Professor Robert MacCulloch: Low Productivity in New Zealand

Is Productivity Low in NZ not because of the Government but because our Big Business CEO's and Corporate Boards are so Utterly Useless?

On 24 February 2020, the day before the pandemic blew up across the globe, the NZX 50 index of our stock market, being the companies with the largest share market capitalization, was 12,073. Over five years later, it sits at almost the same level, at 12,350. That amounts to a rise of 0.15% per annum - next to nothing - and after adjusting for inflation, a huge drop. Meanwhile the Dow Jones of America's Biggest Stocks is up around 70%.

So it turns out that NZ Big Business Incorporated, after being handed $20 billion of taxpayer money during the pandemic years - and in the case of Air NZ having your entire business underwritten by the government - not to mention having huge monopoly and oligopoly powers - can't make a buck. The question is: could it be our private sector - though not small & medium business owners - and not government employees - but instead the Big NZX 50 companies - is being run by people who are so incompetently useless they can't make a buck even when they have no competition? By contrast, could it be that the only reason NZ is continuing to scrape along is that our teachers, nurses, doctors, social service workers - these folks are rolling up their sleeves and delivering incredible services every day. They have to physically go into work. So could it be the real drag on NZ is the "top" private sector managers, the CEOs and the useless company boardrooms who are (pretending) to work from home. Many of them, by the way, are Members of the NZ Initiative, which has become the Prime Minister and Finance Minister's Chief (Informal) Economic Adviser.

Want some proof? Of the 20 biggest companies in NZ, lets take a look at how their share price has performed these past five years since the start of the pandemic in February 2020:

= Ryman Healthcare's share price is down 80%. An achievement in the booming aged-care industry.

= Auckland Airport share price is down around 8%. An achievement for a monopoly provider.

= Spark is down over 50%. Its part of an oligopoly, with few major competitors.

= Fletcher Building is down nearly 60%. Its close to being a monopoly in several of its "markets".

= Goodman Property Trust is down nearly 20%.

= Air NZ, which has a monopoly on domestic routes, is down over 60%.

= A2 Milk's share price is down nearly 50%.

These seven firms make up over one third of the 20 biggest stocks in NZ by share market capitalization, and most of them have all-but-collapsed. I do not know a single other country where monopolies are run at a loss. The question is: does the source of NZ's malaise lay in the quality of the people running these kinds of large private sector companies, even though these very same people blame the government for our problems?

Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.