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February 22, 2021

Productivity of New Zealand

Melissa Baer

There has long been discussion that New Zealand suffers from low productivity numbers relative to the rest of the developed world. In crude language, New Zealand is stuck in the industrial revolution, while the rest of the world has moved onto the information age.  

The draft productivity report was produced in December 2020 and a final report will be available in April 2021. If you are like me and end up at industry events where economists are reviewing the dire state of our productivity, you will know that this special number has long been a challenge for New Zealand. We trail most OECD countries. The question has long been how do we bring in more revenue as a country with less people? Our love of intensive manual labor-based industries is not doing us any favor on this front. How do we elevate the workforce to higher value-added tasks and leave the machines to do the rest, which would result in a few other social metrics being addressed as well?

The challenge is that we need to find more and better ways to get money for the same amount of raw materials that we can produce (or reduce the cost of production). If we keep to the same ratio of raw material-to-revenue in the proverbial door (GDP), we could bring in more gross revenue by producing more raw material as this would be at a cost to the environment potentially as well as require more labor. The new regulations about environment and biosecurity begin to complicate the “produce more raw material” approach. So, we are left with trying to work out how to get more for the same amount of raw material.  

Whose job is this though? In New Zealand, the typical business model is for farmers to produce the raw material, and the processors and aggregators that come next to add the value.  

There are currently no mechanisms to reward ‘on-farm’ value creation beyond audits and new programs. All the work to produce value ‘on farm’ is effectively lost once it has been aggregated to achieve sufficient volumes to justify production and container loads of export.  

This needs to change if we are going to try and achieve high productivity numbers and ultimately economic growth, without continuing to extract from the environment. -Melissa Baer

Some of the initial highlights from the report are as follows:

Some companies are starting to catch on to this. The truth is that the ability to productise rapidly, leveraging data and technology, operate with optimal efficiency, and respond quickly to end-user/consumer preference changes is going to be important in improving our productivity numbers.  

We need to address global problems, not just New Zealand’s problem and we need to do it at pace and scale. - Melissa Baer

From the diagram below – the big “why”, is to achieve sophisticated exports at scale.  

It will be important that our business models shift from patch protection and barrier to entry and competitive amongst each other, to collaborative and open. This is easy when we are addressing large global challenges. We need to put our futurist and globalist hats on to improve communicating value over the distance.  

Our greatest hinderance of distance could be our greatest point of difference, if we choose to take on the challenge of providing our end consumers with a rich data powered story and empower the rest of the supply chain to pass this story on. We can lead the world in transparency, high value articulation and rich nuanced food stories verified by data relevant to consumers.  

Case Study: Manuka Honey (PDF)

Example of a New Zealand company that is leading the way in productivity.

There are pockets of examples around New Zealand of people who are really thinking outside the square and addressing some larger issues, starting in their backyard. This honey company is a example and one to model after.