20 Apr 2021

New Zealand firms' productivity lower than comparable economies - report

5:29 am on 20 April 2021

The productivity of leading companies in New Zealand is on average less than half of that found in the top companies in other small advanced economies.

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Productivity Commission chair Ganesh Nana. Photo:

The Productivity Commission has released its findings into what are known as frontier firms, the top 10 percent.

Productivity Commission chair Ganesh Nana said a mere 30 companies accounted for over half of all exports from this country.

He said New Zealand needed to focus its efforts more or it risked falling further behind.

"To prove our innovation and I suppose the critical thing is our exporting capabilities ... let's focus on exporting distinctive products that can't be imitated elsewhere rather than focusing on volume of commodities which can be imitated elsewhere."

The Productivity Commission in its latest report said New Zealand was becoming less competitive which made it harder to maintain and improve the wellbeing many want and expect.

It compared New Zealand's top frontier firms with the frontier firms of other small advanced economies, such as Denmark and Singapore.

Nana said the focus must be on innovation and moving away from volume to value-added products.

''Let's grow some big frontier firms, let's grow what we call those anchor firms that will enable a lot of the smaller firms to develop underneath that canopy ... that is the missing element.''

New Zealand companies needed to become more productive to be able to compete globally.

Nana said New Zealand was becoming less and less competitive which affected everyone.

"This is not productivity just for productivity's sake and this is not productivity for profitability's sake, this is productivity to enable us to deliver the wellbeing for future generations and frontier firms is a critical part of that jigsaw puzzle."

Nana believed workers were up for the challenge and innovation was the key.

"We have a chance to build a world-class competitive advantage in some markets. Without it, products and production processes become standardised and leave us trying to compete against lower-wage economies."

Nana said Aotearoa could learn from successful small advanced economies (SAEs).

"They have outstanding records of world-leading firms exporting specialised, distinctive products at scale. By comparison, most of New Zealand's larger companies are strongly oriented towards domestic sales.

"Successful SAEs focus their investments on creating world-class innovation ecosystems around their leading firms."

He said small countries could not be world-class at everything.

"New Zealand needs to make some tough choices about where to prioritise investment on a few targeted innovation ecosystems, much like we do in sport."

Nana said Māori firms could help light the way because they took a long-term perspective and used innovation to manage multiple objectives.

He said many Māori firms were already involved in exporting and had higher rates of innovation and R&D than other New Zealand firms generally.

Māori values such as kaitiakitanga, manaakitanga and whanaungatanga help differentiate Māori goods and services and provide added brand value overseas.

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