you would be surprised what the guy on assembly or sales checkout knows that his/her boss doesn't.

'All the many places I worked where bosses socialised with staff were more productive' - absolutely. I've been responsible for some large staffs over the years and more times than I can remember I've been given solid gold inside info, criticisms and compliments by staff who wouldn't venture much at all about the business in non social settings. Same for partners of staff who will sometimes give you the unvarnished truthful take, usually hilariously so, on what your employees really think.

Actually I made no claim or suggestion that 100 times average wage was more appropriate than 8 times for top-level salaries.

Just that saying people should only earn up to double the average wage seemed rather short sighted. Which your anecdote of successful German CEOs earning 8x supports.


Surely it's only fair to redistribute money from savers and wage earners to asset holders though, right? Everything else is horrible socialism but that kind of redistribution is just fine and we can all pretend we did it all on our own two feet with no help from anyone yada, yada, yada.

NZ's digital economy has much room to grow. It feels to me, something like at least a decade behind other advanced economies.

Would we welcome the glaring fallout the US generated? - The Other Side of Silicon Valley

The other side of Microsoft's new NZ datacentre (and the two being built by Infratil/ CDC) is the huge amount of energy they require, not to mention the need to vent heat. I certainly wouldn't want to live/have a business too close to them. Not the same as wage inequalities to be sure... but there's little talk here of the quadruple bottom line.

Microsoft is proposing to extend its portfolio of 60 global data centres by one in NZ. It will be a bricks-and-mortar building to house equipment and buy electricity and broadband capacity. Akin to one of the rumoured billionaire bunkers. It won't be offering development services. It won't be employing locals. It won't be a business you can invest in and it won't be paying tax. It will employ a few engineers. Probably imported and rotated every 6 month out of the US. Google and Facebook have already done it by locating data centres in Iceland. For the cooling effects.

""won't be paying tax"" !!

That's food for thought, thanks. Of course I want to know how you know but respect your privacy..

And I'm not altogether sure if sinking datacentres into the Atlantic is such a good idea either.. interesting times

Iceland's Data Centers
I paid a lot of attention at the time they were being established
Had to look hard for even this following link.

"In bare bones fashion, a data center is simply a dedicated space for companies to keep IT infrastructure and equipment, and this varies from a simple caged server to heavy-duty supercomputers which require vast amounts of electricity and continual cooling"

A tour of Iceland's data centers - can you see all the employees sitting at desks

Yes, e-commerce, online shopping and digital payment will lead the way in the post covid19 world

Great article. Going through council consenting rules and costs with a weed whacker would be a start.

DIY-enthusiasts will save time and money when new rules come into force which scrap building consent requirements for low-risk projects.

Exemptions to the Building Act, which will be introduced in August, will mean that anyone can build a sleep-out, a carport, or a shed, without needing council permission.

The move will scrap as many as 9000 consents having to be reviewed by local authorities, saving an estimated $18m in fees.

Wow, that's shocking.
Bloody labour government always put way to much regulation on things. So pleased national are in to give some sanity to the situation. ;)

National promised to cut red tape in their third term.

Yet didn't manage to do this tape cutting.


Reminds me of the same ideas rolled out during the GFC that were quickly forgotten in favour of driving asset values through the roof as the primary wealth creation mechanism. The principles are right, i fear our nature & kiwi culture are what limits us. Case & point capital gains tax remains a magical myth, the 50 point ocr drop late last year, fonterra a failed experiment, ex state owned forests owned by off shore interests that favour exports of logs, a life plan of so many of us that is centric to capital gains on property & a banking system built on that. We always revert back to what we think we know works. I don't think we'll change, we will ride it out & go back to our usual tricks. My one hope is a banking regulation overhaul to stop the credit craziness & one which supports business investment vs property.


Great comment Bluff. Sadly, I think you are absolutely 100%, correct.
It’s been going on in Aotearoa since 1000 acres of land cost a musket and a blanket. If it worked then, it’ll bloody work now...


" this rebuild is also a once-in-a-lifetime opportunity". Not quite!
We had a shot at rebuilding something of consequence in Christchurch, and we weren't brave enough to do it. As is noted above, we went back to 'what we had before' thinking it would work again.
We lost the opportunity to relocate our administrative and political operations from old and risky Wellington to a brand new, fit-for-purpose city. Besides, the change would have meant 'damaging' property prices in both cities and so the country in general - and we couldn't have that could we!?
Let's not repeat that on a grander scale with our country.
If ever there is a time to look forward with optimism, it's now.

