Written By: - Date published: 9:00 am, March 14th, 2018 - 32 comments
Categories: business, Economy, employment, Financial markets, grant robertson, kiwisaver, labour, tax - Tags:

On the weekend my cousin, who is managing a large Auckland restaurant, asked me about an opportunity to invest directly in a large new cafe business by the same partners. My advice was: keep your Kiwisaver as your primary long term goal, but be brave if you want to with a punt that you can manage with your own smarts and experience. Time to back herself.

A more productive economy – and society – has been an elusive goal for many of New Zealand’s previous governments. As we have seen from National’s last nine years of rule, they were not successful.

Ideally, productivity should mean using fewer resources to get better results and more wealth for more New Zealanders, not slaving your guts out. New Zealanders on average work very long hours and don‘t get good pay or pay increases to reward us. Even Treasury says so.

In Grant Robertson’s speech to the Waikato Business Summit of February 8th, he said that this government will be reforming the tax system to ensure greater support for a more productive economy: “For too long our tax system has lacked balance and has encouraged speculation, particularly in housing. We want this to change, and we have charged a Tax Working Group … to make proposals in this regard.”
Australia – to a lesser degree than New Zealand – has relied on bulk and high-mass commodities to sustain its economy, which hasn’t been good for productivity increases. So two recent announcements from Australian Labor’s Bill Shorten caught my eye.

The first is a commitment that, if elected, businesses which invest in Australia will be eligible for new write-off provisions. It’s a promise to introduce an Australian Investment Guarantee that promises an immediate deduction of 20% off any new asset worth more than $20,000.

At almost the same time he has announced that he is going to come down hard on tax benefits for shareholders called dividend imputations used for cash refunds.

Of course this kind of crackdown on about 200,000 self-managed super funds and wealthy retirees is going to get a major backlash from the politically influential superannuation lobby.

But the intended effect upon Australia’s economy is this: encourage many, many more Australians to invest away from the sharemarket and more directly into businesses, and for those businesses to spend a lot more on high performing productive assets.

This puts productivity squarely in the frame for their 2019 federal election, squeezed in a new direction by Labor from both ends of the investment.

I want to see Minister Robertson expand his horizon beyond cooling housing speculation and tax-and-spend happiness, take a step back and ask: what can be done to shift the whole of our working lives for greater reward, more exciting careers in highly innovative companies, and better use of our natural resources. Labor Australia is now very clear about what it will do, well before its 2019 election.

32 comments on “Productivity”

  1. savenz 1

    You are hard pressed to make any money from a cafe business!

    Same old neoliberalism labour, lets force people to invest in our country even though Labour itself seems to think overseas corporations can do it better. National have this approach too, obviously. NZ First seems to have U turned from the so called NZ First to sign trades deals, and then give logging companies more money so they can trickle it down into jobs. Trickle down only seems to lower and lower wages and provide less and less job security. Time to learn from past mistakes!

    The government allow Kiwisaver funds to take 20% of people’s profits and not guarantee it.

    The government allow banks not to have to insure their deposits.

    So what do people do? In the past they put their money into their house so at least they could have somewhere to live and these days due to immigration it earns more than they do.

    But with 1million dollars for the average house price in some cities it’s actually as likely as first division lotto for Kiwis on local wages.

    Any tax changes aimed at NZ citizens will exacerbate inequality and allow those who don’t work in NZ or have money from overseas to buy up here. It’s already happening and Labour’s weak overseas rules will do nothing as you can still buy land and other assets. The existing houses have already been bought up and their prices doubled. It’s becoming harder to pay rates on local wages, so increasingly people will have to down size or move further out, until nothing is left.

    The UK which has extensive taxes, stamp duty, 17.5 VAT, high income tax, capital gains taxes have the same problems of people on local wages not being able to afford housing.

    Increasing taxes makes no difference because only the local people seem to get caught as there are so many loopholes for corporations who seem to have extra privileges that individuals just don’t have. Many of the biggest corporations don’t even pay any taxes and if they get any liabilities they can just pick up and relocate their office at the drop of a hat.

