NZ Economy Struggles with Chronic Productivity Issue

New Zealand's economy is facing a long-standing productivity problem that could hinder its growth in the future, according to the Treasury's Pre-Election Economic and Fiscal Update.

The report highlights that while the near-term fiscal outlook is brighter than expected, with a $6.8 billion deficit forecast for 2026-27 compared to the previous estimate of $11.4 billion, New Zealand's productivity growth has been weak in recent years, averaging just 0.2% between 2013 and 2023.

The OECD data shows that New Zealand's output per person remains below that of advanced economies, with little sign of the gap closing. The Treasury estimates that addressing this issue will require a combination of policy reforms, including investing more in education and training, increasing access to finance for businesses, and reducing barriers to trade and investment.

The report warns that sustained improvement will require progress across multiple areas, including investment, competition, skills, technology, energy, infrastructure, and regulation. It also notes that improving productivity can take years to show up in economic figures, making it a difficult task for politicians to sustain politically.