New Zealand’s productivity problems in a nutshell
Productivity rates, (or the amount of real production per hour worked) is one of NZ’s biggest economic problems, but its hardly ever rationally discussed, and real solutions are never implemented. Treasury says-
Productivity is the biggest long-run determinant of wages and living standards. New Zealand’s low productivity growth is a long-term problem that has been an issue across a timeframe of generations, not general elections. Raising our productivity performance is the biggest economic challenge facing New Zealand, and will require a sustained effort on a number of fronts.
Why is it so low and getting lower? A post to the General Debate section of Kiwiblog this morning identifies one of the main reasons-
Talking with my younger bro last week – he’s lawyering in the central North Island – he’s got a client with a (commercial) residential development underway.
The client is dealing with SEVEN Maori organisations over his resource consent and each (cultural impact assessment etc) report, from each organisation, costs him $20,000. And if he wants these reports in under six months it’s $40,000.
So there’s a property developer or builder wanting to construct (or produce) some housing, an item in critical short supply in the country today, and he has to jump through so many hoops before he can put a shovel in the ground.
The issue is not just the expense and delay, its the number of people whose work days are taken up with the back and forth of producing the reports and making sure they comply with govt legislation. There must be thousand of workers across the country beavering away on environmental reports and cultural impact assessments and so many other like formalities, and they’re in fact producing very little of tangible worth.
Its not just the people producing the reports either. The builder has to employ people on his end who can deal with his regulatory obligations. So there’s another bunch of people tied up in the same unproductive sector.
Many companies spend a quarter to third of their budgets and a massive amount of time on dealing with regulations relating to environmental and cultural issues. This is a major reason the country’s productivity rates are in the tank. Worst is its nothing new. Its been going on for decades. The Ardern govt is shoveling billions into this sector, when our standard of living will only keep falling as long as this vast waste of human resources continues.
According to global comparisons NZ is meant to be a great place to do business. It is if you’re in the report writing industry. We need more people banging on nails with a hammer, and fewer people banging on their keyboards.
Hoops and irrelevance add time and money
But it puts some off from investing or trying that is the unaccountable part
Investment placed else where
Yep, know of an oil exploration company that came here and established an office. Spent millions on projects but so much of it was wasted on compliance costs. Went away and said never coming back. Too much of its drilling fund spent on stuff that didn’t involve drilling.