Look familiar? (Photo: Getty Images)<\/p>\n
But New Zealand\u2019s productivity is consistently rubbish. Over the past 30 years we\u2019ve increased the hours we work and the number of people working them much more rapidly than comparable countries, and yet still we produce less. The last decade in particular has sent alarm bells ringing: there\u2019s been \u201ca significant and persistent slowdown in productivity growth\u201d, according to Treasury<\/a>.\u00a0<\/p>\n We\u2019ve been trying to figure out why this is and how to fix it for decades, but no one\u2019s quite managed it. It\u2019s not surprising, then, that when a new potential scapegoat emerges, we jump on it. The latest culprit is our extended summer holiday period. In a much-discussed column for The Post<\/a>, business adviser Toss Grumley argued that the \u201ccircle back in February\u201d mentality kicks in by late November\/early December, thus setting in motion 10 weeks of bugger all being done, even if workers are physically present at their place of employment.\u00a0<\/p>\n Does he have a point, or could something else be to blame? Here\u2019s a quick run-through of everything that\u2019s been singled out as a cause of Aotearoa\u2019s productivity crisis over the past 65-odd years.\u00a0<\/p>\n Our \u2018she\u2019ll be right\u2019 attitude\u00a0<\/p>\n New Zealanders\u2019 laidback nature has been repeatedly pointed to as an explanation for why we\u2019re so unproductive, with a management consultant identifying the issue way back in 1959, before our true productivity shitness had even kicked in: \u201c\u2018We cannot afford to use the stock New Zealand phrase, \u2018She\u2019ll be right\u2019,\u2019\u201d said Mr AM Walker at a New Zealand Institute of Management discussion in April 1959, reported The Press<\/a>. \u201cMr Walker said that in a changing world manufacturers must be ready with the latest and best, or be left behind in the race to markets.\u201d He also reckoned stop-watches and financial incentives should be used to get workers working faster and better.<\/p>\n Fast-forward 64 years and Sir Peter Gluckman made a very similar point<\/a> regarding a lack of investment in research and development. \u201cWe\u2019re paying the price for a rather casual, she\u2019ll be right approach to knowledge \u2026 rather than investing for the future.\u201d<\/p>\n We\u2019re a bunch of work-shy layabouts<\/p>\n Or \u201ca country of lotus-eaters to whom pleasure in all its aspects takes precedence\u201d, as one writer put it in 1977<\/a>, in a foreshadowing of Grumley\u2019s summer-hols-are-too-long column. Our \u201cvast holiday-camp atmosphere\u201d, as Peter Isaac described it in the journal of the Manufacturers\u2019 Federation, doesn\u2019t appear to have improved since then. Just this week, while telling Stuff<\/a> that Grumley had a point, Auckland Business Chamber head Simon Bridges said he\u2019d spoken to international business types who saw New Zealanders as \u201clifestylers\u201d more interested in work-life balance than in growing the economy.<\/p>\n A few months ago, University of Auckland economics professor Robert MacCulloch didn\u2019t sugarcoat the situation, telling The Post<\/a> (probably with tongue firmly in cheek), \u201cWe\u2019re getting lazier. We\u2019re just scrolling the web.\u201d Interestingly, MacCulloch pointed to Christopher Luxon\u2019s much-criticised \u201cI\u2019m wealthy, I\u2019m sorted\u201d comment as an example of New Zealand\u2019s collective DGAF attitude \u2013 because in other countries a mere $20-something-million net worth would not be seen as grounds for such claims.<\/p>\n \u201cIn Silicon Valley, when you are worth what Luxon is worth, you don\u2019t consider yourself sorted,\u201d said MacCulloch. \u201cI\u2019ve lived in London and New York, in London there are bankers with hundreds of millions of pounds, they get up at 5am \u2026 They just want more, and it\u2019s never enough. I don\u2019t find that in New Zealand. Like Luxon said, \u2018I have enough\u2019.\u201d<\/p>\n He doesn\u2019t think that\u2019s the crux of the issue, though. That, in MacCulloch\u2019s view, is\u2026\u00a0<\/p>\n Underinvestment in key infrastructure<\/p>\n And he\u2019s not alone there. \u201cPersistent large infrastructure gaps\u201d were pointed to in an IMF report<\/a> on New Zealand\u2019s productivity challenge released earlier this year, as \u201cinfrastructure quality is critical for reaping the benefits from innovation into overall economic growth\u201d.