Source: Productivity Commission
The New Zealand Productivity Commission Te Kōmihana Whai Hua o Aotearoa (the Commission) has released its report on the Improving Economic Resilience inquiry.
The inquiry found clear and strong connections between the challenges of building resilience, fostering innovation, and raising productivity. Further, an increasingly uncertain and volatile economic and geopolitical world reinforces the need to tackle these challenges.
In its report, the Commission focused on two important questions:
– How can New Zealand prepare for a disruption where the nature, timing and impacts are unknown?
– How severe could the impacts of a potential disruption on New Zealand be?
Modelling work undertaken as part of the inquiry gives valuable insights about the size and nature of impacts on New Zealand from three representative disruptions:
– a trade war in Asia
– a new technology making our dairy industry largely obsolete
– a massive rise in the price of oil.
Such disruptions could see between 24,000 and 112,000 jobs affected. Research on labour market outcomes for workers who have been involuntarily laid off indicates that a third permanently exit the labour force. Post-layoff earnings are substantially below pre-layoff earnings, even for workers who are re-employed. Further, earnings for workers can take almost three years to recover to pre-layoff levels.
These results not only indicate the quantum of dislocation from such disruptions, but their disparate impact on industries, regions, and communities. A critical insight from this modelling is the importance of the mobility of productive resources to minimise negative impacts and maximise growth opportunities. Investment to foster the mobility of people and other productive resources is required to improve economic resilience.
The Commission recomm
