New Zealand lags behind OECD peers in productivity. Explore why health, education and utilities face the sharpest pressure - and how lean process design, automation and AI can help close the gap.
New Zealand’s productivity has been weak for decades. Despite some of the longest working hours in the OECD, output per hour remains about 40% below the OECD average - and closer to 60% behind small advanced economies such as Denmark, Ireland and Singapore. This “productivity paradox” matters because productivity underpins wages, living standards and fiscal capacity. Without meaningful improvement, New Zealand risks sliding further behind peers that have surged ahead through technology, innovation and smarter ways of working.
Understanding the root causes of this gap - from capital investment and processes to workplace culture - is the first step toward closing it. A combination of structural and cultural factors explains why New Zealand continues to underperform on productivity, including:
The outcome is a workforce that works hard, but not always smart - and an economy that relies too heavily on labour inputs and population growth rather than efficiency and innovation.
The national productivity challenge is most evident in sectors that sit at the heart of New Zealand’s wellbeing and competitiveness. Healthcare, education and utilities are under the greatest strain, each facing structural constraints that limit their ability to do more with the resources available. Yet these same sectors also offer the greatest opportunity - where targeted investment in digital productivity could deliver outsized gains for both enterprises and the wider economy.
Healthcare is under immense strain. Demand is rising due to an ageing population, but staffing shortages and rising patient expectations stretch capacity. The Improving State Sector Productivity Inquiry (2024) highlighted that while health funding and inputs have grown, output improvements have not kept pace.
Health funds also report that up to 13% of claims may be fraudulent or mismanaged, adding cost and complexity. Many providers also rely heavily on agency staff to fill gaps - in some aged care organisations, this accounts for as much as 20% of salary budgets. This is not sustainable.
Universities and polytechnics face a different set of pressures. Student expectations have shifted permanently post-COVID: digital-first, seamless services are now the baseline. Yet core processes such as enrolment, forecasting and results processing remain largely manual.
The result is wasted staff capacity, frustration for students and a growing competitiveness gap compared to global institutions that are investing heavily in digital services. Labour productivity in education has actually declined relative to the measured sector average.
Utilities and construction are asset-heavy and compliance-driven, yet many still depend on manual subcontractor management and outdated asset-tracking. These gaps lead to delays, cost overrun and weaker resilience - challenges that will intensify as New Zealand undertakes large-scale infrastructure programmes.
The productivity challenge is not just an economic issue - it is an enterprise-level opportunity. Organisations that take deliberate steps now can improve efficiency, resilience and competitiveness. There are four practical levers organisations can pull to start closing the productivity gap:
Automation layered onto broken processes only accelerates inefficiency. The first step is to map how work really gets done, identify bottlenecks and apply lean principles to eliminate duplication and waste.
Real life example: An admissions team at a larger university redesigned its enrolment process before digitising it. By removing unnecessary approval steps and standardising forms, they significantly reduced processing time and created a streamlined foundation that automation was able to amplify.
Automation is not about hype or “bots for the sake of bots.” It is about removing repetitive, low-value work and enabling people to focus on higher-value tasks. AI should be used in practical ways - triaging information, supporting decisions or enhancing data accuracy.
Real life examples include:
● Claims processing in healthcare funds.
● Digital onboarding for new staff or customers (including students for educational institutions).
● Asset tracking and predictive maintenance in utilities.
Enterprises don’t need to embark on multi-year, multimillion-dollar system overhauls to see results. Platforms such as Microsoft Power Platform and UiPath enable rapid, scalable digitisation of processes while integrating with existing systems. These tools make it possible to start small, prove value and expand without excessive capital outlay.
Real-life example: A New Zealand retail chain used Power Platform to build a low-code app for managing shift swaps across its stores. What was once handled through ad hoc emails and calls became a transparent, automated process, reducing scheduling errors and improving staff satisfaction.
Many organisations fall into the trap of “random acts of automation” or isolated initiatives that show promise but never scale. To avoid this, enterprises need strong governance, measurable KPIs and a framework for continuous improvement. The goal is not just to digitise tasks, but to build a sustainable program that matures over time.
Real life example: A construction firm began by automating subcontractor onboarding. With governance in place, it scaled this into a broader program covering compliance checks, safety reporting and project management dashboards. Each stage built on the last, creating cumulative productivity gains.
True productivity gains are not just about short-term efficiency - they build long-term capacity and resilience that allow organisations to adapt and grow. By removing manual effort, streamlining processes and embedding automation, businesses can free up their people to focus on higher-value work, deliver faster and more reliable services - making better use of their resources.
Over time, these improvements compound. A more productive enterprise attracts and retains talent, competes more effectively in global markets and is better equipped to withstand shocks - from supply chain disruptions to shifts in customer expectations. Productivity, when approached strategically, becomes less about cost-cutting and more about creating the foundation for sustainable growth.
New Zealand’s productivity challenge is not a distant issue - it is the defining barrier to competitiveness today. Decades of underperformance have left us trailing our peers, but the levers to change this are within reach.
Enterprises that act now - by rethinking processes, embedding lean design and deploying pragmatic automation - will not only close their own productivity gaps but also help lift the nation’s long-term growth. At Ilaria, we see ourselves as the Digital Productivity Experts, bringing process expertise, automation capability and sector insight to help organisations lead this change.
The question is not whether productivity matters - it is whether your organisation is ready to lead the change. Reach out today to start the process with a productivity diagnostic.
Productivity drives higher wages, better living standards and national competitiveness. For enterprises, it means greater efficiency, resilience against market disruptions and capacity to invest in growth, innovation and customer experience.
Reports from the Treasury and the Productivity Commission highlight healthcare, education and utilities as sectors under the greatest pressure. Each faces structural inefficiencies that digital productivity and automation can help address.
By combining lean process design with automation and AI, organisations can streamline workflows, reduce reliance on manual labour and free staff to focus on higher-value work. Tools like Microsoft Power Platform and UiPath enable NZ enterprises to scale productivity initiatives without replacing core systems.
