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Assessing and Enhancing New Zealand's Productivity

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Assessing and Enhancing New Zealand's Productivity Volume 14 – Issue 3 – August 2018 SPECIAL ISSUE Assessing and Enhancing New Zealand’s Productivity Moving on from New Zealand’s Productivity Measurement Productivity Paradox in the Digital Age Patrick Nolan, Huon Fraser and Paul Conway 3 Sharon Pells 52 The Future of Productivity – what contribution Existential Risks: New Zealand needs a can digital transformation make? method to agree on a value framework Dirk Pilat and Chiara Criscuolo 10 and how to quantify future lives at risk Meeting the Challenge of a Matt Boyd and Nick Wilson 58 Low-Emissions Economy The UK Climate Change Act: an act to follow? Steven Bailey and Geoff Lewis 17 Prue Taylor and Kate Scanlen 66 Quakes and Aftershocks: organisational A Framework for Counter-Unmanned Aircraft restructuring in the New Zealand state sector, System Regulation in New Zealand 1960–2017 Andrew V. Shelley 74 Masashi Yui and Robert Gregory 25 The Housing Haves and Have-Nots: the house Shifting the Dial: improving Australia’s price boom and inequality of wealth in productivity performance New Zealand Ralph Lattimore 33 Timothy Irwin and R. John Irwin 81 Measuring Productivity in the Health Sector New Zealand Retirement Income Policy Patrick Nolan 40 as an ‘Eco-system’ Quality Adjusting Education Sector Productivity Judith A. Davey and Robert Stephens 86 Norman Gemmell, Patrick Nolan and Grant Scobie 46 Editorial – Assessing and Enhancing New Zealand’s Productivity Lifting productivity is the answer to many of New Commission’s (APC) recent five-year productivity Zealand’s hardest problems. It can mean families review. He points to a focus on the non-market Volume 14 – Issue 3 – August 2018 have decent incomes without having to work long sector (mainly education and healthcare), the quality hours. It can help the country earn a living from Policy Quarterly (PQ) is targeted at readers of cities, and the effectiveness of government itself in the public sector, including politicians and the rest of the world while protecting our natural as central to achieving better outcomes. their staff, public servants and a wide variety environment. It underpins the provision of state This work by the APC is mirrored by its Kiwi of professions, together with others interested services to an ageing population in a tighter fiscal counterpart, as shown in the articles on healthcare in public issues. Its length and style are environment. (Nolan) and education (Gemmell, Nolan and Scobie). intended to make the journal accessible to The importance of productivity has been Nolan’s article on health productivity argues that a busy readers. understood for many years. It has been almost greater focus on lifting productivity in this sector Submissions: The journal welcomes 60 years since Conrad Blyth began measuring is desirable given the fiscal outlook and changing contributions of about 4,000 words, written productivity at the New Zealand Institute of Economic demand facing health services. Gemmell, Nolan and on any topic relating to governance, public Research (NZIER). Yet – except for a short period Scobie’s article on education highlights the challenge policy and management. Articles submitted in the late 1990s – New Zealand’s productivity in measuring productivity, particularly in accounting will be peer reviewed. Please submit articles to the Editor: [email protected]. performance has been stubbornly poor and lagged for changes in quality over time. Although issues will not usually have single many OECD countries. Some of the challenges facing productivity themes, special issues may be published from For many years the drivers of this productivity measurement in the state sector (e.g. services time to time on specific or general themes, performance were not well understood. There were being provided to users free of charge) are now perhaps to mark significant events. In such suspects of course: distance from international being seen in the private sector. Pells notes that as cases, and on other occasions, contributions partners, small domestic markets, industry structure, a result we could be seeing a re-run of the “Solow may be invited from particular people. and even culture. But generally New Zealand’s low computer paradox,” where he famously wrote “you Subscriptions: The journal is available in productivity was viewed as a paradox, particularly can see the computer age everywhere but in the PDF format on the Institute for Governance given the quality of some of our policy settings. productivity statistics.” However, she argues, despite and Policy Studies (IGPS) website: https:// But, as the article by Nolan, Fraser and Conway measurement issues, the productivity slowdown in www.victoria.ac.nz/igps/policy-quarterly Readers who wish to receive it by email notes, we have well and truly moved on from this idea New Zealand and elsewhere since the mid-2000s should register as PQ subscribers igps@vuw. of a productivity paradox. The articles in this edition simply cannot be written off as measurement error. ac.nz. This service is free. help show why. They