A newly released industry transformation plan aims to tackle low productivity in New Zealand’s manufacturing sector by increasing investment in advanced technology and attracting high skill staff.
The government has committed $30 million to begin putting the plan into action, with $3.7m for company-specific advice on adopting new technologies, $4 million to upskill workers, and $2.9 million to help companies lower emissions.
The Advanced Manufacturing Industry Transformation Plan was launched this morning by the Minister for Economic Development, Stuart Nash, in South Auckland.
It is one of eight transformation plans created in an effort to increase productivity and performance in key sectors of the economy. Others include agri-tech, construction, forestry, tourism, and digital technologies - which is due to be released later this month.
Nash said advanced manufacturing accounts for 10% of the economy and 73.5% of goods exports, many of which are based outside of urban centers.
“The advanced manufacturing sector has significant untapped potential to increase productivity and high wage jobs, and to support the transition to a globally competitive, low emissions economy. This plan sets out how that can be achieved.”
Advanced manufacturing refers to the use of modern technologies, processes and business practices to improve products or manufacturing processes rather than whether the final products are high-tech.
The transformation plan has set six priorities that the government and key stakeholders believe will accelerate growth in higher-tech manufacturing.
They include increasing investment, developing a high-skilled workforce, creating a net-zero sector, improving research and development, and creating more global connections.
Productivity remedy
The transformation plan is intended to help New Zealand improve its low productivity and boost wages.
A report outlining the plan noted the manufacturing sector has low capital investment in technology compared to international benchmarks, which correlates with low productivity.
“Over the last 40 years, New Zealand has persistently been one of the poorest performers in terms of productivity. The average New Zealand firm produces just over half the output of similar firms overseas using the same amount of labour,” it said.
The Productivity Commission has highlighted a number of reasons for our poor productivity, one of which being “capital-shallow” businesses which have not invested in the best equipment and processes. (Also see this episode of our Of Interest podcast with Reserve Bank Chief Economist Paul Conway on productivity).
Businesses often attempt to grow by employing more workers, rather than investing in plants and machinery that could increase output with lower staff numbers.
The transformation report said refocused industry policy could encourage businesses to make the investments that could lead to increased productivity and wages - without working more hours.
The advanced manufacturing sector made up 10% of gross domestic product in the year ended March 2020 – at $24.1 billion – making it the third largest sector in the NZ economy.
While it has grown 15% over the past decade, its share of GDP has declined from over 19% in 1985. This has been a global trend in developed countries as manufacturing has moved offshore, and services sectors have grown rapidly.
A report by the Heavy Engineering Research Association, which included analysis by Business and Economic Research Ltd (BERL), found more advanced technologies and processes in the local construction sector would boost wages and economic output.
Modeling done by the research firm found GDP could be boosted by as much as $8 billion and wages by almost $3.5 billion across the economy by 2026.
A less optimistic scenario model showed an increase of $4.1 billion in GDP and almost $1.8 billion in wages.
Rachel Mackintosh, a union executive and fellow co-chair of the transformation plan’s steering group, said the plan would help make the industry attractive to future generations of workers.
“New Zealand has the opportunity to harness the creativity of the diverse manufacturing workforce to develop a sustainable industry, where people can build their skills and enjoy decent work and decent wages,” she said.
Mackintosh said the plan was “a testament to the tripartite model” being drafted by unions, workers, businesses and government.
47 Comments
Interesting approach, ultimately however, an expensive (taxpayer funded) and futile way to get more capital into this area.
If you want to raise productivity in any of our capital-starved areas, you simply need to equalize the risk adjusted returns between housing and other asset classes. Until you do that, the $30 million sent here, will pale in comparison to the billions diverted away through poor incentives.
That doesn't give Nash much to do, but it's really what needs to be done.
Yip. Good thing this current government has dramatically lessened the tax attractiveness of rental properties, so that we should see investment going more into productive assets. Finally. After decades of governments not doing anything.
More distortions we need to get rid of: accommodation supplement and working for families, which are welfare for landlords and corporates. If corporates are forced to pay higher wages, investing in capital will become more attractive than hiring workers.
Or just go with the simple approach and levy a low-rate LVT, since land is the main asset held by most tax payers.
I know that you see simplicity as a virtue in a tax system and a broad-based low rate LVT with income tax offsets is about one of the simplest and most effective taxes you can have.
That depends, will those income tax offsets be greater in places like Auckland where the land values have been spiked through crappy planning processes and population policies (or lack thereof) set by central government without infrastructure to match?
