Increasing tech sector productivity will lift the economy by $2.7billion

For every four percent growth in the productivity of the tech sector, the entire New Zealand economy will lift by $2.7 billion and wages will increase by 1.4 percent, according to NZTech’s first-ever investigation report into the state of technology.

The report analyses how increased tech sector productivity helps economic growth benefiting New Zealand households and businesses.

New Zealand Institute of Economic Research analysis shows that any investment to grow the tech sector produces three times return due to the impact tech sector growth has on investment growth, export growth, lower cost imports and higher wages.

Such an increase in tech sector productivity is associated with a $1.3 billion increase in household consumption spending with households benefiting from cheaper goods and higher wages, the report says.

The analysis shows that an increase in living standards comes from a combination of higher wages and lower prices for a higher quality of goods and services. Wage increases are one of the largest effects of tech sector expansion with real wages up 1.4%.

NZTech chief executive Graeme Muller says with the rapidly changing pace of technology, most people are unaware of the exponential impact many technologies are having throughout society.

“While there is general agreement that technology is important to the New Zealand economy, until now there has been little research to confirm this.” Muller says.

“As the voice of the technology sector, NZTech set about finding out just how important it is. Without an answer there is serious risk that as a country we will miss opportunities for both economic and social growth.”

The report says a growing tech sector and better use of technology both help to grow the economy.

“Other national benefits gained from a four percent increase in tech sector productivity would be a $630 million increase in exports and an increase in the level of investment in the economy by around $400 million.

“The technology sector’s export earnings have doubled over the past few years to over $6.3 billion in 2015, making it the third largest export sector.”

Muller says while growth in tech exports will continue to be significant for New Zealand’s economy, the social and economic gains that technology can enable are so vast that we believe more focus should be placed on it.

“Expansion of the tech sector means that incomes of New Zealanders rise and they have more to invest. Inevitably, some of that will go back into the tech sector, as well as other sectors of the economy.

“Such effects are not unique to the tech sector. Productivity growth applied to any sector would have a compounding effect on economic growth. But the characteristics of the tech sector, particularly its outward focus, mean that the impacts are high. Furthermore, the tech sector is a hub for innovation therefore it achieves stronger productivity growth than other sectors.”

However, the real economic opportunity will come from better use of technology across the economy. If New Zealand firms made smarter use of internet services it could lift GDP by $34 billion. Work should be undertaken to educate all business owners on the ways to use technology and connectivity to increase productivity.

The impact report has identified research and development as critical to sector growth. It also encourages government to rethink the procurement process for software in a way that enables government agencies to fearlessly contract for product design assistance.