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

New Zealand’s productivity performance is at the heart of achieving sustained higher living standards and greater wellbeing.

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.

Find out more: What is productivity and why does it matter?

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.

New Zealand's labour productivity, or output per hour worked, is around 40% below the average OECD benchmark, with no sign of catching up. Since the global financial crisis (and before Covid-19), New Zealand’s labour productivity growth has continued to slow.

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 small, insular domestic markets with weak competition. This isn’t a recipe for productivity growth. 

There is no single prescription for lifting productivity across the board. The Commission has been at the forefront of research into the drivers of, and the barriers to, improved productivity, and we have developed a broad diagnostic of New Zealand's poor productivity performance. Our inquiries have detailed policy recommendations to improve performance in specific areas.

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.