Supply shock: A Productivity Commission report found New Zealand’s export sector had become more concentrated since 2008, increasing the exposure from supply chain events. Photo / New York Times
Supply shock: A Productivity Commission report found New Zealand’s export sector had become more concentrated since 2008, increasing the exposure from supply chain events. Photo / New York Times
New Zealand needs to prepare its economy to cope with more big supply shocks in coming years, the Productivity Commission warns in its last report.
In the introduction, Productivity Commissioner Ganesh Nana describes his sadness and mixed emotions on delivering the now disestablished organisation’s last report: Improving Economic Resilience.
“Witha mixture of emotions, I submit our report on the Improving Economic Resilience inquiry,” Nana says in his introduction for the report.
“There is sadness in that this release marks the conclusion of the last inquiry the New Zealand Productivity Commission Te Kōmihana Whai Hua o Aotearoa will undertake.”
In this report, the commission focused on two big questions for New Zealand, he said.
“How can New Zealand prepare for a disruption where the nature, timing and impacts are unknown? How severe could the impacts of a potential disruption on New Zealand be?”
The report concludes New Zealand is “highly likely to experience more frequent supply chain disruptions due to an increasingly uncertain global environment”.
Modelling work was undertaken to look at the size and nature of impacts on New Zealand from three representative disruptions, including a trade war in Asia, a new technology making our dairy industry largely obsolete and a massive rise in the price of oil.
These disruptions could see between 24,000 and 112,000 jobs affected, even under the most optimistic assumptions, the report says.
It ran simulations around major supply shocks for 212 industries, 17 regions and workers from a range of different ethnicities, age groups and education levels.
The shocks modelled had the potential to reduce GDP by between 1.4 per cent and 7.5 per cent.
Dr Ganesh Nana, chairman of the Productivity Commission. Photo / Mark Mitchell
The report found New Zealand’s export sector had become more concentrated since 2008, increasing the exposure from supply chain events.
It noted our reliance on food commodity exports to a small number of markets (dominated by China) “may be more concentrated than direct trade statistics suggest, due to indirect exposures through the country’s trading partners”.
The commission recommends the Government build more capability for firms and industries to identify trade exposures and undertake risk analysis in their supply chains through proactive sharing of trade data and information.
It also recommends strengthening networks between industry and government to align investment intentions.
It argues for “leveraging focused innovation policy to support firms to export high-value products at scale, enabling New Zealand businesses to diversify export markets and increase resilience towards trade shocks, sharpening the focus on economic resilience in existing industry-facing growth and innovation funds” and “developing a strategic focus on economic resilience in the longer-term by building strong institutions, effective leadership, and good relationships among government bodies, industry organisations and the community”.
The report described “clear and strong connections between the challenges of building resilience, fostering innovation, and raising productivity.
“The future may be uncertain, but what is certain is there will be disruptions,” Nana said.
The Productivity Commission, founded in 2011 as part of a coalition agreement between Act and National, will cease operation at the end of next week.
Act pushed for the wind up of the commission as part of its new coalition agreement with National with funding redeployed to a new Ministry for Regulation.
In November the commission’s former chairman Murray Sherwin told the Herald he feared the independent Crown entity had become politicised, with former Finance Minister Grant Robertson appointing openly left-leaning economist Nana to lead it from 2021.
“The tone at the top matters,” Sherwin (who was appointed Productivity Commission chairman under a National-led Government) said.
“I’ve always felt that for these bodies to survive over the longer haul, they need to be able to survive changes of government. That means you can’t afford to have the leadership of the bodies going too far towards one side [of the political spectrum] or the other.”
However, Act leader David Seymour said his push to get rid of the Productivity Commission wasn’t about Nana.
“It’s not about the personnel. It’s a question of what problem is the organisation solving in return for taxpayer funds,” Seymour said.
“We believe a regulation ministry could solve much bigger problems for the same funds.
“As the commission highlighted numerous times over the years, most of New Zealand’s problems can be traced to poor productivity and poor productivity can be traced to poor regulation,” Seymour said.
“While much of the commission’s work has been cited and used by MPs, government agencies, academics and the media, it has been too easy for successive governments to ignore making productivity a focus.”
On its website, the commission says it is working through the completion of its work programme.
“As part of the disestablishment process, we are in discussion with Treasury to ensure this work programme, alongside other inquiry reports, accompanying analysis and research investigations completed by the Commission since its inception, will continue to be available after our operations cease on 29 February 2024.”
