After a few challenging years, during which many New Zealand businesses have effectively been in survival mode, it's time to pursue productive growth, says ASB.

 It’s the awkward reality we’ve known for decades - New Zealanders work longer and harder than most other countries, but produce less per capita in comparison.

 This ‘productivity paradox’ has real-world consequences, with New Zealand’s gross domestic product (GDP) per capita lagging other small advanced nations, often by tens of thousands of dollars. That means relatively fewer dollars to support Kiwi families, and less tax revenue to invest in healthcare, education and infrastructure.

 We’ve known about the problem for years. The solutions are also well understood. A new study by the New Zealand Institute of Economic Research (NZIER), commissioned by ASB, suggests that investing in innovation to lift productivity growth from 1.5 to 2.5 per cent, would see real GDP hit $500 billion by 2045, a 5 per cent increase on current projections. That’s tens of billions of dollars worth of additional value to the economy.

 So how do we get there?

 We need to work smarter

 "New Zealand business needs to be more ambitious, embrace innovation and invest in capital, knowledge and research and development as an engine for growth and sustainability,” says NZIER Principal Economist Christina Leung.

 "The country's economic growth over the past two decades has been largely driven by adding more people to the workforce, and this needs to change, we need to work smarter."

 The NZIER research identifies two key barriers when it comes to businesses investing in productivity-enhancing innovations - lack of capability, and lack of confidence.

 “The government has a role to play in terms of ensuring that those barriers are lowered by incentivising innovation,” says ASB's Executive General Manager for Business Banking Rebecca James.

 “But it has to be primarily driven by businesses. The spotlight is now on business to lean into the productivity challenge and we fully appreciate that access to capital to invest in productivity initiatives is what’s required.”

 Capability encompasses technology, processes, skills and knowledge. When businesses invest in these things, innovative changes can lead to dramatic productivity improvements. James points to New Zealand’s kiwifruit sector, which a decade ago was struggling with the devastating impacts of the Psa kiwifruit vine canker disease, which required entire kiwifruit orchards to be ripped out.

 “The cornerstone of the kiwifruit industry’s recovery from Psa was their ability to come together quickly and develop innovative solutions that everyone could benefit from using the strength of the ecosystem they had built,” she points out.

 Competition breeds innovation

 “Kiwifruit producers invested in their plant and processes and have reaped the rewards in the form of steadily growing export revenues. It’s a shining example to other industries of what a focus on innovation can help achieve across the entire value chain.”

 Innovation requires businesses to invest in themselves. In other countries, government grants and venture capital funding can often be drawn on to a greater degree. With those sources of capital in relatively short supply here, the banking sector has an important role to play in supporting businesses to boost their productivity.

 That’s why ASB is making available up to $500 million in loans for businesses seeking to invest in productivity-enhancing improvements.

 “Whether it’s investing in new plant and equipment, research and development, or staff training to assist with the adoption of new technologies, anything that's going to improve productive output for a business can access this lending,” James says.

 $5 million is also being made available by ASB to borrowers for Productivity Grants, equal to one per cent of their loan, with up to $50,000 per business available to tap into. 

 It goes beyond making dollars available to borrowers. James says that ASB can help customers make the right decisions using its proprietary Financial Diagnostic tool. The tool provides a business with an overview of their financial health and models scenarios allowing them to understand the impact investments can have on their business.  

 Boosting confidence is key

 That will help businesses overcome the other big barrier to investing in innovation - a lack of confidence.

 “It takes courage to be in business today. Business owners need to be confident about the payback of any investment. The focus now needs to be on ensuring that the investment returns can be measured by efficiency, productivity and competitiveness,” James points out.

 "We expect to be supporting our customers' productivity growth through investments in things like efficiency improvements with monitoring and inspection technology, increasing output by adding robotics to production lines, reducing errors and admin by building in point-of-sale technology or investing in people with workforce training and capability," James adds.

 There has already been a flurry of enquiries about ASB’s Productivity Grants, suggesting that despite the soft economy, Kiwi businesses are looking ahead with a growth mindset.

 “Our productivity initiative is aimed at removing barriers for leaders that choose to invest in both their business and the future of Aotearoa,” says James.

 “Now is the time to be bold and ambitious for your business and for the country.” 

 To find out more about ASB’s Productivity Grants, visit asb.co.nz/productivity

 ASB Bank Limited’s lending and eligibility criteria, terms and conditions, rates and fees apply. Offer is subject to change and may be withdrawn at any time.

*Hero image caption: Rebecca James is ASB’s Executive General Manager of Business Banking