If the govt moved out of Wellington would it eventually shrink to be the size of Picton minus the tourists?

It would. And having it just Picton sized when the next Big One hits, could be an advantage!
In all likelihood, Wellington is going to get severely damaged, again, at some stage soonish, anyway.
So, do we take precautions now ( or should we have done!) or let nature enforce that on us?

Moving the capital farther from Auckland would make little sense.

Hamilton is where it should go, one of the least disaster-prone cities in the country and likely best positioned to grow.

Eh, governments actually used to be heavily involved and invested in making property and home ownership affordable for more NZers. A lot of NZ's history has been quite in opposition to the last few decades of inheriting that affordable housing, turning it into unaffordable, and pretending to have done it all on one's own two feet.

But yes, how to get change through the entitled folk?


What we ended up with after the GFC was a policy of more people (tourists and immigrants, mainly low-skilled). Productivity is always going to be a casualty of those policies.

Absolutely great comment. 100% correct, I am afraid.

In some way, i think you are right: "we're all for progress, it's change we don't like". But Kiwis will be more open for change now than ever before. It's the time to be bold and go for it.

Exactly. Still waiting for those other folk to change!

New Zealanders, including myself, need a kick up the arse. What changes can we make to improve our lot. We also need to see others supporting and embracing that change, and a government that follows through with their ideas with more boldness than the last 12 years have seen.

A key step is probably going to be the cannabis referendum.


Faster, faster, more, more, grow, grow. When are people going to wake up and understand there is no end to this and tell those who demand more and more out of us to go jump in the lake. You go faster and harder to compete so the competition goes faster and harder to pull away from you. It's crazy.
What are you going faster and harder for in the long run, to produce what and who needs it? The reality is the planet needs us to go in the directly opposite direction.
The big boys will never, ever allow a company like Fonterra from a tiny country at the bum of the world to become anything other than a small player compared to the likes of Nestle etc. Deal with that, work with that.
There is no longer a satisfaction with the simpler things of life, it is very sad to see.

Nestle is a swiss company and isn't Switzerland smaller than NZ with a small population by EU standards? If they can do it why not us?

Nestle (and Cadbury) are also older than the nation called New Zealand.

Yes but they come from a completely different time and grew from there.


Yip, like the Tauranga council told everyone that it is progress having more building, more people and higher house prices. 15-20 years ago Mount Maunganui was a beautiful wonder-of-the-world in my eyes, now its just a hectic mass of people all rushing round, there are no parking places, house prices are insane, subdivisions and densely packed units popping up everywhere, gangs regularly park their bikes on the local park in a show of force marking their territory from other newly arrived gangs. The Mount is turning into a tacky crime riddled holiday resort to be avoided at all cost. But hey, that's progress?

Yes, it is basically the Gold Coast without the theme parks.

If the Mount had all of Australia to the west of it I expect they'd find plenty of space for theme parks as well

Duh, it's a rock star economy! (read: hollow economy with nothing backing it but speculation and unregulated drugs)

The mount is a prime business development site, basically, everyone wants to be as orange as possible and have as much downtime as possible, as close to the mount as possible. So if you base your business model on that you're set. I'm designing a hemp powered tanning bed that you can charge your e-bike off.

I'm not at all just for rampant consumption. But there are plenty of people in NZ that would have better easier lives if their incomes were a bit higher. Not to mention Kiwis living in deprivation and poverty. And i don't see a trade off between the environment and the economy. We need to grow in ways that are good for our wellbeing and improve our environment. There is a sweet spot to all this and we need to move in that direction because we most definitely are not there yet.

Wasn't the Knowledge Economy conference 20 years ago. You know the one where our largest exporters weren't invited cause they were dying out. Isn't everyone glad technology got rid of them.
Best start on investing in the country would be for the writers industry to repatriate some of its over blown profits from the last 20 years back into the economy and quit with the he rape and pillage. By investment I mean actual investment in new stuff, not the buying of old stuff and running it into the ground or hollowing it out with debt as has been happening for way to long .
To much to ask?

