Productivity and long term growth

Going for Growth 2014: New Zealand

 

Economic Policy Reforms 2014

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The per capita income of New Zealand remains low compared to other advanced OECD countries, mostly owing to a substantial productivity gap vis-à-vis top performers. Key policy challenges for stronger productivity growth include promoting further investment and competition in network industries, addressing the high variance in educational outcomes, which reflects a substantial underachievement by some population groups, and stimulating innovation activities. 

Previous Going for Growth recommendations include:

  • Raise effectiveness of R&D support by evaluating existing schemes, complementing them with R&D tax credit and coordinating immigration and education policy with business needs for innovation skills.
  • Pursue further efficiency in organisation of health care system and resource management, and provide education and assistance to adopt healthier lifestyle.     
  • Promote domestic and foreign investment by reducing barriers to FDI and regulatory opacity.     
  • Enhance capacity and competition in network industries by reducing government intervention and increasing competition in electricity, transport and telecom industries.
  • Reduce educational underachievement among specific groups by improving the effectiveness of schooling system and targeting education and training schemes to underachieving groups and areas.

Actions Taken: Notable reforms in these areas over the past two years include:

  • Increased provision of educational service: under The Youth Guarantee, trade academies and free tertiary education places have been established to increase achievement of the 16-17 year-olds. Also, measures to improve access to education targeted to disadvantaged groups have been taken.

 

The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, rebalancing current account and reducing income inequality). In the case of New Zealand, increased provision of educational service can increase New Zealand’s fiscal deficit in the short run. However, such measures help reducing income inequality by supporting the human capital accumulation and school-to-work transition by the population groups with low educational attainment.