A fresh look at productivity indicates New Zealand's best and most innovative firms are about half as productive as their counterparts in other small advanced economies.
Productivity Commission chair Murray Sherwin said this report was different from the many others it had produced over the past 10 years since it established to help lift improve New Zealand's productivity.
"What's new in this inquiry is that we've been able to do some comparisons with other what we call the small advanced economies ... and the answer is that we appear to be a long way behind, maybe even half the levels of productivity in terms of labour productivity," he said.
"Our penetration in export markets is about half that of the small advanced economies groups."
The commission also backed a recent report by the Institute of Economic Research, which recommends a revamp of migration policy, putting a stop to cheap imported labour particularly to fill jobs in the hospitality, tourism and agricultural sectors.
It also drew from a recent report by British economist professor Richard Harris suggesting New Zealand's major problem was a failure to adopt productivity-enhancing technologies, the small size of local companies, and a lack international connections.
"A key difference is that successful small advanced economies focus their investments on creating world class innovation ecosystems around their leading firms," Sherwin said.
"Successful small advanced economies have large companies that export specialised, distinctive products at scale. By comparison, most of New Zealand's larger companies are strongly oriented towards sales in the domestic market," he said, adding that just 30 companies account for half of New Zealand's exports. "Those exports tend to be less specialised, less distinctive than we see in other advanced economies."
Among the report's recommendations was a change to laws restricting genetic modification and associated technologies in an effort to improve productivity in agriculture as well as New Zealand's response to climate change.
"More particularly, right now, we're locking our scientists out of really understanding what's going on and being able to stay up with with recent developments and I think that's ultimately unhelpful, and we'd like to see that change," Sherwin said.