Three things seem really missing:

- "managerial capability". Yes to that one. Respect and promotion of actual talent. It is common here to be asked "where did you go to school?" and people mean freaking high school!
- Capital accumulation. It's bizarre NZ has no capital.
- Labor market laws. These were self evidently written by lawyers to get business. We have a welfare system the idea that the employer has to act like Daddy in an employer/employee relationship is really weird. The big tourism employers are closing permanently and firing everyone rather than cutting hours and keeping the quality staff. They have no choice under rigid labor laws. I can guarantee you they will magically decide to open again as leaner operations once their period of labor law danger has passed.

The pursuit of equality is the antithesis of capital accumulation. Concepts such as a wealth tax as specifically designed to erode capital. Without capital accumulation no one can invest in technology to improve productivity. Without the prospect of being able to accumulate capital no one wants to risk what they do have to try to invest in technology to improve productivity because there is no reward for doing so.

We need to divert some of the capital accumulation into investing in production systems, instead of real estate. There isn't anywhere near enough spending on upgrading (or even maintaining) production systems in NZ

Exactly right. Too many resourced had been wasted for too long on this real estate Ponzi scheme. It is high time we started focusing on the real economy. The housing correction inevitably brought by Covid-19 will have positive effects in the longer term.

I agree. Part of that is the tax system. There's a big policy angle to all this. changing that is what we need to be talking about.

Investment should go hand in hand with savings..not speculation on capital values using leverage.

100% correct. This is how a sound and sustainably healthy economy should be structured. Sadly, successive governments and the RBNZ have worked exactly in the opposite direction, just to keep the NZ housing Ponzi scheme afloat.

In PNG a typical no wealth village may want new infrastructure to assist their productivity (usually replacing a bridge that has been washed away). I've seen them do it - everyone from the village men, women, elderly and children walked a few kilometres to the stream and the men cut trees down with bush-knives while the women moved rocks in the stream. A few hours later after 'from each according to their ability' the bridge was rebuilt and of benefit to 'each according to their need'.
So leave it to Kiwisaver to accumulate the capital for investing in our productivity. Better than putting the begging bowl out for foreign capital who end up owning another bit of NZ.

Gee, you'd be up for the reintroduction of slavery then?

Feels like an old refrain of technological utopianism to me. Yes, we need better digital infrastructure and more capital expenditure on technologies, but this innovation discourse misses a few key points: firstly, the terrible tendency in NZ to micromanage everything, particularly what is not well understood (new). Second, the belief that innovation is the same as 'more out of less'. Innovation is about changing how we do things. Finally, something that underpins these other two points - having real stakeholder engagement and initiative. Productivity will rise when people feel like they're part of something, not just part of a machine.

Posted twice dammit.
I think what really bugs me is that innovation isn't as expensive as what most people think it is. Take construction for instance, lots of specialists in a supply chain model. Fletchers built a modular facility last year and that's great, but it's 20 years overdue. Or IoT and agriculture/nature management through data science. Great idea, but scrappy support for LoraWan and high bandwidth prices as Telcos prioritised high margins from early adopters over expanding the customer base. We have plenty of innovation in this country but we don't adequately support it at the initial implementation stage.


Frankly, what a load of waffle this article is.

A motherhood statement (Noun)
a "feel good" platitude, usually by a politician, about a worthy concept that few people would disagree with, without any specified plans for realisation


I totally agree. Post COVID we should move towards

- only high skill high wage immigration. No point having a number of low wage migrant workers working in hospo
- wider tax base that takes into account capital so wage earners taking home over 70k are not bearing the burden of the tax system
- A catch up on infrastructure spending.

The taxation of capital is the opposite of what the article is proposing. You need to encourage the accumulation of capital so that there is capital available to invest in productivity enhancing technology. It sounded to me like the author was bemoaning the absence of capital and the consequent lower productivity per hour worked in New Zealand.

But all our capital is invested in residential houses? How do you turn that into investment for productivity in technology?

yes, i am saying that we tend to throw person hours at a job that machines would do elsewhere. And the company tax rate in NZ is a bit on the high side. But I'm in favour of a capital gains tax. Among a bunch of other policy changes, i think that would help encourage investment into the right places.

