NZ yet to fully benefit from ICT-enabled productivity: Commission

Productivity Commission chair Murray Sherwin says that sharpening competition and increasing the use of ICT could give a much-needed boost to New Zealand’s service sector.

Businesses rushed to trim costs and staff numbers following the 2008 worldwide economic downturn. It is instructive, therefore, to look at some of the numbers revealed from one of the surveys in the Productivity Commission’s second interim report, now out for consultation.

The report looks at ways to encourage consumers to put more competitive pressure on service providers, improve competition law, reduce barriers to international trade in services, raise the level of ICT skills in the workplace and increase the uptake of cloud computing.

Commission chair Murray Sherwin says that sharpening competition and increasing the use of ICT could give a much-needed boost to New Zealand’s service sector and, by extension, the whole economy.

ICT is revolutionising the way that services operate, he says. However, New Zealand has yet to experience the full productivity benefits of ICT, in part due to the loss of skilled ICT professionals and ICT-savvy managers, and the high initial cost of ICT services.

A survey into service firms’ rationale for investing in ICT revealed that 62 per cent of respondents did so to improve the quality of existing products or services. Just 13 per cent did so to reduce staff costs, and 13 per cent also to reduce other costs. 42 per cent sought to improve communications with suppliers or customers.

The survey also sought reasons for non-adoption of ICT.

Top of the list was that the business was functioning well enough without new technology (45 per cent); 23 per cent said they couldn’t afford it; and 23 per cent were not confident that the benefits would outweigh the cost.

Differences in technology adoption accounted for at least 25 per cent of per capita income disparities. The report says this is consistent with the view that New Zealand can improve productivity by adopting ICT more quickly.

It notes that perceptions of risk, cost and returns affect decisions on adoption and that perceptions are influenced by government policies and actions.

Sherwin says that streamlining the process for filling ICT jobs from overseas, and helping ICT graduated to adapt to the workplace would increase the number of employees and managers with ICT skills.

Cloud computing, he says, has great potential to create a level playing field for New Zealand services firms by reducing the cost of setting up ICT services. New Zealand firms need encouragement to accept cloud-based services.

The commission is seeking more information about higher New Zealand prices for ICT products, when compared to other countries, which would contribute to delayed adoption.

In March 2013 the commission was tasked with assessing the role of services in the New Zealand economy and providing policy options to lift productivity. It is seeking feedback on the lastest report and will provide its final version to the appropriate ministers by April 30.

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