represent a sample of recent Interestingly, Pells also shows that the global For all subscription and membership research. Much more could have been included and, slowdown in labour productivity growth (i.e. GDP enquiries please e-mail [email protected] or indeed, will be included in future editions of Policy per hour worked) is largely due to lower growth in post to Institute for Government and Policy Quarterly. the effectiveness with which different inputs are Studies, P.O. Box 600, Wellington. In their article Pilat and Criscuolo of the OECD combined in production (a component of labour Electronic Access: The IGPS directs discuss the potential impact of digital transformation productivity called multi-factor productivity). Yet, interested individuals to its website: on productivity. Current and emerging technologies as Nolan, Fraser and Conway show, New Zealand’s www.igps.victoria.ac.nz where details of the could be as disruptive to models of production as recent productivity performance differs from this Institute’s publications and upcoming events earlier industrial revolutions. But, as the authors in key ways. Not only has the slowdown in labour can be found. Permission: In the interest of promoting note, while the digital transformation of the economy productivity been relatively mild, but our multifactor debate and wider dissemination, the holds much promise, these opportunities will not productivity performance has been stable. IGPS encourages use of all or part of the materialise automatically. They thus show that the major factor holding articles appearing in PQ, where there is no One critical example of the potential of back New Zealand’s productivity growth since the element of commercial gain. Appropriate technological change is in transitioning to a low- Global Financial Crisis has been the failure of capital acknowledgement of both author and source emissions economy. As Bailey and Lewis argue, to grow in line with labour, even with the historically should be made in all cases. The IGPS the effects of this transition will be “profound and low interest rates over this period. Flatlining business retains copyright. Please direct requests widespread” and innovation will be key to avoiding investment (when measured relative to population for permission to reprint articles from this damaging climate change while also protecting growth) could mean that New Zealand misses the publication to [email protected]. (improving) national wellbeing. But they also boat on future technology-led productivity growth Editor: Jonathan Boston Guest Editor: Patrick Nolan suggest that it would be wrong to simply expect new and suggests we still have a way to go in making the Editorial Board: Barbara Allen, Guy Beatson, opportunities to materialise. Well-designed laws and transition from an economic model that emphasises Roger Blakeley, David Bromell, Simon institutions are needed. growth from working more. Chapple, Jo Cribb, Girol Karacaoglu, Gerald Further, as they note, innovation needs a This discussion leads to the question of how Minnee, Anneliese Parkin, Mike Reid and stable and enduring policy framework. Yet, as Yui reform could support closing the productivity gap Andrea Schollmann and Gregory show, the past 30 years have seen with the rest of the world. Charles Dickens’ character ISSN: 2324-1098 (Print) “successive and seemingly endless cases of Mr Micawber was always hoping for something ISSN: 2324-1101 (Online) organisational restructuring.” This is based on new to turn up to help solve his problems. But, as the Volume 14, Issue 3 – August 2018 data collected by Yui as part of his PhD research articles in this edition show, we can and should do Copy Editor: Rachel Barrowman and which could in future be used to test a number better than this. Lifting New Zealand’s productivity Design & Layout: Aleck Yee of important hypotheses. One question the authors Cover Image: Aleck Yee requires a broad reform agenda, ranging from topics Production: Alltex Design raise is whether we too often use institutional reform such as matching skills to jobs, to lifting business Proof Reader: Vic Lipski as a “surrogate for genuine innovation designed to investment and trade in services, and to improving effectively achieve better policy outcomes.” government productivity. The opportunity is there – Continuing with this theme of a need to lift the we need to take it. performance of the government sector, Lattimore outlines key lessons from the Australian Productivity Patrick Nolan – Guest Editor Patrick Nolan, Huon Fraser and Paul Conway MOVING ON FROM New Zealand’s Productivity Paradox or many OECD countries the decade following the global Asbtract Ffinancial crisis was tough going. Yet For many years New Zealand’s productivity performance has been New Zealand avoided the worst of the disappointing. This article outlines recent progress in understanding downturn. GDP growth was healthy, the public finances remained in generally what could be driving this performance. It starts by drawing on good shape,1 and the central bank was Statistics New Zealand industry-level data, before summarising able to rely on conventional macro- policy tools.
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