Well how on earth do we get the government to listen, re a capital gains tax and other policy changes to stop the housing market being a wealth generation tool. As that's all it has become. The rich get richer and the have nots end up retiring with nothing. Both main political parties have said no to a CGT so what hope do we have. Why don't they listen to the man/women on the street. Oh, that's right, the people they listen to have guess what, more than one property and in many cases, many more. When a CGT was muted last year, the first person I saw on our TV screens was the head of the property investors association telling us how terrible it would be. This is what we are up against in this country. People with a vested interest are the only ones that seem to be heard. Bloody annoying as my young kids have no hope of ever buying a house if the ponzi scheme doesn't collapse in a heap, like it needs to.

There is no capital in NZ. We need to reward it not punish it even more. To be clear I'm talking about actual capital accumulation not lottery style winnings from asset inflation.

More than 50% of $60 billion in Kiwisaver is invested overseas, creating employment overseas

Sounds right. We have to back ourselves at some point. That is the point of having a capital market.

I guess by the time you hit age 50 you start to see the world as it is and where its going and its certainly not for the better for 99% of the population.


From this day on all immigration should be restricted to migrants who have a verifiable track-record in business who commit to establishing a business here in NZ and employing people. A commitment that is reviewed after 5 years. If it hasn’t happened, and/or its not profitable, their visa is withdrawn

I’m talking about “serious” businesses that provides jobs for local people paying $50,000 per annum. Those $2 shops and new ethnic start-up takeaways employing family are simply shams. With a 5 year review on the existence of the business down the track, audit of the payroll records, there probably wouldn’t be too many takers which proves the point of the exercise

There are countries that sell citizenship - from memory St Lucia was charging millions. The price depending on the number of countries that accept a passport without processing a visa - NZ is one of the best. Your scheme would still make it easy for a wealthy person from a 3rd world country to obtain NZ residency and then citizenship while getting their children into our schools without paying international fees. From my experience in the 3rd world we would not be getting the many honest wealthy foreigners but the rather dodgy ones who want an escape hole if they get found out. They would run their businesses just inside whatever rules you produce. Better to simply charge more for work visas and residency visas.

I won't disagree with you

How much would you suggest per person?
Any discount for a couple?
Any discount for a couple plus 2 children

For years the slick immigration-agents have been charging up to $20,000 to $30,000 per person

Those Vietnamese who suffocated in a container trying to get into England illegally paid over $30,000 to the people smugglers (usually their families entire wealth).
As a strictly financial arrangement the value of NZ infrastructure divided by our populations is over $400,000 (well it was a few years ago) then add a little for our trained teachers and medics. The value of Superannuation for a retiree is half a million - the cost if you had to buy it. So you can see how high levels of immigration make our country poorer. Just look at the infrastructure being built or needed in Auckland - wouldn't have been needed if we had had no immigrants.
I am an immigrant. I like immigrants. But it irritates me when I'm told they are making me wealthier even if it might be true with my house purchase (quadrupled over 17 years).
I'd sell NZ citizenship to elderly foreigners with (a) some English language, (b) good health, (c) no criminal record, (d) an inflation proofed pension, (e) $1 million to IRD.
For a young single worker with (a), (b) & (c) a work permit annual charge should cost the same as employing a Kiwi on a living wage for a year say $30,000. With partner double it. Citizenship after 7 years.

NZ could entice all the "nuclear physicists" in the world to come to NZ and it wouldn't make the slightest bit of difference

To improve the productivity of the workforce, NZ needs to rethink her approach on sourcing overseas human resources. Quality needs to be over quantity - you get what you paid for. NZ also needs to rethink how to make the best use of the real foreign talents. Knowledge and experience, work ethics and performance need to be over ethnicities and nationalities. If someone is really good but that person was not born as a Kiwi, organisations need to be more brave to make that person a leader. At least in ICT, I have seen a lot of excellent doers wasting their potentials because of their Kiwi management.

Conways advocates dynamic deployment of capital and knowledge by private enterprise as the solution to NZs chronic productivity lag. Meanwhile Robertson plans a major 'reset' of the economy with government having a central role in creating our brave new world but apparently it's nothing to be alarmed about because this will be in 'a genuine partnership between government and the people'. One can only speculate what he means by that socialist mantra but clearly Robertson intends a very different hands on approach to that advocated by Conway. Which is terrifying when one looks at who is sitting at the table around Robertson.

Judging by previous recessions what actually happens next is that productivity falls.

The two things I can immediately see that would improve productivity is update the depreciation schedule and encourage the formation of smaller, industry orientated banks.


