A blue map of New Zealand dripping south
We’re only 68% Productive as the Rest of the OECD – Myths and Hard Truths about New Zealand’s Low Productivity
July 13, 2023
A graph comparing GDP per hour worked for OECD countries
We’re as Small, but not as Good as the Others – Myths and Hard Truths about New Zealand’s Low Productivity
July 23, 2023
A blue map of New Zealand dripping south
We’re only 68% Productive as the Rest of the OECD – Myths and Hard Truths about New Zealand’s Low Productivity
July 13, 2023
A graph comparing GDP per hour worked for OECD countries
We’re as Small, but not as Good as the Others – Myths and Hard Truths about New Zealand’s Low Productivity
July 23, 2023
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It’s not (just) about Innovation – Myths and Hard Truths about New Zealand’s Low Productivity

graphs showing GDP per hours worked

We’ve lamented the sorry state of New Zealand’s low productivity in the first article of our ‘myths and hard truths’ series. We promised to trawl through the data for you. At 68% of productive output compared to the other (early) OECD countries, we are lagging well behind, and this will affect our future generations big time, if not our own. This series is a call for action. Well-directed action that is. So, in article #2, let’s play ‘truth or myth’ and start with an oft-heard solution: we need to invest more in innovation!

For Wellbeing we copy the Nordic ‘happiness’ nation’s policies, thus for Innovation we should copy Innovation Nation: Israel. Often described as one of the innovation hubs, Israel is the darling for R&D. Should we copy them?

In the recent CEO World Magazine article titled ‘Why Israel is a Rising Innovation Hub’, the authors explain the nation’s competitive advantage created by innovation: “Israel has invested in resources and programs to encourage entrepreneurs and support them. It is creating a hub for the tech industry’s best to now be nicknamed Startup Nation. The country invests 4.1% of its GDP into its research and development.”

In comparison, New Zealand does not even spend 1.5% of its GDP on innovation. Thus, back to the question, should we copy Israel’s approach to innovation, and invest significantly more in innovation?

Well, if the 2023 Productivity Data is anything to go by, the trajectory of GDP per hour worked is remarkably similar between New Zealand and Israel. Even though Israel has a strategic policy initiative around tech innovation to boost their economy, that has been significantly funded for over a decade, they are no better off than New Zealand in GDP per hour worked. And even if you believe the long lag of innovation is demonstrated in the recent years where Israel appears to be on the up, we are talking about a significant lag, knowing that the seeds of Israeli innovation were first sown in the late Noughties. Should we copy Israel? No.

Let there be no mistake: Innovation can be a cornerstone of productivity improvement for New Zealand, but we need selective or directed innovation, backing our ideas. Innovation in a pre-ordained sector, like Israel did with tech, is not the panacea to our low productivity. Copying that is a myth. Copying another nation’s approach has never worked well for New Zealand, because it is often done out of context, out of step with other socio-economic foundations, or not a good match with our culture.

We have a lot of really good ideas in New Zealand, some already commercialised, some not, and we need to back these ideas. From seaweed food supplements for ruminants to significantly reduce methane emissions, to the small payload vehicles Rocket Lab is sending into space, to the wound healing properties of Manuka, and the easy-to-use small business accounting software packages Xero is flooding the globe with, we have no single identifiable sector to back. We should back ideas.

We should not be afraid to fail in our first attempts and lose (investor) money. As Rocket Lab founder Peter Beck will tell you, innovation is largely about ambition, and we need more of that here.

When have you last mentored a young entrepreneur with ambition? Given them solid advice when they asked you questions? Do young entrepreneurs even know you have expertise to share? When have you last showed up in ‘Business After 5’ event and shared your knowledge, attended dragon’s den business pitches, even considered providing seed money? If you are not innovating yourself, why not back Aotearoa’s ideas?

Next time: what can we learn from ‘Frontier Firms’ on improving our productivity?

If you would like to see the data for yourself, the Productivity Commission has provided access for everyone here: 2023 Productivity Data.

About the author: Geerten Lengkeek is the Managing Director of Productivity People