    In the UK you literally pay 12 pounds and set up a UK company with fewer checks than joining a gym. It’s the same in NZ. These companies are used to get around local rules such as taxes or embargoes.

    For example Amnesty were tracking arms deals work $169 million from a UK registered company to South Sudan but the use of shell companies made it hard to verify if it was violating British arms embargo against South Sudan. Interestingly in the arm’s deal the company was headed by Ian Taylor as a sole shareholder who was a New Zealander, who denied knowing anything about it!

    But as the Panama papers show, the ease of shell companies is being used in so many ways to hide money and assets.

    Why don’t governments crack down?

    … well one of the biggest users of tax havens shown by Panama papers for examples was politicians.

    The National government sent Judith Collins to the anti laundering summit!

    If the government want to get taxes, stopping the rise of corporations and having much tougher rules with zero loopholes will be a start as is cracking down on foreign corporations paying little taxes.

    But with Labour’s love of trade deals that give even greater advantages to corporations over public good and wellbeing, it seems Labour would find it hard to crack down, even if they wanted to.

    Best leave the large exploiters alone, and concentrate on easy small local targets to be seen to be doing something and then lament the growing inequality and lack of small business investment. (other than immigration routs which are rampant).

    Funny hospitals, roads and schools are full in one of the lowest population increases by birth in decades in NZ, the only thing not full, is the tax coffers! Funny that, because if you only earn $20 p/h you actually qualify for tax subsidy, so why would you import people in at that level to drive the wages down even further! It’s crazy!

    • Ad 1.1

      They are making money hand over fist right now – and the central Auckland cafe market believe it or not is a long way from saturation.

      The current government is taking significant steps to limiting foreign capital – some of which you will be aware of through the legislative process.

      The more useful question than “So what do people do” is “How can government send the right investment signals”.

      I would be interested in your ideas about how New Zealand businesses could be incentivised to be more productive.

      • Tricledrown 1.1.1

        Better education of workers and management.
        Much research has been done on why NZ has one of the poorest productivity growth’s in the OECD.
        Poorly educated management the number 1 reasons.
        Poor rates of investment in technology
        Speculator’s are not taxed as heavily as productive industries.
        More recently standardized testing has caused a massive increase in youth unemployment 96,000 under 25 year olds not in training or education.
        While IT and the construction industries are steaming out for 120,000 workers .
        Rural industries farming ,forestry ,horticulture also not attracting enough workers.
        Gridlock in Auckland is reducing productivity by a huge 25%.
        Labour/NZ1st/Greens need to spend huge amounts in these neglected by National Areas of the economy.
        They have started by getting rid of the dumbing down of education,and making tertiary / Apprenticeship’s easier to access.
        National are still ranting on about a growing economy at 0•1% per Capita growth the economy actually declining per capita a recession in reality.
        National govts are bad for the economy as John Key we just muddled through the GFC,National were too busy fighting teachers by damaging our education system and giving election bribes to do anything about productivity.
        Labour are sidelined by sexual abuse scandals to show up Nationals longterm failures.

  2. Kat 2

    What about building a few ships similar to The Spirit of New Zealand and put maritime training in the school curriculum for all able bodied kids to participate in. Beats military or boot camp training and lays a good foundation for instilling resilience, self reliance, respect for others and decision making. Coupled with the reinstatement of a 21st century Ministry of Works and Development, reinvigorated industries such as Forestry, Rail and Maritime this country could go a long way down the productive road.

    • Ad 2.1

      Are you thinking about something like the Americas Cup and its associated boatbuilding support industries? That is underway.

      • Kat 2.1.1

        No Ad I am talking about the govt taking control of the situation and instigating the building of training vessels such as the Spirit of New Zealand. If we want real productivity we must start with giving all our kids the best opportunity and instruction to work things out for themselves so they can genuinely contribute. David Mac is onto it with his comments. Maritime training as part of the school curriculum would go a long way in pulling this country out of the mire of youth delinquency, substance abuse, general crime and the need for bigger prisons.

        • Ad

          OK Kat I getcha.

          I completely agree.

