The Government should commission a major review of migration policy to ensure New Zealand employers have access to skilled workers while reducing the inflow of low skilled and temporary migrant workers, a new report by the Productivity Commission says.
The Commission says the Government needs to work with sectors which currently depend on seasonal workers to transition away from that reliance.
It notes New Zealand has had the highest number of temporary work permits issued in the OECD, per head of population.
The call is part of a comprehensive review of New Zealand Government strategies for lifting productivity and innovation in the economy.
In a 250 page report - 'New Zealand firms: Reaching for the frontier' - the Productivity Commission highlights New Zealand's weaknesses, and runs comparisons with other small advanced economies like Denmark, Singapore and Sweden.
It makes a range of recommendations for Government action which include increased investment in R&D funding, more focus on attracting foreign direct investment in the innovative sectors and the simplification and consolidation of programmes to assist exporters.
The Commission found that the productivity of New Zealand's frontier firms is on average less than half (45 per cent) of that found in its international peers.
"New Zealand needs to change key aspects of the status quo, to lift the performance of its firms and lift national productivity," says Commission chair Ganesh Nana.
"Innovation is the key. Small countries can't be world class in everything. New Zealand needs to make some tough choices about where to prioritise investment on a few targeted innovation ecosystems, much like we do in sport."
Immigration policy is just one key area of focus in report and but is likely to be near the top of Government priorities as it looks to re-open borders in the coming year.
The Commission notes that despite large inflows of migrants to New Zealand over the last 10 years, skilled labour shortages continue.
It cites work by the NZ Institute of Economic Research (NZIER) which today released a separate report on Recognised Seasonal Employer (RSE) workers and skill shortages in the horticultural sector.
The work by NZIER suggests the influx of RSE workers in the past decade has hindered productivity gains in the sector
The Commission says there is a "mismatch at the lower-skilled end of labour supply".
"Some New Zealand industries, including in the primary sector, rely heavily on temporary migrant labour to meet their seasonal employment needs."
"There is mismatch between the supply of labour and the needs of firms, that is not being met either by the domestic education and training system, or by skilled migration".
The report recommends that the Government works collaboratively with industries that currently rely on seasonal migrant labour, "to develop a planned transition away from such reliance, and determine the role of government in supporting that transition".
This could include: supporting industries to accelerate the development of automation and other labour-saving technologies.
It could involve building the skill base for higher-tech production practices; and
helping to make jobs more attractive to local workers.
For example in horticulture, work could be coordinated across multiple crop types to provide work for all or most of the year, with associated training.
The review should look at how to reduce inflows of low-skilled and temporary
migrant workers over time.
"As part of this, the review should consider the aspirations of New Zealanders to attain higher skills and education, and jobs commensurate with their skills."
More evidence on the economic impacts of temporary migration in New Zealand was needed to support such a review, the Commission said.
That should include empirical studies to assess the impacts of working holidaymakers,
international students, and workers in the RSE scheme on local labour markets, automation and productivity.
Some other broader recommendations made by Commission included a review to evaluate NZ Trade and Enterprise's (NZTE) effectiveness in promoting added valued exports.
"The Government should review its funding channelled through Callaghan Innovation and New Zealand Trade and Enterprise, including funding targeted at individual firms to support innovation and exporting," the report said.
It also recommends a full review of the regulation of genetic modification (GM), to ensure it is fit for purpose and supports domestic innovation.