The New Zealand Productivity Commission Te Kōmihana Whai Hua o Aotearoa has released an Issues Paper on its inquiry into improving the resilience of the New Zealand economy to persistent supply chain disruptions.

As shocks and disruptions continue to eventuate and considering the recent devastation brought by Cyclone Gabrielle, economic resilience is a top-of-mind concern with the expected long road to recovery for the economy of Aotearoa and its associated communities.

The Issues Paper continues the public conversation on economic resilience. It outlines the Commission’s current thinking on supply chains and economic resilience in New Zealand and overseas, and highlights policy challenges the inquiry should focus on.

The Commission is calling for submissions to help identify trends in supply chain disruptions that submitters are worried about; coping mechanisms that businesses, industries, and communities are using to enhance their resilience; how the government can help to enhance economic resilience; and case studies that can help the Commission learn more about how industries and communities can adapt to build resilience over time.

Submissions are open now until 17 April 2023. Feedback from submissions and ongoing engagement will be used by the Commission to progress the inquiry toward delivering a final report to Government in February 2024.

Dr Ganesh Nana, Chair of the Productivity Commission noted that "supply chains have been neither front nor centre in economic conversations until recent events ".

"The concept of economic resilience to potential supply chain disruptions has, for some time been relatively invisible compared to the push for efficiency, cost savings, and production gains alongside increased trading opportunities.

"However, with recent influences gathering momentum at home and abroad, the concept of economic resilience to supply disruptions has come to the fore," says Dr Nana.

The Commission worked closely with prominent New Zealand economists, Brian Easton and David Skilling, in the development of the Issues Paper. Findings from their research have also been published alongside the Issues Paper.

A New Zealand history of shocks by Easton examines how New Zealand governments and industries have responded to major historical shocks and perceived risks and trends in the last century.

Supply chains to the last bus stop on the planet by Skilling provide an analysis of global economic and socio-political events and trends to identify the external shocks New Zealand political and business leaders and industries may need to respond to in the future and to examine policy responses that other small, advanced economies have engaged to navigate these future trends.

Dr Nana says, "the commissioning of research and collaboration with others is vital to our work."

"Working with experts enables us to encourage and benefit from a diversity of ideas and insights. This leads to the delivery of high-quality research and analysis that will help shape influential policy advice.

"Brian Easton’s work provides the Commission with valuable insight into the past economic resilience of New Zealand industries and communities. His paper highlights the difficulty of distinguishing temporary supply chain disruptions from persistent ones and underscoring the importance of macroeconomic stability, fiscal capacity, and a diversified economy.

"David Skilling’s research provides important context for the inquiry by outlining the global dynamics that present New Zealand industries, communities, and policymakers with challenges in the future, and highlighting areas for possible policy responses," says Dr Nana.

Functioning supply chains underpin specialisation and trade, which is vital to the prosperity and wellbeing of New Zealanders. As global trends indicate that disruptions are likely to be more frequent, it becomes increasingly important for businesses, industries, workers, and communities to anticipate, prepare, absorb, recover, and learn from those disruptions.

Dr Nana says, "this inquiry is important to identify ways to explore policy options for enhancing the resilience of the economy of Aotearoa to supply chain disruptions.

"It is possible to under-invest or over-invest in economic resilience. Under-investment exposes a society to adverse impacts of disruption. Over-investment wastes valuable resources that have better uses.

"With a more volatile and uncertain future on the horizon, now is a good time to examine if the country has the mix right.

"We are pleased to launch this paper and engage in conversation and encourage thoughts, comments, and submissions on the questions raised.

"This process is an important step to inform our final report and ensure our findings and recommendations contribute to lifting productivity and improving wellbeing for all the communities of Aotearoa New Zealand," says Dr Nana.

Submissions can be made on the Commission’s website or emailed to info@productivity.govt.nz by 17 April 2023. All feedback received through this process will be published on the Commission’s website.

See embargoed versions of the documents below. Final versions will be available on the Commission's website on 11am 28 February 2023.

Issues paper: Improving Economic Resilience

A New Zealand history of shocks, Brian Easton (2023)

Supply chains to the last bus stop on the planet, David Skilling (2022)

Editors notes

The Government has asked the Productivity Commission to undertake an inquiry to identify policies and interventions that can enhance the resilience of the economy and living standards to persistent medium-term supply chain disruptions.

To identify ways to enhance the resilience of our economy to external shocks, the Commission will investigate:

- factors that make the New Zealand economy vulnerable to supply chain disruptions within the context of increasing risks and the pandemic experience;

- vulnerabilities from importer and exporter dependencies on global supply chains;

- a Te Ao Māori perspective on resilience considering He Ara Waiora dimensions and how it applies within Māori businesses and communities; and

- drivers of variation in firm, sector, and community, resilience to supply chain disruptions.

The Issues Paper is the Commission’s first step in engaging with stakeholders. It outlines the Commission’s current thinking on supply chains and economic resilience in Aotearoa New Zealand and overseas, and highlights policy challenges that the inquiry should focus on.

The paper seeks feedback on an initial set of four questions by 17 April 2023:

• 1. What supply chain disruptions and trends are you worried about?
• 2. What is your industry/community currently doing or planning to do to address supply chain concerns?
• 3. How can the government help to enhance the resilience of your industry/community to supply chain disruptions?
• 4. What should the Commission learn more about the economic resilience of industries and communities?
• The Commission will rely on feedback and ongoing engagement as the inquiry progresses toward delivering a final report in February 2024.
• Responses can be made on the Commission’s website, or emailed to info@productivity.govt.nz by 17 April 2023. All feedback received through this process will be published on the Commission’s website.

For more about the inquiry go to Productivity Commission | Improving Economic Resilience

A New Zealand history of shocks, Brian Easton (2023)Brian Easton’s research paper examines how New Zealand governments and industries have responded to major persistent shocks and perceived risks and trends in the last century. It identifies the main policy responses to past disruptions in the context of New Zealand’s unique position as a small, advanced economy, with historically high living standards and an idiosyncratic economic structure.

The paper explores how past disruptions were understood at the time and what choices or narratives decision-makers adopted in their responses; how previous governments worked with industry to build economic resilience, and what advice they received from officials and experts; how these policy responses impacted long-term economic resilience, productivity and wellbeing; and what lessons should be applied to future policy options, particularly regarding industry and trade policies.

Supply chains to the last bus stop on the planet , David Skilling (2022)

David Skilling’s research looks at the events and trends currently taking shape outside New Zealand, to identify the external shocks New Zealand politicians and industries may need to respond to in the future. The paper examines the disruptive events of recent years and outlines how these are reinforcing challenges and changes to the post-Cold War order. It finds that ongoing geopolitical shifts and changing attitudes towards trade among the governments of major economies are driving a fragmentation of trade and investment flows, trends that will have powerful impacts on supply chains as they escalate in the future.

Building on this assessment of the international trends, Skilling explores the implications and options for small, advanced economies like New Zealand to manage their exposure to disruptions and keep their supply chains open.

About the Productivity Commission

The Productivity Commission is an independent Crown entity. It generally undertakes two inquiries at any time following a referral from the Minister of Finance and other referring Ministers as required. Terms of Reference for inquiries are agreed to by Cabinet before referral to the Commission.

More details about this inquiry, including Terms of Reference and key inquiry dates, are available at the Commission’s website, www.productivity.govt.nz/resilience.

The Commission has recently finished its inquiry into immigration settings, ‘ Immigration - Fit for the Future ’ in May 2022. It is currently also undertaking the inquiry ‘ A Fair Chance for All’ .

For more information email info@productivity.govt.nz

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