          It’s such a long haul to bring young people into boatbuilding apprenticeships, and it’s been a boom-bust ride for so many businesses over so many years.

          But there is a great precedent for such a school in the Rotorua-based New Zealand School for Maori Arts and Crafts. This has its own governing legislation, and has been around a while. It is a primary centre of Maori skill and traditional knowledge, and brings a lot of young people through.

          One of the reasons Emirates Team New Zealand wanted the base so close tot he Maritime Museum was to ensure that there would be a permanent legacy of training and sailing right next to our history. This effort will not have gone away; the Auckland Council is keenly aware of the legacy that it will gain after this Cup is gone.

    • Exkiwiforces 2.2

      What happens if the Kid’s rather be doing Civil Defence or Military Training than being forced onto a boat? As you get this “instilling resilience, self reliance, respect for others and decision making” from CD and Military Training as well.

      • Kat 2.2.1

        The kids I envisage taking up sail training program at school would be at an earlier age but could later move on to Civil Defence or Military Training if that was their calling.

        • Exkiwiforces

          There is the Sea Scouts, and NZ Cadet Forces that can achieve the same goals as you mention instead forcing the school kids into something they don’t like as that’s my only issue with your idea.

          But at same token people have issues with NZ Scouting movement and the NZ Cadet Forces.

          Could throw in the High County/ Urban SAR, High Country Fire Teams and the NZCC in the mix.

          • Kat

            What on earth would kids not like about a week or so away sailing on the blue sea. Have you ever been on the Spirit of New Zealand training ship.

            • Exkiwiforces

              Would’ve love to Kat, but my teachers at Hornby High knock me back as I was (according to them) a below average student and felt it should go to someone better. They even had nerve to say I wouldn’t even get into the Armed Forces as I too dumb in school reports bloody assholes they were and don’t get me started on my Middle to Long distanced running or Javelin throwing. I should’ve gone Hadley High (that my first choice) or if my parents could’ve afford it to St Andrews High and then some doors would’ve really open for me.

              Back on tropic the only Sea time this Ex tankie/ soon be Ex rockape has done. Was with the weekend Navy with Kiwi and Moa when they still boats (ships) it was quite fun. Travelling on the HMAS JB Cat from ET after INTERFET, did a Swift Eagle out Townsville which included Ship to Shore landing from our old LPA’s when I was in Support Flt and was knock back for a EX Sealion which was a rehearsal for Ex Tailsman Sabre. Sailing and racing on the lake in Canberra with a group of pirates (Navy personal and almost got drafted into the Navy team for their annual regatta until some muppet of a Jackie found out I was a bloody RAAF’ie) while I was in a Tri service unit and now boating around the Top End of Oz in my 5m waka while fishing, crabbing and the odd bit of hunting.

              My on issue is forcing kids into something they don’t want to as they could a problem and I have someone who wants to be there. Then start opening their mind/ doors to a whole new world and to me as teacher/ trainer thats the real fun part and them watching grow and learn to better themselves.

  3. David Mac 3

    I think Kat is pointing to the camaraderie and bonding that takes place between a crew of all ages over a relatively short period of time on a large sailing ship. Work as a team or all suffer.

    An alternative to dragging wayward kids out of bunks at 6am to march round a parade ground.

    Very hard to sneak in and consume drugs/alcohol. Cellphones left on the dock. A bit of internet time each evening. No TV. No visits from bad news peers. The vessels could perform a role in protecting our coastlines. Spotting and reporting illegal fishing etc. Would give the experience a sense of purpose.

    I think it’s a great idea for instilling the social attributes some of our kids are lacking.

    Lot of pride to be had for those building the boats too. They’re usually working for squillionaires

    • David Mac 3.1

      If it’s a concept that starts returning measured favourable results, an international market for the program/vessels could open up. Big fast tough utilitarian aluminium hulled yachts. Stacks of bunks rather than staterooms.

    • Ad 3.2

      Thanks David that’s good clarification.
      I will respond to Kat in kind.

      On the Americas Cup itself there must be pressure put on both Auckland Council and the government to ensure precisely this kind of legacy for young people.

