Deloitte and 2degrees study: improved productivity is key to NZ’s success

Liza Van der Merwe, Deloitte Access Economics Lead Partner, Deloitte New Zealand, says the need for a productivity uplift is greater now than ever given New Zealand currently ranks 63rd out of 67 OECD countries in terms of productivity and efficiency.

“Increases in technology adoption and innovation are key to lifting productivity and our modelling shows the economic benefits of doing so are huge,” Van der Merwe says.

“However, New Zealand is currently spending an average of 1.4% of GDP on R&D, well below the OECD median of 2.7%, and we currently face relatively low rates of technology adoption due to several barriers.”

The report, which is available here, finds lifting R&D to 2.5% of GDP by 2035 and tripling the adoption rate of new technologies would provide $46 billion in incremental benefit to the New Zealand economy in 2035. However, those benefits are not guaranteed, which is why this report also outlines what needs to happen to turn those potential gains into a reality.

2degrees Chief Business Officer Andrew Fairgray says 2degrees commissioned the report in a bid to help NZ Inc create a roadmap to increased technology adoption, in order to lead to a more productive and prosperous society.

“Our teams are at the coal face talking to Kiwi businesses every day. They know they need to increase technology adoption, but face barriers such as skills shortages, short-term risk aversion, limited collaboration with technology partners, and the regulatory environment.

“We commissioned this report to help provide both individual businesses and policy makers with a document that will help focus their attention on productivity, and specifically using technology to increase productivity.”

The report suggests a four-point pathway forward.

Firstly, ensuring R&D tax credits are fit-for-purpose. Secondly, addressing the barriers to scaling start-ups through a range of ways, including access to capital as well as policy and regulatory changes that will increase domestic demand generation for start-ups.

Next, it recommends that innovation funding gaps are addressed.

Finally, it suggests we encourage firms to self-monitor and improve productivity, noting: “Many firms in New Zealand lack the tools and incentives to effectively monitor and improve their productivity, particularly in terms of integrating new technologies and tools in their operations.

“To improve productivity, we need to encourage firms to adopt self-monitoring frameworks that help businesses to assess and improve their digital capabilities.”

Fairgray says this is the first report in the Productivity Propelled series, which will see Deloitte Access Economics and 2degrees investigate a range of issues, in their shared bid to help NZ Inc become more productive.