The latest report out this week from the Productivity Commission highlights again how New Zealand's productivity growth is significantly lower than countries like Australia and Canada.
This is a big deal because productivity growth is essential for sustainable economic growth and maintaining our way of life for future generations. Poor productivity leads to higher prices, imposing a burden on those with lower incomes.
It is timely to revisit the issue now because much has been said about whether a post-pandemic recovery can break the trend. Can New Zealand start working smarter, not harder?
The latest productivity report is based on research for the year to March 2020 – before the response to Covid-19 – so there's an absence of recent data to show whether this may be starting to happen.
Anecdotal evidence, however, suggests New Zealanders are not necessarily getting more done in less time - either from home or at their place of work - since Covid turned the world upside down.
Many are just replacing their commute time with more unproductive work.
The report notes the pandemic has forced many firms to reassess their productivity processes and invest in technology, in particular using video conferencing as an essential work tool.
Another example is the expansion of "brick and mortar" retailers into e-commerce using technology largely developed overseas.
But it's not as simple as relying on new technology to boost productivity.
"Recent research suggests that New Zealand firms are not making the most of leading technologies and that global best practices do not flow swiftly into the New Zealand economy," the report notes.
New Zealand firms are a "long way behind the "international frontier" of the world's best businesses, it said.
"For example, New Zealand's leading firms appear on average to be less than half as productive as top firms from countries such as Belgium, Denmark, Finland, the Netherlands and Sweden."
Another problem for New Zealand is that any short-term improvement is likely to be concentrated in sectors that were already more digitised and already among the most productive companies.
Allowing for "creative destruction" of low productive industry is one way to address the wider issue but so too is having a culture of responsibility and accountability. It starts with the misallocation of capital into areas that soak up labour and resources for little or no return, sometimes negative.
Business owners should also take it upon themselves to improve management practices and implement incentives for employee motivation and innovation.
After all, if productivity is not going to be rewarded, it is unlikely to be obtained.
New Zealand will never solve its economic problems until it learns to work smarter, not harder.