      I expect you will see precisely this kind of debate around the Council chamber when the next iteration of the design for the Americas Cup bases is put up in the Governing Body meeting in late March.: actual apprenticeships. Actual futures for young people. Dare I mention Waka.

  4. David Mac 4

    I think your advise to your cousin is spot on Ad. I tried hard to make several business partnerships work well for all parties, they failed. Most do. They seem to work best when one or more partners have zero to do with running the business and purely a financial interest. I am by far at my happiest when I’m the only one with the reins.

    Just as Thatcher described the UK as a nation of shopkeepers, we’re not much different here. Small to medium businesses are the backbone of NZ and some solid viable plans to support and grow the sector is fertile vote catching territory for the Left.

    • Ad 4.1

      Cheers David.

      Her backers are good and the developers have an excellent history.

      Once the whole development is up and running I will let people know, so they can try it out.

      So long as she takes care of her long term savings and keeps that secure, it’s time to risk and promote her skill and her confidence.

  5. Draco T Bastard 5

    A more productive economy – and society – has been an elusive goal for many of New Zealand’s previous governments.

    That would be because all of them have NFI WTF an increase in productivity is for.

    Ideally, productivity should mean using fewer resources to get better results and more wealth for more New Zealanders, not slaving your guts out.

    Which is a misunderstanding of productivity and economics. It’s also one of those nasty combinations of meanings that reduce the comment to meaninglessness.

    Using less resources to get the same or better results is an increase in efficiency.
    An increase in productivity occurs when the same job can be done with less people involved in it.

    The latter is why an increase in productivity within a job/sector must, if all else remains the same, result in decreased wages. Of course, not all else remains the same as the reduced use of labour can open up new opportunities allowing the demand for labour to stay the same with wages staying at the same level.
    An increase in efficiency also increases the resources available for those opportunities as well.

    The result is something like this:
    If a nation is already producing enough food to feed everyone well then an increase in productivity must result in a decrease in people used for farming. The people freed up can, and should, be used in other places of society which don’t have enough people to supply the demand. More doctors, more construction workers etc.

    And before you say but, but, exports we have to query if that’s actually a viable option. Is exporting our limited physical resources out of the country actually sustainable? It really doesn’t look like it to me – once we’ve dug up all our iron sands and exported them we won’t have them any more. What do we do then?

    • Tricledrown 5.1

      DTB do what team NZ has done for $20 million we beat a syndicate who spent $200 million .
      Lord Rutherford we have no money so we have to start thinking.
      Unfortunately bean brained bean counters started tomorrow’s schools then standardised testing instead of turning out work prepared youngster’s who can think outside the box we have have 100,000 unemployable box tickers.

  6. eco maori 6


  7. Ad 7

    I forgot to mention that the Productivity Commission is holding a few events in the last week of March about a lot of this stuff.

    Much of what they talk about in this paper from last year still applies:

  8. AsleepWhileWalking 8

    Ideally, productivity should mean using fewer resources to get better results and more wealth for more New Zealanders, not slaving your guts out.

    I took this not to be a misunderstanding of economics, but a better use of leverage by individuals to obtain a semi passive income.

    Perhaps I read it this way because I continuously look for reoccurring income (royalties or subscription services) + ways to scale up with tech or outsourcing.

    It is frustrating to see the “you must work hard” narrative still held up as a gold standard.

  9. Stuart Munro 9

    In the business context the often avoided quality approach that comes out of Shewart’s work is a proven path to lifting productivity. Local managers often aren’t keen on it however – they perceive it as diluting their power.

    I think too though that productivity has been an area (like English teaching in some countries) that suffers from measurement bias. Instead of measuring what is most productive they tend to measure what is easiest to measure. Let me suggest two productive examples that conventional contemporary economics would tend to understate. Robert Guyton’s garden – maximizes long term fertility and sustainable output and aesthetic factors while minimizing labour inputs. And, my grandmother, whose kitchen and garden were never still. She fed and clothed a family of seven through the depression, and supported her community in spite of using little in the way of cash by contemporary standards. Yet economists tend to suggest that pulling such productive workers out of that kind of situation and into low end external employment is some kind of achievement.

