Productivity

Productivity is about ‘working smarter’ rather than ‘working harder’. It’s a measure of how much output we produce from a given quantity of inputs.

Productivity is about how well people – individuals, businesses, countries – combine resources to produce goods and services.

Countries think about productivity as a comparison of national output – Gross Domestic Product (GDP) – to a measure of inputs (for example hours worked). It’s about how good countries are at turning their inputs – resources – into outputs. That is, how productive they are.

The Commission aims to lift New Zealand’s productivity and, as a result, lift the wellbeing of New Zealanders.

Productivity matters

Improving productivity is essential to raising wellbeing and fostering inclusive, sustainable economic growth in New Zealand.

How productive we are as a country impacts our daily lives – for example, what healthcare we can afford, the quality of education available, how much we get paid, the interest rates we pay and how much time off work we can afford.

When productivity growth is stronger, real wage growth is stronger too. This may mean that more families can have decent incomes without having to work long hours.

New Zealand’s productivity performance

Workers in New Zealand work longer hours and for less reward than workers in most other OECD countries. We are one of a small number of OECD countries with both a low level of labour productivity and low productivity growth. Countries with productivity records similar to New Zealand are Mexico, Greece, Portugal, Israel, and Japan. The most productive country is Norway.

New Zealand's labour productivity, or output per hour worked, is around 40% below the average OECD benchmark. Since 1996 there has been no sign of this catching up to the top half of the OECD. Instead the gap has increased.

So why is New Zealand's productivity performance so low? It used to be said that New Zealand’s productivity performance was a paradox, but recent research has changed this view. For example, a combination of New Zealand's small domestic markets and large distances to global markets works against the diffusion of new technologies and ideas into our economy and across businesses. Very few New Zealand businesses operate at the global technological frontier in their industry. We have lots of very small low-tech businesses surviving in a small, insular domestic market with weak competition. This isn’t a recipe for productivity growth. 

The Commission's research and inquiries aim to better understand how to enhance New Zealand's productivity performance and we put forward policy recommendations to the Government to lift productivity. Ultimately, there is no simple quick fix. Turning around New Zealand's productivity will require consistent and focussed effort over many fronts and for many years. 

Find out more:

The Government plays a key role in lifting productivity

New Zealand's laws, policies and institutions are made to best support the wellbeing of New Zealanders.

The Commission provides the Government with independent policy advice and research to improve productivity. The insights from our research and policy recommendations from our inquiries aim to improve the current system to contribute to a more productive New Zealand. 

The Government’s response to the Commission’s inquiry reports are published by The Treasury here.