GDP rise set for NZ, but OECD recommends digital transformation to drive growth
New Zealand has often been viewed as the face of economic and financial perseverance throughout the pandemic, and new OECD research has proven that after surging to 4.7% in 2021, New Zealand's GDP is expected to rise by 3.8% this year before easing to 2.5% growth in 2023.
Unemployment fell to its lowest level since 2007, while the employment rate rose to its highest level on record in the third quarter of 2021. However, while job security and options were plenty, house and government debt had significantly increased, making it harder for Kiwis to buy and own their first homes.
The data reflects that strong government support to protect jobs and incomes during pandemic times helped New Zealand recover from the damaging COVID-19-induced downturn. While there is projected growth and stability, the OECD says that there are many challenges ahead to retain the momentum.
OECD suggests that fiscal policy be adjusted to help stabilise the economy. They recommend increasing productivity, particularly by making better use of digital technologies, which would support further increases in living standards.
OECD secretary-general Mathias Cormann says that working towards common goals with the government will help provide better paths and growth opportunities, even though NZ is in a stable position currently.
"The near-term economic outlook is positive. The New Zealand economy has recovered strongly from the pandemic," he says.
"The need for policy action is pressing in a number of areas to make economic growth sustainable. For instance, helping the digital sector to grow would help boost labour productivity."
The survey also says that with affordability for first home buyers at low levels and a buoyant housing market, the government should complete reforms to increase housing supply and for macro-prudential regulations to be tightened further.
Policy setting for the long term should be implemented by setting explicit long-term debt-to-GDP targets that would show a clear commitment to improving the country's fiscal position.
OECD believe it is crucially important for NZ to implement a new digitisation strategy, with a severe shortage of IT professionals and availability of high-speed connection hindering growth efforts.
They say that digital apprenticeships should be developed to help drive forward this technological transformation, and particular assistance be provided for those pursuing digital careers. This would include expanding the GOVTechTalent graduate program to all public sector organisations.
Challenges to productivity growth have been found to be linked to the digital sector as well, with weak international linkages and innovation along with skills and qualification mismatches.
The OECD says that consumption growth is also expected to ease to a more sustainable pace as employment growth slows, creating further progression opportunities.