An absolute load of tosh, word salad article from... well an economist mired in economic theory who doesn't want to face reality. Not one mention of the biggest thing that would drive productivity in NZ - a change to the tax system towards productive investment, not asset accumulation. Any talk of productivity without addressing NZ's abysmal tax system that encourages buying and selling assets to each other in non productive industries is worth less than the page it's written on. It completely misses the real problem and encourages readers to focus on an unattainable theoretical utopia which does not match reality.

What's with Interest publishing articles at the moment utterly disconnected from reality? They keep posting articles from "experts", who are the same ones pushing the same theories that got us into this economic mess! Guess what - more of the same isn't going to fix it. It reeks of the "experts" at the RB telling us over the years "Don't worry, this NEXT interest rate cut will drive inflation!", being surprised when it doesn't work and causing other unintended consequences (which they may secretly intend, but not tell us). Then when have have hit the bottom end of their theories, instead of taking a different direction, they accelerate their thinking, telling us to trust them again. Why would we trust anything you are telling us when your economic theory hasn't matched reality for decades?

We need entirely new thinking with where to go from here. It's clear these "experts" haven't a clue anymore and will continue to make our lives worse by continually introducing greater and greater distortions based on theories which have not mirrored reality for decades.

Indeed. A bank economist having a go at the fact we don't have enough capital seeking out productive enterprise in NZ. When the banks gladly clip the ticket on ratcheting up housing prices which is an inevitable conclusion from our tax system. It's a bit rich.

It is immigration and cheap money that drove/drives housing bubble. Tax free capital gains would help but if market still under supplied, rents and gains will be irresistible

Well I guess everyone has their own reality. For the record, I think we could improve the tax system to do more to lift productivity. In my next opinion piece I'm going to talk about the conversations and policy considerations i think are necessary to move our economy to the "ideal" I describe in the article.


I think because our system is so skewed towards property ownership and investment, public, bankers, govt. Until we move past this it will never change.
Money is not channelled to the right place to accomplish what, as a country, we need to be successful outside of the family bbq boastathon. Its generational now.

Your 4 line comment is worth more than this entire article. It's sad when us commoners can see the problems clearly, yet those in power are so deluded with self reinforcing models which don't reflect reality.

When your model doesn't match reality, you change the model. NOT try and force reality to obey your model (which is what all these numpties are now doing).

Yes and central banks are now doubling down on a failed economic philosphy (QE and lowering rates). All it is doing is increasing risk and making the issue/s worse further down the road. This economic approach is literally the road to hell.

Well, it's like climate long as the consequences aren't going to affect those of us with the advantage now, we don't have to worry about it eh.

I agree with much of that. Now's the time to change it. It's the best shot we'll get at it in our lifetimes.

This is what should be done, but there is no way I can see this Labour coalition govt rebuilding a new economy based on better productivity... their fundamental rationale is to provide better wages for the lower socioeconomic and to provide work for everyone - hence the last 2.5 years of wasteful "unproductive" spending with little GDP growth and now that the GDP has crashed and the same time as money printing and spraying it around, we can expect very little from Labour on building a new productive economy.
National could do it...just waiting now to see what they offer up!


Um National literally did nothing while they were in power. They just watched central banks around the world drop interest rates and reaped the rewards of many people becoming wealthy on paper and then some voters lacked the capacity to assess causation correctly of their new found wealth and said it must have been because of how well National were managing the economy (and I voted for National in two of those terms only to feel completely let down by them in the end so please don't label me as a left wing communist if anyone is thinking that).

So much interesting stuff on YouTube now and its great to get a totally different view to the mainstream media. I never followed anything like this in the past and I can see why I was blissfully unaware of any economic downturns coming on the horizon.

I watch a lot too - car and equipment repairs, that sort of thing - real stuff. Economics and politics? No - too many flakes there.

