Peter Nicholl
We know that actions and words should be consistent – and when thery aren’t, actions speak louder than words. The gulf between the actions and words of New Zealand politicians over the last 20 years or more when it comes to productivity is as wide as the Tasman Sea.
The key to a country’s living standards is its productivity. Some productivity gains can be made by working longer and harder. But the substantial and long-lasting gains come from working smarter. It is alarming how long our productivity rates have been behind most other western countries and how far our relative productivity has fallen because of this long-term poor performance. For example, in the 1970s, our gross domestic product per hour worked was similar to the Scandanavian countries. We now produce about 40 per cent less output per hour worked than those countries.
This is reflected directly in our relative living standards. For example, GDP per head in Denmark is now about 60 per cent higher than here.
One of the few steps the current government has made in the productivity area is the abolition of the Productivity Commission. Given our poor productivity performance over a long period this seems an unusual body to choose to close. But the Productivity Commission opened in 2011 and closed in 2024. During the 13 years it existed and wrote reports, New Zealand’s relative productivity performance didn’t improve, it got worse. I haven’t looked at the Commission’s reports to see if that was because they made the wrong recommendations or because they made some good recommendations but weren’t listened to.
Last year, the International Monetary Fund wrote a report labelled ‘New Zealand’s Productivity Challenge’. I only become aware of that report recently. It didn’t get much attention when it was released last year. That’s a pity as it made some important points. Most reports on our poor productivity record list the same causes: low investment in equipment and technology, limited spending on research and development, excessive regulation, poor infrastructure, a lack of long-term planning – and so on. What made the IMF report different was it said on top of underperforming in all these key areas, we are actively backing the wrong kinds of firms. They said our poor performance is not an accident or due to bad luck. We are doing it to ourselves.
Should we believe the actions or the words of New Zealand politicians regarding productivity? Have politicians decided we should be a tightly regulated economy in terms of health and safety, resource use, environmental issues and money laundering – knowing that that will mean we won’t grow as fast or have incomes as high as many other countries? That is what the actions of our politicians and beaurocrats over the last 20 or so years imply.
But that is not what their words have said. Their words usually say we aspire to be a fast-growing economy at the forefront of technology.
We are far from that. This is an election year. Either the words need to change to match the actions – we will be a slow-growing but safe and sound economy – or the actions need to change to match the words – we will become a vibrant, risk-taking economy at the forefront of technological change.
Having a huge gulf between the words and actions of our governments is the worst of all worlds.
Peter Nicholl
