In search of improved productivity

Productivity and economic growth in New Zealand increased as result of the economic reforms from the mid-1980s, both absolutely and by comparison with Australia, the 2025 taskforce says in its second annual report. Alas, public policy in the past 15 years has often been inconsistent with achieving increased levels of productivity, the report contends, whereas Australia has continued to introduce range of productivity-enhancing reforms over that same period.

The Government seemed as lukewarm towards this report as it was towards the first even though the taskforce is chaired by former Reserve Bank governor and National Party leader Don Brash and despite its projection that the income gap between New Zealand and Australia is projected to reach 42 percent in 2025.

Brash was phlegmatic, saying he accepted the Government’s reaction had been “less than enthusiastic” but the taskforce wasn’t set up to find politically acceptable ways to catch Australia.

Murray Sherwin, Brash’s deputy at the Reserve Bank, will be hoping for more enthusiastic response to the work that will flow from the Productivity Commission he will head when he retires as director-general of MAF.

Regulatory Reform Minister Rodney Hide, announcing Sherwin’s appointment, said if New Zealand was to significantly raise people’s living standards, “then we must first advance policies to raise our productivity performance”.

The commission – strongly promoted by the ACT Party – will have wide-ranging brief to enquire into productivity-related matters. It will be modelled closely on the Australian Productivity Commission, which has been operating for more than 10 years.

Among the proposals from the Australian commission is an overhaul of the regulation of professions, to ease duplication and inconsistency.  It found occupational regulation was “an area where there is substantial scope to reduce regulatory burdens and improve economic efficiency”.

Another report from Australian Productivity Commission found that rural research and development was of significant benefit to the agriculture industry, but the research of greatest benefit to producers was mostly funded by levies. The contribution of taxpayers had limited value in buying additional research activity.

This report recommended government funding of industry-specific R&D should be halved over the next 10 years and funds of around A$50 million year should be provided to new body to undertake broader rural research, such as climate change, biosecurity, water use, weed reduction, nutrient use efficiency, salinity and other soil related issues, native vegetation, biodiversity and tropical agriculture. It says industry-based R&D organisations should become largely reliant on levy funds.

After about decade as head of MAF, let’s see if Sherwin will echo these recommendations in this country.

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