Links between exporting and productivity

NZTE calls for more research on links between exporting and productivity

3 April 2006: The Chief Executive of New Zealand Trade & Enterprise (NZTE) has welcomed the publication of the first comprehensive report on productivity, Productivity Statistics 1988-2005, saying that while the findings show a small improvement in productivity over the last few years, there is room for further growth.

The report released by Statistics New Zealand shows solid productivity growth since 1988 but suggests that our levels remain below that of many other developed countries. Australia’s level of GDP per hour worked is estimated in OECD figures to be 31 percent higher than in New Zealand.

NZTE’s Chief Executive Tim Gibson says the report is welcome but raises the question about how New Zealand can achieve the further growth necessary for New Zealand to offer wage levels competitive with those in Australia. “New Zealand needs to find ways to generate more value from our inputs – both our people and our natural resources. One way to do this is through exporting – which provides a much bigger market for New Zealand goods and services,” he said.

“The question for me as we open entries to NZTE’s 2006 Export Awards is how New Zealand can raise its level of exporting to gain the productivity benefits of engaging in international markets and thereby contribute to improve the standard of living of all New Zealanders.

“As the Export Awards celebrate forty years, proving the long term sustainability of exporting in an environment that clearly transcends market trends, my feeling is that exporting contributes substantially and should therefore be celebrated, supported and encouraged.”

International studies have found direct links between exporting and productivity, with evidence showing that firms that explicitly target export markets consistently make different decisions regarding investment, training, technology and the selection of inputs, and thus raise their productivity.

Exporting matters for productivity to the extent that it assists New Zealand firms to benefit from scale and specialisation, leverages the return to innovation, increases the competitive environment for domestic firms and exposes them to international best practice, Mr Gibson said.

Work by the New Zealand Institute in November 2005 concluded that in order to maintain economic growth rates at their current levels, a substantial improvement in labour productivity is required. Their study concluded that, while there is no single factor that contributes to productivity growth, the small effective size of the New Zealand market has a powerful effect on New Zealand’s economic performance and can be linked to lower labour productivity growth.

“The implication of this is that expanding the effective size of the New Zealand market through increased international engagement, in terms of New Zealand firms exporting abroad, will be a critical part of raising labour productivity in a substantial and sustained way,” said Mr Gibson.

“It would be interesting to see further research into how that is borne out in New Zealand.”

ENDS

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