A small increase in productivity growth could unlock tens of billions in future value, study finds
Increasing productivity growth by just 1% could unlock tens of billions in future value for New Zealand, according to a report released by ASB.
The research, conducted by the New Zealand Institute of Economic Research (NZIER), highlighted New Zealand’s productivity lag compared to international peers and the critical role businesses must play in reversing this trend.
The report suggested that elevating productivity growth from 1.5% to 2.5% could propel real GDP to $500 billion by 2045, marking a 5% boost over existing forecasts.
A focus on business innovation and investment
Christina Leung (pictured above), NZIER principal economist, underscored the importance of business ambition and investment in innovation, capital, knowledge, and research, and development.
“New Zealand business needs to be more ambitious, embrace innovation, and invest in capital, knowledge, and research and development as an engine for growth and sustainability,” Leung said.
The urgency of addressing productivity now
The report called for immediate action to enhance productivity, highlighting the ageing population's impact on New Zealand’s labour force participation. It pointed to international competition as a catalyst for performance improvement, citing examples from the Nordic countries, Ireland, and Singapore.
Government and banks to support, not lead
While recognising the government’s role in creating a conducive environment for growth, the report stressed that the onus is on the business and non-government sectors to take the lead.
“A culture of innovation coupled with sustainable, domestic ecosystems, that bring together business, research institutes, government and the finance sector, create opportunities for business to share knowledge, innovate and grow,” Leung said.
“The government cannot fix New Zealand’s productivity problem on its own. It’s time for business and the non-government sector to take leadership by being more ambitious and collaborative with a focus on developing skills that would enable adoption of new technology.”
Leung stressed the importance of businesses recognising the advantages of investing in areas like research and development to foster product innovation or enhance processes.
She said that once businesses are inspired to act, it’s crucial for the conditions conducive to productivity growth to be established, ensuring a straightforward route to investment.
Leung also pointed out the pivotal role of banks in aiding businesses to innovate and expand by facilitating access to both traditional and innovative financing solutions.
ASB commits to supporting productive investments
Rebecca James, ASB’s executive general manager for business banking, said the bank was committed to supporting businesses in their productivity-enhancing initiatives.
“We’re doing that through our lending for productivity, as well as initiatives already available for food and fibre exporters, clean tech innovators, and developers and investors in social, affordable, and Māori housing,” James said.
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