You could well end up with townhouses subject to covenants (i.e. not really possibly to develop/use land more efficiently) paying through the nose for postage sized sections of land while small towns with single houses on far bigger sections pay less in smaller centres. And that's before you get into the equity issues of the state effectively forcing people into reverse mortgages to continue living in their own house.
It seems simple, but only if you ignore all the bits you'd actually have to work through for it to make sense.
Yea, no thanks. I don't want to be stung to live in a city at the purchase price level and then every single year thereafter because Councils capitulate to zoning NIMBYISM and central government won't stump up for the infrastructure for greenfield areas that cities need because they keep trying to jam more and more people into our two actual cities without the infrastructure to support them.
The failures of the current land allocation system are a big enough red flag when it comes to agency issues, imagine how bad it would get if you made Crown revenue contingent on LVT revenues constantly increasing forever like they've shamelessly pulled with PAYE and GST.
This is a bigger step in the right direction than i have seen in years . We should support the effort and direction... i am pleased to see a govt that sees a better future outside of milk and houses.
Imagine instead of continually seeing stories about house prices and adverts to train as tradies and fruit pickers.. an nz where we grow and discuss tons of Xeros, Rocket Labs, AuthorITs and have kids wanting to be engineers and tech entrepeneurs.
Gotta praise people when they try good things...
That is partisan nonsense. I worked in mfg operations/supply chains in ANZ SMEs & Global Multinationals for 45 years. Labour is doing nothing in this for the 40% of kids who aren't attending school regularly except disillusion them even more when either National or Labour come along in the near future & say oops we now need to import more high tech workers to operate the technology in these industries. NZ Business have a long track record (since the 1980's) of failure to invest in staff development, it being far cheaper to moan their staff import case to the Govt of the day who will always rollover & NZ tertiary institutions never teach anything until it's at least a decade out of date because sticking with conventional wisdom avoids any academic risk.
Government dropped the ball on their response to COVID in late 2021 and haven't properly handled it since then.
Teachers are the worst affected profession for COVID infections, and this is an element of the teachers strike this Thursday.
If it's just COVID, why the scramble to spend more on truancy officers?
1. The government has to reverse National's previous decision to get rid of truancy officers, so there's that.
2. The government has to be seen to be "doing something". It doesn't really matter how effective it is (this should not be news to you at all).
New Zealand has the opportunity to harness the creativity of the diverse manufacturing workforce to develop a sustainable industry
Looked up Rachel Mackintosh on LinkedIn. Ironically this person swearing on the strength of our manufacturing workforce herself has no degree/experience in business, economics, manufacturing, trades or engineering. Serves on 4 different unions without probably having spent a day on the factory floor.
We aren't short of brilliant people in our workforce, only in decision making positions.
Looked up Rachel Mackintosh on LinkedIn. Ironically this person swearing on the strength of our manufacturing workforce herself has no degree/experience in business, economics, manufacturing, trades or engineering. Serves on 4 different unions without probably having spent a day on the factory floor.
Linkedin can be your friend. One of her prior roles was 'National Director of Organising'.
Right direction how? Productivity is doing things efficiently rather than just doing it at all costs. Those skilled migrants who have moved to Nelson will struggle without affordable accommodation and the low wage.
Most will stick around for their residency and move to Auckland or overseas, leaving the employer wailing for yet more imported workers.
Do you think tens of thousands of workers in health, aged care, transport, retail and hospitality vanished in thin air over Covid? Most left their respective sectors or left the country sick of crappy wages and working conditions. The joint solution from the sector and government is to hire more migrants on low wages.
The Productivity Commission has highlighted a number of reasons for our poor productivity, one of which being “capital-shallow” businesses which have not invested in the best equipment and processes. (Also see this episode of our Of Interest podcast with Reserve Bank Chief Economist Paul Conway on productivity).
No disrespect to Paul Conway, but he was involved in a debate with a colleague and got frustrated when my colleague referred to Jeff Booth (author of 'The Price of Tomorrow: Why Deflation is the Key to an Abundant Future') who Paul is obviously not aware of and dismissed as 'some YouTube guy'.
The point is that Paul didn't seem to appreciate that technology and its efficiencies are 'deflationary.'
Quote: "Technological advances are happening at a rate faster than our ability to understand them, and in a world that moves faster than we can imagine, we cannot afford to stand still. These advances bring efficiency and abundance—and they are profoundly deflationary. Our economic systems were built for a pre-technology era when labour and capital were inextricably linked, an era that counted on growth and inflation, an era where we made money from inefficiency. That era is over, but we keep on pretending that those economic systems still work. The only thing driving growth in the world today is easy credit, which is being created at a pace that is hard to comprehend—and with it, debt that we will never be able to pay back. As we try to artificially drive an economic system built for the past, we are creating more than just economic trouble."
