Background

Yesterday the Treasury hosted a seminar on New Zealand’s lagging productivity growth rate. It shared the slot with the New Zealand Productivity Commission (NZPC) and Motu, a Wellington-based research institute.

Attendees could (and many did) pick up a new NZPC paper, “Productivity by the numbers”.

It was data heavy, with 54 charts, but light on solutions.

I should have asked about solutions, and lessons from Ireland – the object of a recent TNZI policy study tour.

But perhaps the Q&A would have gone something like this:

Question: What are the NZPC’s key recommendations for government?

Answer: Government should focus on ensuring “appropriate” investments in innovation and technology. It should build on its existing tax incentive for R&D. Its efforts need to be aligned and well-connected to every interest group, and well-evaluated.

Question: Great, but if that is good, why have they not been doing that already?

Answer: Well, umm, governments have other priorities. We have to hope that will change.

Question: Indeed, so have you got any ideas for how to change their incentives for the better?

Answer: As you know that is difficult. Redistribution is really important. We all want more of it.

Question: The NZPC shows in Figure 4.1 that Ireland spends fractionally less of GDP on R&D than NZ. But we know that its productivity growth has been massively faster than NZ’s, and Figure 4.3 shows its capital formation is much higher relative to GDP. So why the focus on R&D?

Answer: Oh, Ireland doesn’t really count. You will have noticed that only one of our seven-country comparisons across 11 indicators includes Ireland. Ireland has attracted a ridiculous amount of capital and know-how from foreign direct investment and its proximity to Europe. We can’t do that.

Question: So, why Ireland and not, say, Scotland?  And why not New Zealand, relative to Australia?

Answer: Look, New Zealand land is extraordinarily sensitive. Ireland is not so lucky. The trick is to attract foreign capital that will not be on or above land. Get real.

Question: So, you want us all to trust government appointees to direct NZ R&D like we trust them to run an efficient health, education, housing and welfare system?

Answer: Exactly. Trust is crucial. Figure 4.21 shows that only 13 of 39 other countries have higher trust in government than New Zealand.

Question: Yes, so why does the same figure show much higher trust in government in Ireland?

Answer: For heaven’s sake can we stop talking about Ireland? New Zealand is different.