Otautahi – New Zealand has a productivity problem, and now it is also a climate problem. For decades, the country has fallen behind other OECD countries in output per hour worked.
Kiwis have worked longer hours just to stand still, the latest New Zealand Institute of Economic Research says.
A new NZIER report shows how poor productivity growth hurts Aotearoa’s ability to deal with climate change. The reliance on old technology means New Zealand emits a lot of greenhouse gases for the amount it produces.
It suggests the country should focus on improving technology adoption as a way to address climate change. Productivity growth has been a concern for economists and it should also be a concern for environmentalists.
The report makes some recommendations. It describes a tight-loose framework in which the public and private sectors have a role to play. It recommends government have tight, strict targets for emissions levels.
Without clear signals, there is a temptation to play the referee rather than reduce greenhouse gas emissions.
It also recommends a loose, flexible approach to emissions reductions practices. People and businesses will have different things they can do and want to do. All possible approaches should be encouraged.
This approach will encourage creative and efficient responses, making a better transition to a zero-carbon economy.
Technology is a key part of the transition, the report says. New Zealand needs policies that promote technology adoption and overcome existing barriers.
Aotearoa must retire old assets and put in more investment and better training. It has to be led by individuals and businesses, but there are things the government can do to help, the report says. Such as:
Explanations of low productivity
1. Failure of diffusion from frontier firms to laggard firms
2. Weak market selection pressures – firms do not die
3. Small market size limits growth of productive firms
4. Weak international connections
5. Geographic segmentation – low density of human capital
6. Low investment in R&D and managerial capability
7. No technology spill-over from foreign-owned firms
8. Poor infrastructure
9. Governance issues
10. Government ownership of businesses
11. High cost of investment goods
12. Poor schooling
13. Skills mismatch
14. Low savings
