Briefly

A new perspective on New Zealand’s productivity deficit

The galvanising fact in the Productivity Commission’s now completed inquiry into New Zealand’s frontier firms is that the labour productivity rate of our top 30 companies lags that of other small, advanced economies (Belgium, Denmark, the Netherlands and Sweden) by 55% on average.

A possible contributor to this gap is that New Zealand firms are typically “capital shallow” by international comparison, meaning that workers have limited equipment and other capital goods to work with.

The Commission’s central conclusion is that innovation is the key to improving New Zealand’s productivity performance and that some element of planning and specialisation will be required.

The Commission has come up with a sheet of 30 recommendations in its final report, New Zealand firms: reaching for the frontier, released on 30 April. They include:

• that the Government seek out and encourage foreign direct investment that is innovative and export oriented and that is likely to stay long-term and to provide spill-over benefits
• that IRD, MBIE and the Callaghan Foundation do a stock take this year on the Research and Development Tax Incentive to identify areas for improvement
• that the Government select a small number of areas of the economy and devote a “substantial and enduring commitment of public resources” to them ($20m to $40m a year for periods of five to 10 years), conditional upon the private sector at least matching this investment.

The Commission is also recommending that the Government review New Zealand’s migration policy with a view to providing employers with the skills they need while reducing our reliance on low skilled migrant labour. New Zealand currently issues the highest number of temporary work permits per head of population in the OECD.

View the report.

Environment struggling under population pressure

Our Land 2021 – a joint StatsNZ/Ministry for the Environment publication – paints a picture of an environment struggling under population pressure. Among its findings are:

• a rise in urban land cover between 1996 and 2018 of 14.6%
• an increase in dairy cattle numbers of 82% between 1990 and 2019
• a reduction in the highly productive land available for food production (because converted to residential/lifestyle use) of 54% from 2002 to 2019
• a 91% increase in irrigated land between 2002 and 2019, and
• an estimated increase in nitrogen applied to the land in fertiliser of 629% between 1991 and 2019.

To learn more, read our Our Land 2021.

Climate change “consensus” ruptured?

National’s Climate Change spokesperson Stuart Smith has written to Climate Change Minister James Shaw asking that the Climate Change Commission’s deadline to finalise its advice be extended to 31 August and indicating that a failure to grant this extension could preclude National from supporting the first climate change budgets.

This would shatter the fragile consensus obtained under Simon Bridge’s leadership when Todd Muller held the shadow climate change portfolio. National also made a submission in which it said the Commission needed more time to address issues raised by submitters, including providing more analysis to support the “over 70” policy recommendations it had made and releasing the information behind its economic modelling and its input assumptions.

Read the National Party statement and the submission.