    We do have significant underemployment however, and some kind of state startup support is highly desirable because cost of living and especially housing is presently sucking up all the liquidity which once might have allowed new enterprise creation.

  10. CHCOff 10

    Not long ago there was a post highlighting the Fonterra situation, of it’s increased output, increased environmental cost, and increased financial strain the farming sector was under in keeping it’s head above water ( due to the corporate farming model which will eventually deprive them off the land).

    Without ‘value’, productivity becomes increasingly meaningless (much like knowledge without wisdom, a major problem with the purely political approach to govt. of the modern west in particular).

    And the best guarantor to the security of value’s efficacy, is that derived from distributed demand. It is that simple.

    • CHCOff 10.1

      In addition to the above then, it seems the ‘one size fits all approach’ of the current ‘free trade’ has been stripping western industry & economy of it’s ‘value’ component.

      In the short term, it has allowed govts. to appear ‘fiscally responsible’, although at boomerang costs of increasing ‘private debt’ across producing economy into the stuck in neutral to reverse speculative property ‘rock star’ economy.

      This has all been great for China. It has allowed the papering over of the structural problems of the communistic economy due to the centralised sovereign nationalistic govt, which for example in stark contrast to say New Zealand, does not allow the sale of it’s resources to outside interests. CHina has had distributed demand of sorts through the wide embrace of it’s cheap factory economy, that it’s govt. has been able to off-set through that demand in co-ordination via targetting the centralised open door political systems for sale in the west, in deal making and buying up the stipped out sectors of economy that have lost their ‘value’ component, essentially to China.

      The polar opposite positions to this arrangement, are for example contrasted that China has a problem in building ‘ghost cities’, not the shortages of housing say endemic to New Zealand.

      The lastest ‘free trade’ step of the TPP, is going to be a further fiasco in these regards.

  11. Richard@Downsouth 11

    A certain supermarket I know of down here, is paying most staff after April 1 $16.60 an hour (allows them to proudly say “We’re paying above minimum wage”)

  12. Exkiwiforces 12


    “At almost the same time he has announced that he is going to come down hard on tax benefits for shareholders called dividend imputations used for cash refunds.
    Of course this kind of crackdown on about 200,000 self-managed super funds and wealthy retirees”

    This policy announcement from Labour is not only going to hit the wealthy, but those on Low to Medium income retirees such as my mother-in-law and me in a couple of mths time when I’m pensioned off from the ADF as result of my injuries. I’m a little bit unhappy about Labours policy ATM as it could effect my living standards as I already live off smell of a oily rag at keeping costs down. The dumb ass Shorten is really out of touch of his work class retiress as lot have work their ass off during their working lives and want to enjoy what they earned at the end of their working life.

    Albo for PM, there’s a real work class hero in a true sense.

  13. beatie 13

    Then there’s the common situation whereby the workplace bully is promoted into management, resulting in an unhappy, underperforming workforce.

    • R.P. Mcmurphy 13.1

      Yes and the ignorant too. witness the fonterra debacle when the people in charge had no idea that while it may have been clean on the floor it was rotten on the fringes and production was everything.

      • R.P. Mcmurphy 13.1.1

        and furhermore the workplace strawboss bully is standard throughout workplaces in new zealand where some management is sadistic as a matter o fcourse.

  14. Tricledrown 14

    ACTs Don’t Brash was given several hundred thousand Dollars to look at what was needed to improve productivity.
    His first and last report was that housing needed to be affordable so industries had plenty of worker’s handy to where they are required.
    National cut Brashes funding immediately..
    So he wouldn’t show Nationals lack of policy in dealing with this catastrophe!

  15. R.P. Mcmurphy 15

    New Zealanders work as hard if not harder than most other workers in the world.
    Productivity is a chimera when we dont really make the sorts of goods where economies of scale and real innovation take place or can be utilised. Most of the spruiking comes from owners and operators who want to keep wages down while they cream off the top and keep up a howl of bullshit to make workers feel that they are not good enough when the fact of the matter is they are..

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