How NZ can be better off by working smarter

The report recommends the Government collaborate with industry and other stakeholders.

New Zealand is grappling with how to work ‘‘smarter’’ not ‘‘harder’’ to improve our lives and the Productivity Commission says part of the solution is to focus on exporting unique products at scale, something other countries our size do better.

For the last 25 years, our income per person has remained at about 70 per cent of the average of countries in the top half of the OECD despite the efforts of successive governments. That is holding back our standard of living and wellbeing, according to a report released by the commission today.

‘‘New Zealand’s main approach to maintaining and growing our living standards has relied on adding more people into the workforce, having employees working longer hours, and expanding production in industries with damaging environmental impacts,’’ said commission chairman Ganesh Nana. ‘‘This approach is not sustainable.’’

The late Sir Paul Callaghan observed that New Zealand’s business strength was in weird and wonderful niche products, like Fisher & Paykel Healthcare’s breathing respirators, which have been in hot demand globally during the Covid-19 pandemic. In its 250-page report on how to lift the performance of our most productive ‘‘frontier’’ firms, the commission agreed.

‘‘Exporting specialised, distinctive products at scale is the best way to lift the productivity of New Zealand’s frontier firms, and improve their contribution to national living standards and wellbeing,’’ the report concluded.

While it was possible to develop world-class businesses from a New Zealand base, the country had very few such companies, and the productivity of frontier firms was on average less than half of that found in international peers, it said.

To develop large, globally significant firms, the commission recommended the Government narrow its focus on areas of the economy with potential for innovation.

‘‘A small economy has only a limited number of areas that can get to critical mass and support sustained world-class competitive performance,’’ it said. ‘‘As a complement to broad-based innovation policies [which benefit all firms], finite government resources also need to be deliberately focused on a small number of high-potential areas rather than being thinly spread.’’

The report recommends the focus reflect existing and emerging strengths and capabilities and that the Government collaborate with industry and other stakeholders.

The Government should commission a review of migration policy to consider the optimal level of permanent and temporary migrants to support innovation and productivity, it said.