Tuesday 6 August 2013

Get your tuppence worth in...

Last month the Productivity Commission released its first Interim Report on 'Boosting productivity in the services sector' (background info, and links to the press release and the report itself are here). It's well worth a read: if you're interested in the performance of New Zealand's service sector, which these days accounts for some 70% of the overall economy, you'll find a great deal of conceptual, statistical and analytical coverage.

It's interesting to note, for example, that there's a bigger slice of services in our exports than you might have thought. The report has a nice illustration (below) of how this works.

If pretty pictures don't do it for you, here are the numbers. Rounding means the numbers that follow don't add exactly, but when you add the services embodied in goods exports ($22.1 billion) to the value of services exports ($10.5 billion), and subtract the goods component of services exports ($3.4 billion), you come up with a total value of services exported of $32.7 billion  - just over half of the total value of goods and services exports combined.

It's a shame that the government's terms of reference for this project ruled out some important services: "Consideration of productivity in the services sector should be limited to market-provided services and therefore exclude study of services provided directly by the public sector. The Government has a wide programme underway to improve public sector productivity, detailed consideration of this sector is not possible within the time available to the Commission, and measurement issues in this sector also make analysis difficult".

The rationale for leaving them out has its own logic, fair enough, but I'm not the only one who felt that non-market services ought to have been included: various submitters to the Productivity Commission felt the same way (as noted on p14 of the report). For a start, the non-market provision of services is a very sizeable chunk of some important service sectors, notably education and health, as the table below shows.

You'd also expect that the services that are more sheltered from market competition are the ones that are most likely to have problems with efficiency and productivity, so there's a risk you're ruling out the very areas where you might have most wanted to fossick. And it also means that the project won't be looking at all the recent initiatives in other western economies to get the benefits of competition and choice flowing in areas, such as health, where rationing or other administrative devices have traditionally been used to commission and allocate services outputs.

In any event, this is still a very worthwhile project, and you can help out with it. The Productivity Commission in particular wants input (by August 23) on which two out of these three possible topics it should focus on in the next stage of the project.

I'll be voting for the first two.

The Commission has also got some detailed questions for each of these possible topics that it would like feedback on (see pp142-3 of the report), and it's also still open to submissions on anything else that you might find interesting in the report.

Get your say in - policymaking can be excessively Wellington-centric, so views from the rest of the country are all the more valuable.

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