New Zealand’s productivity challenge is often framed as a problem of distance and scale, but our latest NZIER Public Good Programme research report suggests the reality is more complex — and more domestic.
Distance matters. Small-scale matters. But neither fully explains why New Zealand continues to lag behind comparable advanced economies. The deeper issue is that too little capital, technology and capability are flowing into the firms and sectors that drive long-term productivity growth. This makes productivity not just an innovation problem but a diffusion problem: how quickly ideas, technology, management practices and skills spread beyond leading firms into the wider economy. This suggests a policy agenda focused less on a single silver-bullet reform and more on improving diffusion, capability and investment incentives across firms and sectors.
Each year NZIER devotes some of its resources to undertake and make freely available economic research and thinking aimed at promoting a better understanding of New Zealand’s important economic challenges. The preparation of this paper was funded by those resources.