Central Bankers Happy Talk

Thanks for that youtube link.
Crystal clear
Bernanke in a 2009 interview on 60 minutes declares TARP and QE programs were temporary and expected to be withdrawn within a short period of time. My recollection was 6 months


Few things Ive noticed over the years.
1. NZers are very strong individuals and everyone has the "best" way to do things. Great in a small business where you can have this diversity but once you get to big scale or competing internationally you need good, disciplined structure and systems to compete. Macas is an example - you don't cook the burger how you think it is done you follow the rules and hey presto it works. Kiwis are not good at this conformity and doing your little bit of the puzzle well. They all have a better way.
2. Capital is and always will be scarce in a very small country at the bottom of the world and in percentage terms gets smaller very day this will be a struggle for ever.
I believe we really need to build on what we are good at and what we have.
Good creative skills - education is a key here but so many still don't trust science and higher education - maybe covid will change a few thoughts here but I'm not holding my breath.
Accept that our small businesses will probably be bought up to compete internationally but be the creative engine for new stuff.
Look after our environment and Indigenous culture - this is the only brand thing that makes us different. Ive talked to many exporters of food and other things and without a miss this is the things they all come back to - the fact is we feed only 40 million people, our landscapes are nice but both can be obtained elsewhere.
Become the cleanest, greenest and nicest place in the world. Good things will follow as its getting very hard to find that in nearly everywhere else in the world.

thanks for that. I agree. we're on the same page.

"Capital is and always will be scarce in a very small country at the bottom of the world and in percentage terms gets smaller very day this will be a struggle for ever." Why? There is nothing magical about saving money.

Man - Despite his artistic pretensions,
His sophistication, and his many accomplishments
- Owes his existence to a six inch layer of topsoil
and the fact that it
Rains Unknown author

The biggest labour productivity growth, 1996 - 2018 in NZ, was in the primary sector. The most disadvantaged sector for internet connectivity is....the primary sector. Has the latter stopped the development of technological advances for the primary sector - no. Has the latter hindered the development and uptake of technology in the primary sector - heck yes.

So you're saying that a digitally-enable primary sector would be even better? It's true primary has had good productivity growth over recent decades. but that can't be all we are good it. but the tech aspect of primary is very exciting....

1) We need to measure productivity change in terms of change in total welfare per capita (i.e. externalities such as air pollution are accounted for) & it's distribution, not simply GDP or GDP per capita

2) Local government needs to be forced through legislation to undertake proportionate cost benefit analysis (including externalities) on all its spending & bylaws much of which is currently unproductive.

3) The same approach needs to be taken for all RMA planning rules. Many are unproductive and at greater cost than benefit. They should all be sunsetted with their replacements going through full cost benefit assessment.

4) The tax system needs to be modified to support productive use of money that enhances total welfare. This means introducing environmental taxes & other taxes on externalities that arent currently priced and offsetting these by reducing income and business taxes.

yep, i agree with a lot of that. except i think councils often have stuff thrust upon them by central government whereas a conversation on how best to get something done would probably be better.

The author states - "Instead, with rapid migration inflows until very recently and a strong Kiwi work ethic, economic growth has come from adding more labour into the production mix, rather than from adopting new technologies and investing." - but does not suggest the answer to our poor productivity should be drastically reducing migration.

Increasing points needed and reducing PR approvals to 10-20k PA would reduce internal demand growth, reduce the Kiwi dollar, stimulate exports and force businesses who have relied on cheap labour for growth to either invest in new productivity enhancing technologies or die. Covid-19 has given us an opportunity (as painful as it may be) to be letting the low-wage low-productivity businesses die a swift death and be replaced by the agile, innovative, highly-productive businesses that can out-class and out-compete them.

PR approvals at 10-20k PA is roughly where most OECD countries have them per capita.

Our poor productivity is caused by those immigrants who sell you fast food, work checkouts and drive Uber. The immigrants writing computer software, working as doctors and academics are not affecting productivity. It is cheap docile immigration that is our downfall - it means why train Kiwis and why invest in technology? High-paid immigrants are OK. [And that is not mentioning the rorts that are endemic with low wage immigration.]

Good comment. I agree that high-paid immigrants are OK and are to be valued. However, if we could somehow magic up 50k PA of high quality software developers, doctors, engineers and academics etc to give PR to I suspect it still could have a negative impact on our own people. The ideal is to train Kiwis and why invest in technology AND have a moderate flow of highly skilled migrants to bring new ideas etc to the mix.

I think being smarter with migration is part of the puzzle of improving productivity. I'm going to talk about policy stuff in my next opinion piece....

Thanks for the reply Paul. Look forward to reading your next piece.

e should this read if you haven't already. Very interesting take on things by a very astute author.

We need Donut economics ( see ), not economics motivated by endless production and consumption.