<\/p>\n Infrastructure includes everything from crappy roads and public transport (can\u2019t get much mahi done when you\u2019re stuck in a traffic jam<\/a>) to crappy internet (the IMF report points to nearly half of New Zealand firms experiencing internet disruptions, pointing out that \u201cgains from digitalization are larger for firms located in regions with better digital infrastructure and faster internet speeds, implying public investment in such infrastructure can help amplify the effect of advanced digital technology in boosting productivity\u201d).\u00a0<\/p>\n Or, as a 2017 OECD working paper<\/a> put it, \u201cEconomic geography is an important factor in New Zealand\u2019s poor productivity performance, as the small size and remoteness of the economy diminish its access to global markets, the scale and efficiency of domestic businesses, the level of competition, and the ability to benefit from innovation at the global frontier.\u201d\u00a0<\/p>\n Red tape and bureaucracy and stuff<\/p>\n Before the RMA was even a twinkle in Geoffrey Palmer\u2019s eye, people were complaining about overregulation dragging down productivity. \u201cToday\u2019s visit to Wellington was a typical example of the loss of productivity going on in New Zealand at present,\u201d said Christchurch mayor Ron Guthrey in 1971<\/a>, having gone to the capital to make a submission about Hagley Park on some bill or other. \u201cA full day was wasted by eight people from Christchurch and half a day by 12 Wellington people through departmental bungling and parliamentary red tape.\u201d<\/p>\n By 1984, a forestry boss was pointing to<\/a> \u201clarge-scale, prolonged disputes\u201d slowing down projects. \u201cIn such a small society I never cease to be amazed at the incredible number of unproductive organisations which wasted effort by indulging in duplicated activities, pushing parochial causes, and egotistically seeking publicity,\u201d Mr WA Hunt of Forest Products Ltd told The Press, adding that he reckoned a 5% boost in national productivity would go a long way towards solving New Zealand\u2019s economic problems in the next three years.<\/p>\n In more recent years, there has been the RMA, of course. \u201cThe Resource Management Act has been the worst handbrake on New Zealand\u2019s productivity bar none,\u201d said Taxpayers\u2019 Union spokesperson James Ross when the replacement bills were introduced this week.<\/p>\n So our productivity\u2019s gonna go through the roof soon, right?<\/p>\n Well, maybe, but then there\u2019s\u2026\u00a0<\/p>\n The tax system<\/p>\n Complaints about New Zealand\u2019s tax system discouraging productivity have been floating about since at least 1963<\/a>, and attempting to explain them all here would be an exercise in futility. But it\u2019s clear that there\u2019s no easy fix. \u201cWhen it comes to significant changes that would truly shift the dial, there are relatively few tax options available in the short run to support productivity growth,\u201d according to a recent speech<\/a> by Struan Little, Treasury\u2019s chief strategist.<\/p>\n The main problem is that \u201cOur tax system incentivises putting savings into housing, penalises certain types of saving when inflation is high, and encourages work and saving through entities like companies,\u201d he said. To solve that we need to move towards \u201ca more comprehensive and coherent income tax\u201d. That includes taxing capital gains, yes, but a CGT would be \u201cjust one part of a broader package of reform to tackle the inconsistencies in our income tax\u201d. It would have to include looking at \u201calternative income tax systems, such as a Norwegian-style dual income tax, which allows for different rates to apply to labour and capital income\u201d.\u00a0<\/p>\n Incentivising the wrong sort of investment is something highlighted by the aforementioned IMF report in its discussion of \u201cgazelles\u201d \u2013\u00a0the name given to young, high-growth firms. Our gazelle birth rates have been lower than our peers and concentrated in the financial and real estate sectors. \u201cThese trends suggest investment and innovation incentives may be misaligned between sectors in New Zealand,\u201d said the report. \u201cTrends could also be a symptom of the high propensity to save in real estate.\u201d\u00a0<\/p>\n In his analysis of the report, tax expert Terry Baucher said<\/a>, \u201cThis is where I think the issue of our lack of capital gains tax and a general lack of capital taxation comes home to roost. The incentives to invest in businesses have been trumped by the investment and lending practices in real estate.\u201d<\/p>\n This was pointed to in the OECD\u2019s economic survey of New Zealand last year, wrote economist Cameron Bagrie in BusinessDesk<\/a>: \u201cLimited competition dilutes pressures to innovate, become more efficient, and provide better services and cheaper prices to consumers.