NZ productivity gets low rating

By IRENE CHAPPLE

New Zealand's productivity is ranked woefully low in the latest international competitiveness report.

It is 24th out of the 29 economies with populations under 20 million included in the survey.

That compares with Australia, which came in fifth in the rankings of economies with populations over 20 million.

The rankings are part of the annual IMD World Competitiveness Yearbook.

Economists struggled to explain why New Zealand's productivity - which is the GDP per person employed - is so low.

A kneejerk reaction would be to conclude that New Zealanders were slack workers - but that was not accurate, they said.

Deutsche Bank chief economist Ulf Schoefisch said there had been many productivity studies but none had come up with a substantive answer.

Because New Zealand's workforce was cheap, companies might employ more people rather than buy new machinery to produce a product, thus lowering productivity figures, Schoefisch suggested.

Another reason could be the strength of New Zealand's service sector, which included industries such as tourism and business services and was personnel-intensive.

Bank of New Zealand economist Stephen Toplis said inappropriately skilled labour could be an issue, as could infrastructure.

If Auckland roads were congested and workers were stuck in traffic for hours on end, he said, that would reduce productivity.

However, there were similar problems in other countries.

Treasury's Bob Buckle and Geoff Lewis were not convinced by a graph used to judge New Zealand's productivity. It showed a steep drop in productivity between 1997 and 2001, then rising last year. The graph used the US dollar which would be heavily affected by the exchange rate.

Buckle also said the six-year graph went though the recession of the late 1990s.

A graph over a longer period of time would give a more accurate picture.

Later figures were affected by an increase in employment. If newly employed people had low skills, their contribution to the GDP would not be high.

Buckle and Lewis said it also depended on how productivity was calculated. New Zealand does not yet officially calculate productivity.

Overall, New Zealand was ranked the 14th most competitive nation - the same as last year - of countries with populations under 20 million.

The rankings, which placed the United States and Finland top, measure economic performance, Government efficiency, business efficiency and infrastructure.

New Zealand ranked well on Government and business efficiency, and badly on infrastructure and economic performance.

The New Zealand Institute of Management, which was a local partner for the survey, said the study helped identify five challenges facing the country.

They were to:

* Diversify the product base and increase value-added products.

* Improve international sales and marketing of products.

* Improve access into foreign markets by reducing international trade barriers.

* Increase the supply of skilled labour and investment in employees.

* Increase infrastructure investment.


Productivity:*

1. Ireland

2. Catalonia (Spain)

3. Hong Kong

4. Ile-de-France (France)

5. Denmark

6. Singapore

7 Bavaria (Germany)

8 Greece

9 Belgium

10 Luxembourg

24 New Zealand


* in economies with fewer than 20 million people.