Foundations for Growth and Competitiveness 2026

New Zealand

New Zealand’s output per capita remains persistently below the most advanced OECD countries and convergence towards the living standards of the OECD top half has stalled. While labour utilisation is strong, with increasingly high participation and employment rates, the investment rate, and especially labour productivity, are low.

Increasing investment and productivity growth demands continuing broad structural reforms, including encouraging greater foreign direct investment by reducing screening restrictions as well as faster adoption by businesses of digital technologies. Simplifying licensing and permitting processes would also help speed up infrastructure investment. Putting the economy on a sustainable growth path requires more research and investment to reduce agricultural and industrial emissions through technological solutions.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Digitalisation: Improve regulation to encourage digital diffusion and spur competition

The share of New Zealand’s businesses connected to broadband and using AI is below the OECD average. Investment in R&D in digital technologies and intangible assets (designs, software and data) is low. Slow adaptation of regulation to digital innovation may hold back investment and hinder market entry and competition, especially in areas dominated by large platforms and/or incumbents such as banking.

Recommendations

✓ Strengthen digital competition tools, including ex-ante regulation for dominant platforms.

✓ Promote data portability and interoperability to reduce switching costs, including fully implementing the open banking reforms.

✓ Encourage digitalisation by ensuring legislation is suitable for digital markets, including ensuring that copyright law does not unduly hamper AI use.

Early childhood education and care: Provide better value for money

Early childhood education and care (ECEC) costs are amongst the highest in the OECD relative to income. Participation of children from lower socio-economic backgrounds in ECEC is low. Unnecessarily high compliance costs may be raising prices directly, and indirectly by creating barriers to entry, reducing competition. High childcare costs contribute to a high disincentive to work for second earners and especially women. There is also insufficient system-level data and information about the quality and outcomes from ECEC.

Recommendations

✓ Reduce regulatory compliance costs by streamlining reporting processes through switching from paper to digital reporting; and making building, space and service delivery requirements more flexible and adapted to age group, cultural and service model (e.g. centre or home-based) demands, while maintaining high quality.

✓ Carry out a review of the ECEC sector from an educational quality perspective, beginning by establishing the collection of accurate and consistent information on ECEC quality.

Physical infrastructure: Improve permitting processes

Permitting and licensing procedures are complex and slow relative to the OECD average, vary across local government jurisdictions, and are subject to more legal appeals than in many other OECD countries, including for construction, land-use and environmental approvals. This is reducing business entry and competition and slowing infrastructure investment, potentially contributing to lower-than-average environmental sustainability and climate-resilience of infrastructure.

Recommendations

✓ Digitalise licensing and permitting systems to improve efficiency and transparency and harmonise them across local government jurisdictions.

✓ Provide more data and modelling support to local government to increase consistency and quality of decision making, including better taking account of environmental effects.

Foreign direct investment: Streamline restrictions on FDI

New Zealand’s FDI restrictions have long been among the highest in the OECD, with particularly strong restrictions in air transport, broadcasting, fisheries and land acquisitions. An important barrier was onerous screening practices. This has contributed to an FDI ratio to GDP far below the OECD average, reducing access to foreign technology, know-how and high-quality management, likely contributing to low productivity growth.

Recommendations

✓ Streamline the screening regime including by giving greater clarity on the criteria potential investments must meet for approval, and speeding up processing times.

✓ Establish a one-stop-shop for foreign investors.

Agriculture: Support low-carbon technologies to boost exports

Low-carbon food products command a significant price premium providing an important opportunity for New Zealand to increase the value added of its commodity exports and notably dairy and meat products. Indeed, the large agricultural sector accounts for around half of total greenhouse gas emissions, of which around 80% is biogenic methane. However, R&D on low-carbon technologies is lower than average and the overall effective carbon tax rate is also low in part as a large share of agricultural emissions are not taxed at all.

Recommendations

✓ Provide strong support for research and joint ventures to develop emissions reduction technologies.

✓ Improve on-farm measurement of emissions in preparation for introducing agricultural emissions pricing.

Recent progress on structural reforms

The government is implementing 15 recommendations to reduce regulatory compliance costs in ECEC, including a single, simplified licensing system. A new one-stop-shop FDI promotion agency, Invest New Zealand, is in operation, and a reform streamlining the FDI screening regime is underway. Major planning reforms are in progress, including introducing nationally standardised land-use zones and a new planning tribunal. Support to boost business R&D capability, including in digitalisation, has been increased using targeted New to R&D grants and targeted grants for firms to hire graduate students. Digital markets regulatory reform is in an exploratory phase. Public funding for technical solutions to reduce agricultural and industrial emissions doubled between Budget 2023 and 2025 to NZD 1 billion (0.2% of GDP).