NZ’s productivity and dynamism sharply lower

NZ’s productivity and dynamism sharply lower – aging population cited

2 October 2015

Grant Thornton’s 2015 Global Dynamism Index (GDI) currently ranks New Zealand as the world’s 13th most dynamic country compared to 4th out of 60 countries in the 2013 index. Our labour productivity ranking has slipped even lower, New Zealand ranked 27th in 2013 and has dropped down to 52nd in 2015.

An aging population has been cited in both indexes as one of the reasons for holding us back from reaching our full potential.

The GDI, developed in conjunction with the Economist Intelligence Unit, ranks 60 of the world’s leading economies on dynamism, which indicates changes in an economy that are likely to lead to a faster rate of future growth. The GDI reveals that a low percentage of the country’s population is under 30 and ranks New Zealand 25th out of 60 countries. The Treasury forecast that a ratio of working age people to retirement age people of 5:1 in 2006 will shift to 4:1 by 2020 and rapidly accelerate to only 2:1 by 2050.

“In New Zealand, the Government has yet to address the productivity dilemma the aging population of New Zealand will present,” says Tim Downes, National Managing Partner at Grant Thornton New Zealand.

“While the aging population debate to date has focussed on the affordability of universal superannuation and the ever-increasing financial burden on the health sector, an aging population has a direct impact on productive capability both of those who look to retire, and the significant number of businesses owned by baby boomers,” says Downes.

“The business environment is changing at a fast pace and the succession issue that faces exiting baby boomers is becoming critical given the volume of companies they collectively own and the productive capability of these businesses.

“They will all require transition arrangements, but that doesn’t simply involve removing the baby boomer, it means finding someone suitable to take the business over and keep it viable.

“Our aging population presents a possible fiscal deficit creep and without immediate change to capital investment and efficiency, a productive capability decline will take a lot of time to address and amend,” says Downes.

ENDS

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