Government productivity report slammed for underplaying NZ ICT sector

IT professionals annoyed at Productivity Commission report referencing Google reports. Photo / Getty Images

A report published by Government has come under fire for not giving enough credit to the importance of New Zealand's ICT sector and heavily referencing Google's own report.

Joint research project 'Growing the digital economy in Australia and New Zealand' , put together by the New Zealand Productivity Commission and Australian Productivity Commission, did nothing to highlight the opportunities within the local ICT and digital sectors, and heavily references a report commissioned by Google, a critic says.

NZRise co-chair and Catalyst founder and director Don Christie says he was disappointed at the report, which he said wrote off New Zealand's digital sector as too small to bother with.

He says the 168-page report suggested innovation only happens at scale and scale only happens in San Francisco and China.

"It's sickening. It is extremely offensive to those of us who spend our lives building and promoting Kiwi products and services," he says.

The report suggests regulations that would protect society from digital dominance were unnecessary, he says. "There really is nothing here about opportunities for our sector or how we might achieve some core government goals. It's very outdated thinking and very disappointing."

A big believer in New Zealand's ICT sector, Christie says Government had bold ambitions to double the size of the digital sector to make it the second-largest contributor to GDP.

But Christie feels the report "almost exclusively" references Google's Alpha Beta report highlighting its economic and social impact in New Zealand.

"My concern is that report very much reflects the view that Google would give you of the world's digital economy and effectively has no ambition for anything that happens in New Zealand or might be exported.

"They quote uncritically from the 'Alpha Beta' report, which was commissioned by Google. They seem to have failed to reference that obvious self serving connection. Google and Uber get far more mentions than our own local digital sectors."

Catalyst founder and director Don Christie. Photo / Supplied

However, Productivity Commission chair Murray Sherwin has defended the report, saying it made no comment about the quality of the local technology sector but was simply observing current trends.

"We made the observation (which is widely held in academic literature) that there are strong economic forces that are concentrating the production of digital goods and services in a relatively small number of locations such as Silicon Valley, Seattle, Beijing and Shenzen," he said in a statement.

"These forces include 'spillovers' and 'agglomeration' - that is, the benefits that one firm or individual gets from being physically close to other producers in the same sector, such as the sharing of ideas, access to specialised staff and advice, and proximity to customers. We concluded that these economic forces are very difficult to overcome."

Sherwin acknowledged the Commission cited "a couple of reports prepared for Google".

But Christie believes the report does not reflect the realities of the sector.

"New Zealand, like other small economies, can be very innovative. We solve problems that other economies don't need to solve and when we do that we actually hit a sweet spot that is really useful for New Zealand and useful for export expertise."

New Zealand's ICT and digital sector does the most research and development (R&D) out of any sector. The sector's R&D efforts has increased by 40 per cent between 2014 and 2016, and is growing rapidly.