As part of New Zealand's first Productivity Week in March, businesses were asked to consider how they might help address the country's lacklustre productivity performance.

Productivity is a key determinant of economic growth, so New Zealand's poor performance in the regions and more so in its largest city Auckland, is a real concern.

One of the key outcomes expected of the new $3 billion Provincial Growth Fund is to raise productivity; however, productivity is a complex issue with no quick fix. Part of the challenge is translating complex economic reports into simple meaningful messages that businesses can respond to.

The New Zealand Productivity Commission, established as an independent Crown entity in 2011, has undertaken excellent analysis of the causes and consequences of New Zealand's low productivity growth and published reports that have both informed the debate and influenced government policy.

However, much of the language is technical and contains many of the disclaimers and assumptions typical of economic analysis, making it hard to translate into action.

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Smart technology which was used to land and navigate on Mars is being tested in Northland trucks. Northland Innovation Centre chief executive Martin Knoche with the IPS mapping device. Photo / File
Smart technology which was used to land and navigate on Mars is being tested in Northland trucks. Northland Innovation Centre chief executive Martin Knoche with the IPS mapping device. Photo / File

The commission's recent publication The Labour Income Share in New Zealand: An Update looked at the critical connection between labour productivity and wages. It highlighted that over the long run, when labour productivity rises, wages also tend to rise; and, of course, the reverse is true.

The report acknowledges the inequality where in a global and New Zealand context, growth in real wages has been "slower" than growth in productivity. Despite improvements to productivity in many countries, the benefits of this growth are not universally resulting in equal improvement in workers' wages, which impacts negatively on equality.

The reasons for this are not fully understood, but productivity improvement being driven by capital investment, technological change and the drive towards flexible labour markets are all having an impact.

The report concludes that New Zealand needs to improve the flexibility and resilience of 'the economy' so we are prepared for the opportunities and challenges of ongoing technological change and disruption, particularly if future productivity growth is to also support future wage growth.

The accelerating depth and pace of technological change is challenging and we are continuing to fall behind international peers. The productivity premium enjoyed by Auckland is being eroded; and inequality is becoming entrenched within and between regions.

Let's embrace innovation and disruptive technologies now, writes David Wilson; augmented reality/virtual reality, Internet of Things, robotics, artificial intelligence and Blockchain. Getty / Images
Let's embrace innovation and disruptive technologies now, writes David Wilson; augmented reality/virtual reality, Internet of Things, robotics, artificial intelligence and Blockchain. Getty / Images

The provinces face similar challenges in different ways. For example, high dependency ratios (a smaller percentage of working age people) demand different approaches in both assessing and addressing productivity challenges.

To build economic adaptability and resilience the current and future workforce must have the qualifications, skills and flexibility to embrace change and technological disruption.

Let's also embrace innovation and disruptive technologies now. Augmented reality/virtual reality, Internet of Things, robotics, artificial intelligence, and Blockchain have the potential to disrupt all industries and create new forms of value.

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New Zealand must support its pioneer companies and world-renowned researchers in this space, and adopt the platforms they're creating more broadly across all industries and regions.

Cities with plenty of tech businesses and strong research capability and assets need to up their game in supporting NZ Inc's export efforts. For the provinces this may mean innovating in established comparative advantages to create internationally competitive specialisations, or to diversify.

New Zealand is a nation of small businesses. Typically less than 10,000 new businesses are created each year – the difference between business births and business deaths - but for a country with one of the fastest growing populations in the OECD, this is arguably too few. There is an opportunity to accelerate the establishment and expansion of small businesses across the country.

In a growing era of protectionism, let's instead seek out opportunities for export and trade growth and take full advantage of the opportunities created for us overseas through our comprehensive platform of free trade arrangements. Trade not only offsets our small domestic market, it also opens us up to competition which in turn drives innovation and productivity.

Finally, let's ensure that the benefits of innovation, entrepreneurship and trade fall across society. Being innovative, flexible and resilient, are hallmarks of New Zealand's history and development. Let's keep it that way.

■ Dr David Wilson is the chief executive officer of Northland's Economic Development Agency, Northland Inc, and chairman of Economic Development NZ.
■ Patrick McVeigh, is GM – Business, Innovation and Skills at ATEED, and an EDNZ Board Member.