New Zealand’s post-covid rebuild offers enormous opportunity to lift economic performance through digital transformation, says BNZ chief economist Paul Conway.
“Adapting to the impacts of the pandemic is a chance for permanent and positive change. Lockdowns gave us a crash course in using digital tools. We are not going to unlearn all that, because the benefits are potentially immense.”
Workplace transformation via digital adoption has been radical, says Conway.
“My own work life is very different now compared to before the pandemic. I’m working from home a lot more, on planes a lot less, and connecting virtually with colleagues and customers.
“We’re seeing a hybrid model developing in the workplace. People like the ease of working from home. But it’s also good to see colleagues regularly and to have those all-important watercooler conversations that are critical for sparking new ideas and innovating. It’s about flexibility and finding the right balance between the physical and digital worlds.”
Tools such as Zoom, Teams and Slack, however, are only part of the story, says Conway.
“For years now, we’ve been seeing more of our daily activities move online and the internet has become an integral part of many peoples’ lives. Many of us work more online, shop, and keep in contact with friends and whanau.”
But digital technology can be a double-edged sword. For Kiwis that lack digital skills, there is a risk of being left behind, Conway warns.
BNZ’s recent Digital Skills for Life in Aotearoa 2021 found that 700,000 adult New Zealanders lack the digital skills needed to use the internet safely and effectively.
“Even more concerning is the fact that these New Zealanders are often from households with low incomes, lower levels of education, or disabilities. These people are at risk of being increasingly marginalised, as job applications, banking, bill payments, government services and many other aspects of everyday life move online."
If we fail to address these digital skills gaps, seizing the opportunities offered by the digital transformation risks deepening inequality, Conway says.
“In a few short months, we’ve achieved digital transformation that would have normally taken five years. We need to build on that and make sure we bring everyone along, rather than becoming complacent and thinking the job is done. That would be wasting the crisis.
“But let’s not pretend this is easy. For a business to successfully use digital technology, it is much more than just buying a computer and putting it in the corner and saying, ‘cool we’re all digital’. A business has to work hard and turn itself inside out to integrate digital tools into every aspect of what it does.”
For some businesses, successfully adopting new technologies will be harder than for others, Conway says. “There are plenty of examples where digital transformations have not gone well.
“A lot of small business owners are time poor and it can seem like a huge hurdle to integrate digital technology into their businesses. There's a hump to get over. But done successfully, it pays for itself and frees up time and resources. That’s the goal here.”
If we can achieve that across New Zealand’s many small businesses, we will see a much-needed step up in our economic performance.
“Pre-covid19, our economy was not serving us particularly well, with many New Zealanders struggling just to get by.
“An hour at work in New Zealand doesn’t create as much value as an hour spent working in lots of other countries. On average, an hour of work in New Zealand creates $68 worth of output compared to $85 in other OECD economies.
“That’s the fundamental reason why ours is a low wage economy. Because we create less value from an hour of work, wages are on the low side and we have to work longer hours to earn a living compared to people in more productive economies.
“Add in the housing crisis and high cost of living and many people are doing it tough.”
One of the main reasons New Zealanders work hard for low wages can be traced back to the small size of our economy and geographic isolation, Conway says.
“We live in a small economy spread over a large land mass that’s a long way from anywhere else.
“Despite what we like to tell ourselves, we are not very well connected into the global economy and our domestic markets are small and fragmented across a country the size and shape of Japan but with only a fraction of the population.
“The size of the market influences the size of the firm, so most New Zealand businesses are tiny. About 70% have no employees and 97% have less than 20 employees. Being small can make it harder to invest and adopt new technology."
“While our ‘economic geography’ has held us back, embracing digital tools allows us to take that out of the liability column and maybe even make it an asset. Geography is less relevant online, and widespread digital adoption would help ensure we don’t return to the status quo of a low-productivity low-wage economy.
“Digital technologies enable New Zealand businesses to expand their domestic markets and to be part of the global economy. The development of software as a service makes investment in digital capability much more affordable for small businesses."
We are currently living through a fundamental economic shift caused by the digital transformation, Conway says. “We can use that to push back on the economic forces that have kept wages low in New Zealand. If we grasp the opportunity, we can build a stronger economy that delivers greater wellbeing across more New Zealanders.”
While he acknowledges technology is not a silver bullet, Conway says it can help create prosperity and abundance if we do the work needed to make the most of it.
Conway says resources are available to help businesses that want to adopt digital tools and workers that want to update and upgrade their digital skills. Government resources are available at www.digitalboost.co.nz.
In addition, BNZ has facilitated an alliance of 20 leading New Zealand corporates working in partnership with Government to encourage digital adoption and upskilling, an achievement about which Conway is especially proud. More information is available at www.digitalboostalliance.nz.
“Our own BNZ pledge, as part of the Digital Boost Alliance, is about providing finance and advice to support businesses to digitally transform their operations. We will also use our broad community reach to help lift the digital skills of New Zealanders and give people the confidence they need to fully participate in a more digital economy.
“On our own, our impact is limited. But by working with other corporates we can take meaningful action that helps lift the digital capabilities of New Zealanders and puts us firmly on track to deliver a more productive and connected economy.”
Any views expressed in this article are the personal views of Paul Conway and do not necessarily represent the views of BNZ, or its related entities.
This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser. Neither BNZ nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any information, representation or omission, whether negligent or otherwise, contained in this article.
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References to third party websites are provided for your convenience only. BNZ accepts no responsibility for the availability or content of such websites.Digital Skills for Life in Aotearoa 2021