\u201d The OECD\u2019s proposed solution is a strategy of gradual escalation of intervention, or, as Bagrie puts it, \u201cput some bullets in the chamber and fire one\u201d, ie stop putting them \u201con notice<\/a>\u201d and actually break up the major players.\u00a0<\/p>\n Bad bosses<\/p>\n The greatest barrier to productivity growth was \u201cconservative management\u201d, a former industrial relations manager said at a productivity seminar in 1972<\/a>, \u201cpensively reacting to factors which it believed were beyond its control.\u201d\u00a0<\/p>\n University of Auckland Business School professor Rob McNaughton said much the same thing<\/a> a few weeks ago, pointing to a survey of business leaders that found most of them blamed the productivity problem on others. \u201cWe know there\u2019s a problem, but we tend to think it\u2019s someone else\u2019s fault: the government\u2019s, big business\u2019s, or \u2018the system\u2019s\u2019. In reality, productivity begins with the everyday choices made within firms.\u201d\u00a0<\/p>\n We\u2019re not happy enough<\/p>\n Writing for The Conversation<\/a> earlier this year, a clinical psychologist from Victoria University pointed to \u201ca substantial body of evidence<\/a> showing poor mental health is related to poor productivity\u201d. Measures taken by employers to improve workers\u2019 mental health could therefore boost productivity, and the \u201cmost promising appear to target leadership capability, health screening and psycho-socially healthy working environments\u201d, said Dougal Sutherland. One of those is the four-day work week pioneered in New Zealand by Perpetual Guardian. Another is when a packet of biscuits appears in the kitchen of The Spinoff office.\u00a0<\/p>\n We don\u2019t have industry bargaining<\/p>\n This was suggested by union brains Edward Miller and Craig Renney in a piece for The Spinoff<\/a> in 2023. Countries with industry bargaining, where key terms and conditions of work are coordinated across entire industries, don\u2019t face the same \u201crace to the bottom\u201d to deliver competitiveness, they reckoned. \u201cTaking wages out of competition helps force firms to compete on other issues \u2013 such as efficiency, quality or product innovation. Overseas, industry bargaining has also made it easier to manage training across industries, helping with the problem of \u201cfree-riding\u201d employers who don\u2019t train any staff and steal them from others who do. A big part of New Zealand\u2019s chronic productivity problem is essentially a skills problem.\u201d\u00a0\u00a0\u00a0<\/p>\n Speed limits<\/p>\n Letting commuters zoom to work in no time by increasing speed limits<\/a> was part of the coalition government\u2019s grand plan to boost productivity. Some holes were quickly picked in this argument by the likes of urban planning lecturer Timothy Welch<\/a>, who pointed out that simply changing the number on the sign would not magically clear congestion, while also increasing the likelihood of crashes, which are famously not that helpful in terms of making that 9am meeting.\u00a0<\/p>\n In sum, then, New Zealand\u2019s productivity problem is because of our long Christmas shutdown period, our she\u2019ll be right attitude, the fact we\u2019re a bunch of work-shy layabouts, underinvestment in key infrastructure, because we\u2019re so damn small and so damn far away, red tape and bureaucracy and stuff, the tax system, insufficient competition, bad bosses, because we\u2019re not happy enough, because we don\u2019t have industry bargaining, and speed limits. Hope that clears things up.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"The lengthy Christmas shutdown period is just the latest in a long line of suspects. If the OECD…\n","protected":false},"author":2,"featured_media":178013,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[138,492,1702,111,139,69,624,113880,113881,4478],"class_list":{"0":"post-178012","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-comments-enabled","10":"tag-infrastructure","11":"tag-new-zealand","12":"tag-newzealand","13":"tag-nz","14":"tag-productivity","15":"tag-red-tape","16":"tag-tax-system","17":"tag-workers"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/178012","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=178012"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/178012\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/178013"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=178012"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=178012"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=178012"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Photo: Getty Images
\nWe\u2019re so damn small and so damn far away\u00a0<\/p>\nImage: The Spinoff
\nInsufficient competition\u00a0<\/p>\n<\/p>\n