Fran O'Sullivan: Narrowing the Tasman divide

The Government will soon launch a Productivity Commission designed to run its ruler over key sectors in the NZ economy and advise on initiatives that might ultimately help bridge the income gap with Australia.

The proposal for a Productivity Commission has grown out of the post-election agreement National and Act made for a "high quality advisory group" which would be tasked with the challenge of investigating how NZ would close the income gap with Australia by 2025.

A decision to set-up a Productivity Commission in New Zealand will be warmly welcomed by the business sector.

Just over two-thirds (69 per cent) of respondents to the Herald's Mood of the Boardroom survey said they believed a body along the lines of the Australian Productivity Commission should examine business sectors and key government changes. Just 30 per cent were opposed.

The Australian Productivity Commission has undertaken work in New Zealand.

It studied proposals for a joint Australian competition authority in the wake of dissatisfaction - particularly on the Australian side - that a proposal for a tie-up between Qantas and Air New Zealand was foiled by the NZ competition regulator.

But the Australian body found there was insufficient transtasman competition to justify a joint body.

The Australian commission is well-known to many NZ business leaders. Its chairman Gary Banks has come to NZ several times to address influential business people on his commission's work.

The fact that Banks is known to many here probably underpins why 44 per cent of chief executives responding to the Herald survey favoured a proposal for the New Zealand Government to invite the Australian commission to come here and study more issues.

But 56 per cent were opposed.

One of the first initiatives for the new Productivity Commission should be to examine why New Zealand has so many ports.

Ports productivity is a major issue - for both exporters and importers - given NZ's distance from markets. Just two NZ ports have agreed to transparently provide benchmarking data to overlay on the Australian Productivity Commission's benchmarking studies in this area - other ports declined to participate.

Given the fact that Australia is New Zealand's biggest export market, it is important to get ports' efficiency increased.

It is still unclear who will chair the commission.

Minister for Regulatory Reform Rodney Hide favours former Reserve Bank Governor and now company director Don Brash.

The National-Act agreement spelt out the two parties' joint aspirations for greater prosperity for New Zealanders - with Australia as the benchmark.

Attaining the "concrete goal" of closing the income gap by 2025 would require a sustained lift in New Zealand's productivity growth to 3 per cent a year or more.

The political leaders' ambition was crystal clear - a high-quality advisory group would be established to investigate the reasons for the decline in New Zealand's productivity performance, identify superior institutions and policies in Australia and other more successful countries, and make credible recommendations on the steps needed to fulfil National and Act's aspirations.

Yesterday, Prime Minister John Key affirmed the Government had three key economic objectives, which together will result in improved and enduring economic growth.

These are:

Increasing New Zealand's productivity growth.

Maintaining high levels of employment.

Reducing New Zealand's vulnerability to adverse events.

Key said increasing our productivity growth basically means getting better at producing goods and services the world wants, and getting paid more for them.

The Herald's survey found 87 per cent of CEOs who responded had made productivity improvements in their own firms in the past year.

Many of the chief executives have invested heavily in technology or realigned their business systems to enhance productivity and efficiency.

Among other initiatives: Investing in training and introducing incentives to reward individuals; reworking internal processes, manufacturing excellence programmes, improvements to electronic banking; tighter job descriptions, more efficient business models.

To get a higher productivity performance at a national level the commission will need to take a systemic approach.

In Australia, the commission promotes itself as an "independent research and advisory body on a range of economic, social and environmental issues affecting the welfare of Australians".

Its role, expressed simply, is to help governments make better policies in the long-term interest of the Australian community.

The upshot of achieving a more productive economy is seen as the key to higher living standards.

In New Zealand's case, a systemic approach combined with individual company initiatives will be needed to bridge the gap.

The Australian Productivity Commission's work programme gives some insights into the type of issues that the New Zealand commission could be invited to examine.

The Australians are examining the relative performance of the public and private hospital systems looking into comparative hospital and medical costs for clinically similar procedures.

It is examining Australia's anti-dumping system, executive remuneration, the contribution of the not-for-profit sector and gambling.