Wayne Mapp: Slowdown calls for productivity boost

Wayne Mapp

This year is going to be tough if the current low level of business confidence is a guide to the future. The effect will be that growth might be doing well to reach 1 per cent a year. This figure barely matches population growth, with the result that per capita income would be static.

It is time for the Workplace Productivity Group, established by the Government in 2004, to make a real impact on how New Zealand can improve its growth. The group is intended to be a collaborative exercise between the Government and business and, given the ideology of the current Government, unions. The objective is to boost New Zealand's productivity.

Our productivity growth has remained stubbornly low at 1.4 per cent a year on average over the last 10 years, compared with 2 per cent in Australia over the same period. Australians have become richer compared to New Zealanders. Our low level of productivity is also one of the reasons why New Zealand is so vulnerable to the impact of exchange rates, interest rates and commodity prices.

Research by the New Zealand Institute shows that the overall composition of New Zealand exports has scarcely changed over the last decade. We remain primarily an efficient, low-cost producer of temperate agricultural products.

The reforms of the 1980s have certainly made the economy more efficient, and improved the profitability of our principal agricultural producers. They do not seem to have led to a more diverse range of exports, at least in goods. In 2005, only 50 firms had annual exports greater than $75 million.

Of course, trade in commodities and physical goods gives only a partial picture of our economy. Trade in services, tourism and by the creative industry, particularly film production and educational services, has grown at a much faster pace than our traditional commodity-based business. Tourism has grown from $9.1 billion in 1995, to $17.2 billion in 2004. Nevertheless, New Zealand's export performance compared with other similar developed economies is poor. In Ireland, exports are 86 per cent of GDP; in Finland the figure is 43 per cent, but in New Zealand it is 29 per cent. As the New Zealand Institute notes, there is no developed country with a similar population to ours that exports less than New Zealand.

All this raises the question, "What can be done about it?"

This is where the Workplace Productivity Group should have something to say. The work done to date largely consists of platitudes. There is no sense of urgency on what has to be done to improve New Zealand's economic performance. Much of what the Government does is counter-productive. It has been steadily increasing the cost of business through greater compliance costs. It has stubbornly refused to reduce taxes, either for individuals or the corporate sector, even though there is an annual surplus of $8 billion. However, the question that has to be asked is whether the productive potential of the economy can be unlocked if the principal prescription is to reduce taxes and compliance costs.

In successful economies, Governments do more than get out of the way. They are the primary funders of education, and actively work to attract international business. The common theme of the most successful countries is a highly skilled workforce. In 2002, New Zealand's expenditure in tertiary education is 1.5 per cent of GDP, falling well short of Australia's 1.7 per cent, particularly given so much of New Zealand's tertiary education expenditure is on low-quality and low-level courses such as those offered by Te Wananga o Aotearoa.

There is comparatively little sense of strategic direction for tertiary education. There is not any significant consultation with the business and private sectors, although some notable efforts to change this, with the University of Auckland's new business school, and business incubators such as Auckland's Icehouse, and Massey University's Albany facility.

The productivity reference group needs to take a much more focused approach to improving the quality of New Zealand's workforce and building quality management. We need to do more to work out what are the key drivers of success in other small highly developed economies. The alternative will be a continuation of the brain drain across the Tasman, and less choice and opportunity for those New Zealanders who remain here.

* Wayne Mapp is a National MP and spokesman for labour and industrial relations