Covid a catalyst for boosting our woeful productivity
Last week’s Budget was filled with big numbers to help find our way out of the Covid crisis. But hidden in there were the beginnings of what Xero's Craig Hudson hopes is a commitment to solving our productivity plight.
We went into the Covid pandemic with a healthy and stable economy, but we achieved this through the brute force of Kiwis.
We invested in people and time, rather than learning to work smarter and more efficiently. We hit a population of five million in March this year, having adding an additional million in just 17 years with half of this growth coming from immigration.
This is fine in short-term stints, but it's not something we can maintain or rely on. New Zealand has a longstanding productivity problem.
Our productivity levels are well below the average of our high-income OECD peers. New Zealand’s GDP per capita is about 30 percent below the average of the top half of the OECD, and this hasn’t really changed during the past 25 years.
In 2018, New Zealand was ranked 25th for GDP per hour, coming in behind the likes of Australia, Germany, France and the wider European Union.
Without addressing this, we have little chance of swiftly rebuilding our economy, let alone improving the quality of life for future generations.
So before we run back to our pre-Covid lives, we need to think about what we are running back to.
What parts of our businesses are the strongest and what do we need to adjust? What parts of our country are the strongest and what needs to change?
Last week’s Government Budget was filled with big numbers. But hidden in there were the beginnings of what I hope is a commitment to solving our productivity plight.
Whilst in the scheme of the Budget, it wasn’t a huge investment. I was glad to see the establishment of a $10 million fund to provide incentives and grants to encourage e-commerce, which will support Kiwi businesses wanting to incorporate it into their future plans.
The $12.5 million committed to advancing Trans-Tasman e-invoicing will also have a good impact on improving the capabilities of local businesses to invoice more effectively.
Buyers and sellers alike will benefit from e-invoicing becoming commonplace, eradicating traditional invoicing in favour of an automated process that improves accuracy and security while speeding up processing times.
But we need to think bigger than just e-invoicing and e-commerce grants. Without driving adoption and usage of cloud-based technology across all businesses, we have little hope of increasing our productivity.
Working smarter is the key to unleashing business potential, and the uptake of cloud-based technology such as Google Docs, Microsoft Office 365, Vend or Hubdoc is a huge part of this.
Think of the difference of a tradie who has an online system to quote on the go, versus the tradie who has to wait until they get back home. Or a retailer operating with or without a real-time view of what stock they currently hold.
Cloud-based technology has the potential to unlock New Zealand’s business productivity. This is because it allows companies to access tools they might not otherwise have.
This significantly improves business accuracy and gives management the ability to make better decisions because they understand their business better with real-time information. It helps staff to be more mobile and allows management to spend more time on strategy and innovation.
Prior to New Zealand heading into lockdown, Xero was ready to release some economic modelling we commissioned NZIER to do.
The report was completed just prior to the outbreak of Covid-19. So, whilst the pandemic has fundamentally changed our economy, in many respects the findings of this report are more important and relevant than ever.
The economic modelling in this report – again, modelled on a pre-Covid economy – found that a 20 percent uptake in cloud-based technology could increase New Zealand’s GDP by between 1.2 - 2.1 percent, adding up to $6.2 billion to the local economy annually.
The report found that this technology uptake could lift household spending by $2.6 - $4.6 billion, increase business output by $4.1 - $7.3 billion, increase real wages by $1.8 - $1.9 billion and grow exports by between $341 - $618 million.
Right now, we can’t only focus on rebuilding together, we have to focus on rebuilding better. We’ve been doing well at leapfrogging other countries’ health recovery. Now it’s time to leapfrog their economic recovery too.
I’m realistic that last week’s Budget was only a piece of our rebuild journey. It's going to take years to rebuild completely, meaning it will involve many more government Budgets.
But wage subsidies and other supplements can only be short-term solutions. We need increased investment to help businesses be more productive with what they have, and innovate to find new revenue streams.
Ultimately, the New Zealand economy needs more technology if we are to rebuild a modern, resilient economy.
To fully unlock the potential of cloud-based computing, we must first remove barriers to adoption. These barriers include skills gaps, concerns over privacy, internet infrastructure and cost.
Singapore has undertaken something similar with their Digital Economy Framework, which aims to accelerate the transition for businesses into the cloud. The government of Singapore recognised the need for this and is directly investing in small and medium businesses through services and grants.
It’s critical the Government works with industry to build an integrated strategy that accelerates investment in training and drives policy to support cloud adoption.
Cloud-based technology provides an immense opportunity for small businesses to revolutionise the way they operate, and by doing so help transform our economy and lift the living standards of all New Zealanders. The challenge is for all of us to help them do so.
Aotearoa has the opportunity to be world-leading and create one of the best digital economies globally that many generations of Kiwis will benefit from.
That’s how we’ll solve a problem we’ve been struggling with for decades and rebuild ourselves out of this economic shock. Let's make this happen.
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