Low Productivity in New Zealand: The Role of Risk Management

Stuff. 19th December 2025.

This news about New Zealand's economy is both unwelcome and unsurprising.

Over the past week, I’ve been examining our poor productivity performance compared to similar nations and how inadequate risk management contributes to this issue.

Productivity is a key driver of economic growth, and higher productivity can lead to higher GDP.

New Zealand’s productivity has been a concern for over a decade, with growth rates declining from approximately 1.4% in the 1990s to an average of just 0.2% since 2013. Treasury’s May 2024 report underscores the significance of this challenge:

“Raising our productivity performance is the biggest economic challenge facing New Zealand and will require a sustained effort on a number of fronts.”

What Is Productivity?

Most of us understand personal productivity as achieving more with less effort. On a business or national scale, productivity means producing a larger output of goods and services with fewer inputs like labour, capital, and materials. Greater productivity leads to better results in less time and at lower cost—benefiting individuals, businesses, and the nation alike.

The Role of Risk Management

Good risk management can significantly improve productivity by reducing waste, eliminating inefficiencies, and fostering innovation. Treasury’s productivity report highlights a concerning trend:

“Increasing uncertainty from geopolitical and climate risks was likely to lead to reduced risk-taking and innovation.”

While technologies like AI offer potential productivity boosts, these gains may take time to materialise due to factors such as falling educational attainment, low managerial capability, and insufficient investment in research and development. As the Treasury Commission notes, our productivity gains have primarily come from increasing work hours and labour—an approach that is both unsustainable and harmful in the long term.

The Limits of Hard Work

New Zealand’s traditional response to productivity challenges has been to work harder. However, research shows this strategy often backfires:

• Stanford University: Productivity drops significantly after eight hours of work. Overworked employees may make mistakes that take longer to fix, effectively negating any additional effort.

• Harvard Business Review (2015): “The research is clear: Long hours backfire for people and companies.”

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How Risk Management Outperforms Hard Work

Effective risk management enables organisations to work smarter, not harder, by optimising resource allocation and improving decision-making. Here’s how:

1. Optimising Resources: By prioritising activities based on risks and potential returns, risk management helps maximise resource value while minimising waste. Streamlined processes and controls enhance efficiency, reduce costs, and ensure compliance.

2. Enhancing Decision-Making: A robust risk management program enables informed, balanced choices aligned with organisational goals. It helps businesses adapt to changes, evaluate alternatives, and execute plans effectively while learning from feedback.

3. Fostering Innovation: Risk management encourages exploring new ideas, products, and markets while managing potential downsides. This culture of innovation drives long-term productivity growth.

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The Way Forward

New Zealand’s productivity challenges demand a shift from the “work harder” mindset to smarter, risk-informed strategies. Adopting strong risk management practices can help businesses and the nation achieve sustainable growth, making better use of our resources and fostering innovation in a rapidly changing world.

Fox Risk Consulting seeks to help businesses develop suitable risk management programmes supporting business growth.  If you would like to discuss this, please contact me. David@fox-risk.com