That is because New Zealand’s biggest economic challenge is not a lack of technology. It is productivity.
For decades, New Zealand has struggled with relatively weak productivity growth. We work long hours by OECD standards, yet our output per worker continues to lag many comparable economies. Economists have long argued that lifting productivity is one of the most important ingredients for improving living standards, supporting higher wages and driving long-term economic growth.
The reason is relatively simple. Productivity determines how much value an economy can generate from its people, capital and resources. When productivity rises, businesses can produce more, workers can earn more, and living standards tend to improve. It also expands the pool of economic activity from which governments collect tax revenue. In a country facing rising healthcare, infrastructure and superannuation costs, that matters.
In many ways, productivity is the wealth story.
Over long periods, rising productivity underpins stronger company earnings, higher household incomes and greater national prosperity. It is one of the key drivers of long-term investment returns.
This is where artificial intelligence becomes particularly relevant.
There is growing expectation across both the public and private sectors that AI can help organisations do more with less. In Wellington, ministers have signalled that digitisation and AI will play an increasing role in improving efficiency across government. Businesses are reaching similar conclusions as they look for ways to reduce costs, improve customer service and remain competitive.
The ambition is understandable. But there is an important distinction that often gets lost in the discussion. A useful way to think about AI is that it does not create capability on its own. Rather, it amplifies the capability that already exists within an organisation.
There is a temptation to view AI as a shortcut to productivity. Buy the software, automate a few processes, reduce costs and efficiency magically improves.
The reality is usually more complicated.
The organisations generating the greatest value from AI are not simply deploying new tools. They are redesigning workflows, improving access to information, strengthening governance, and building systems that allow people and technology to work together effectively.
The sequence matters.
Too often organisations focus on the technology first and the operating model second. In practice, the biggest gains tend to come when those steps occur in reverse.
Put differently, AI acts as a multiplier. If an organisation has strong processes, high-quality data and clear decision-making frameworks, AI can significantly enhance performance. If those foundations are weak, technology often amplifies inefficiencies rather than solving them.
This challenge is already becoming visible through what some describe as a “two-speed AI” environment.
In many organisations, a small group of highly engaged users is extracting substantial value from AI tools every day. At the same time, much of the broader workforce remains stuck in experimentation mode, using AI inconsistently or not at all.
The result can be fragmented adoption, uneven outcomes and growing governance challenges. Formal systems are introduced through approved channels, while more powerful tools often appear through personal accounts and informal experimentation.
The issue is rarely a lack of technology. More often, it is a lack of organisational readiness.
Despite the attention AI receives, adoption across the economy remains surprisingly uneven. Recent surveys suggest many organisations are experimenting with AI, but relatively few have embedded it into their core workflows. In the United States, Census Bureau data suggests only around one in five businesses are actively using AI in day-to-day operations. Even among organisations that have adopted AI, the gap between experimentation and transformation remains significant.
That distinction matters. If AI adoption were already widespread and mature, many of the productivity gains might already be reflected in economic data. Instead, much of the opportunity may still lie ahead as organisations move from testing tools to fundamentally redesigning how work gets done.
New Zealand is unlikely to build the world’s leading AI models. We do not possess the scale, capital or infrastructure of the United States or China. But we do have an opportunity to become an exceptionally effective adopter.
History suggests that countries do not always need to invent transformative technologies to benefit from them. Often the greatest gains come from applying new technologies effectively across the wider economy.
Electricity provides a useful example. The technology itself was revolutionary, but many of the largest productivity gains did not occur immediately after its invention. They emerged years later when businesses redesigned factories, workflows and production processes around it. Simply replacing a steam engine with an electric motor delivered some benefits. Reimagining how work was done delivered far more.
AI may prove similar. The biggest gains are unlikely to come from simply purchasing new software. They are more likely to come from redesigning how organisations operate.
Digital artwork of AI technology being used in healthcare.
Healthcare provides a useful example. AI is already being explored to assist radiologists, improve stroke diagnosis, reduce administrative burdens and support clinical decision-making. The objective is not to replace doctors and nurses, but to help skilled professionals make better decisions faster and spend more time where they add the greatest value.
Education may offer an equally significant opportunity.
While much of the public debate focuses on whether students are using AI, a more important question may be how teachers and schools can use it to improve learning outcomes. Many educators are already experimenting with AI to help prepare lesson plans, develop resources and reduce administrative workloads.
The goal is not to replace teachers, but to make great teachers even more effective. Great teaching relies on relationships, judgment and encouragement – qualities technology cannot replicate. But AI may allow teachers to spend more time on those high-value activities and less time on paperwork.
That opportunity is particularly relevant given New Zealand’s educational challenges. OECD assessments show student achievement in mathematics, science and reading has declined over recent decades. If AI can help personalise learning and free up teachers to focus on students who need the most support, the benefits could extend well beyond the classroom.
In many respects, education is where the productivity story becomes a prosperity story. Better educational outcomes contribute to a more skilled workforce, stronger economic growth and higher living standards over time.
Perhaps the most important consideration is demographic.
Like many developed countries, New Zealand faces an ageing population, rising healthcare costs and increasing pressure on public finances. Labour shortages remain a challenge across a number of industries.
Viewed through that lens, the question may not be whether AI replaces workers. It may increasingly be whether AI helps a smaller workforce support a larger population.
That distinction is important because concern about AI remains high. Many New Zealanders worry that AI could threaten jobs or fundamentally change the nature of work. Yet history suggests new technologies tend to reshape work more often than they eliminate it. While AI can automate certain tasks, it still lacks human judgment, accountability and genuine emotional intelligence.
The more likely outcome is that AI makes people more productive rather than replacing them entirely.
Much of the discussion around AI has focused on technology companies and soaring share prices. Yet the larger opportunity may ultimately lie in what AI does for productivity across the broader economy.
The internet transformed commerce. Smartphones transformed communication. AI has the potential to transform how knowledge work is performed. If deployed effectively, the benefits could extend well beyond the technology sector and flow through to company earnings, wages, public services and overall economic growth.
That is why the AI conversation should not be viewed solely as a technology story.
Ultimately, productivity is one of the foundations of long-term wealth creation.
New Zealand’s opportunity is not to outspend Silicon Valley or compete in a global race to build the next frontier model. It is to become world-class at applying these technologies where they deliver genuine value.
In many respects, New Zealand’s AI challenge is less about technology and more about adoption. The tools already exist. The question is how quickly businesses, institutions and workers can incorporate them in ways that genuinely lift productivity.
The organisations and countries that benefit most from AI are unlikely to be those that simply purchase the most software licences. They will be the ones that redesign how work gets done.
If New Zealand gets that right, AI could become one of the most important productivity tools the country has seen in decades. And over time, productivity is what drives prosperity, higher living standards and long-term wealth creation.
Generate is a New Zealand-owned KiwiSaver and Managed Fund provider managing over $9 billion on behalf of more than 190,000 New Zealanders.
This article is intended for general information only and should not be considered financial advice. The views expressed are those of the author. All investments carry risk, and past performance is not indicative of future results.
To see Generate’s Financial Advice Provider Disclosure Statement or Product Disclosure Statement, go to www.generatewealth.co.nz/advertising-disclosures/. The issuer is Generate Investment Management Limited.