Excellent job chippy and team.
Labour are putting National to shame with some awesome pro productive business efforts that arent just changing property/tax/immigration settings to suit the rich.
I am seriously impressed that efforts are being made to transform our businesses qnd productivity.
Not too concerned if its the right or wrong way for now... it shows good leadership and strategy and direction and we cqn learn from mistakes.
a+ another reason not to vote for 7housesLuxon
I think there is a real disconnect from all side right now.
I was out on Saturday night and mentioned to a bunch of serious National voters, What taxes will be put up to pay for and fix things. The answer from every last one of them was, we dont need to put taxes up we just need to stop Labours wastage.
While I am sympathetic to this view, the Labour wastage seems to be in planning for mergers, bicycle bridges light rail, all only accounts to a few hundred million.....
Labour seems hell bent on introducing no new taxs least the piss off the middle classes, National the same.
I don't think your avergae voter on either side realises how much needs to be spent on health, education, power/roading infrastructure, Policing and crime reduction. Three waters along is going to cost the average NZ household some serious interest costs, think 2k plus.
Everyone wants solutions but no one wants to pay via more tax.
The risk is that a failing NZ lurches left then right over several election cycles and we start to look like Italy, where debt servicing is starting to look ugly.
broad-based low rate LVT with income tax offsets
I don't know if this can actually happen, we need more cash in the pot to fix things, if you pay more in one place but get it back somewhere else, its the waterbed effect, or is the left just saying this knowing full well that their will be more tax paid under this? well put on your big boy pants and tell us , be proud and tell us where it will be spent.... Please no more wrap around solutions to complex problems.
Lets spend it on front line services, Like mid wives, ED drs and nurses, GP practices, Teachers, roading maintenance crews.....
If you want advanced productity make STEM education free at uni level with 5 year bonding.... Cant have Advanced anything without the Stem grads..... hard to get a stem anything if so many of school kiddies not at school any given day.
Next up, why Math is Racist....
I don't know if this can actually happen, we need more cash in the pot to fix things, if you pay more in one place but get it back somewhere else, its the waterbed effect, or is the left just saying this knowing full well that their will be more tax paid under this?
This policy proposal is purely on the taxation and welfare side of things, you can read it here: https://www.top.org.nz/higher-incomes-policy
Other taxes would have to be raised elsewhere to do the things you discuss. But part of creating a vibrant economy is getting the foundations correct, and this country's foundations are tilted towards non-productive investment in housing and construction generally. A LVT is a way to tilt the playing field back in favour of productive enterprise, which will flow through to all the good things you want to see.
My household is in the top 3%.
It's also not 'socialist envy', but a realistic appraisal of how radically we're going to have to change our society in the face of global resource shortages. The world as a whole is going to have to get by on much less 'stuff', and the IMO the only equitable way to organise a society to prevent it from descending into chaos with 10-20%+ unemployment is going to be a UBI.
But of course you are quite deliberately excluding The likes of excise tax and gst from your calculations despite personal tax accounting for way less than half the tax take. Infact by using a net figure you are really pointing out how little of the total tax take that 12% pay.
Your argument is entirely a strawman to start with, you're pretending that only income tax matters and that all benefits are funded purely out of income tax and that not a single dollar of corporate tax, GST, or any of the other sources of tax revenue go towards paying benefits (which includes superannuation btw, the single largest expense in our government's budget).
Money is fungible.
Equity: The Thief of Human Potential - Thomas Sowell https://www.youtube.com/watch?v=8WYi-64MejU
Productivity is really a ratio of energy efficiency. Amount of energy to work done.
We have plateaued because the Laws of Thermodynamics limit that ratio. We have for some time, seen diminishing returns - absolutely predictably.
Nothing - repeat nothing - can be done to increase energy efficiency, once you come up against physics limits. It will always take x joules to raise y tonnes up z metres. Or fly x kilos of person y miles, or..or...
But we can magic this away.
Nothing like economics when you need to pretend....
Wouldn't energy efficiency only be an issue if we are currently using all the energy that we could lay our hands on? We are currently only using 1/10000th of the 173,000 terawatts of solar hitting the earth. Unless it costs more to collect the solar energy than we get back(it doesn't because solar panels pay back the energy used to construct them within 4 years), don't we have plenty of energy?
Youve clearly not worked in some smaller businesses where the owner doesn't know shit and will not invest in efficiency tools. I'm talking ERP, CRM, stock, the basics. I'm sure this isn't the only business like it. The huge amounts of wasted time is incredible.
.. reached the limits of thermo haha. Yea right. Sorry I'm just disillusioned.
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