The debate about how well our public services are performing compared to the private sector is always buzzing. Globally, it’s a known fact that public sector productivity often struggles to keep pace, and New Zealand is no exception. According to a McKinsey report, this isn’t just a recent trend but a long-standing challenge.

New Zealand’s Productivity Story

Here in New Zealand, productivity growth has its own story. Over the years from 1996 to 2023, our productivity, measured by multifactor productivity, grew by just 0.5% annually, while across the ditch in Australia, it was slightly better at 0.7%.

Both countries saw similar increases in workforce numbers, but Australia’s output grew faster, which meant their labor productivity jumped more than ours. 

The Consultant Conundrum

To tackle these productivity woes, New Zealand has leaned on consultants and contractors. In the 2021/22 financial year, the government shelled out $1.244 billion on these services, marking a 33% rise from the year before.

Realizing this might not be sustainable, the government aimed to cut this spending down to less than 11% of what it spends on its workforce. The good news is, by early 2023, they managed to reduce this expenditure by over $200 million.

Finding the Right Balance

While consultants bring in fresh perspectives and specialized knowledge, there’s a risk here. If we depend too much on outsiders, we might not grow our own skills and knowledge within government departments. It’s crucial to build up our own team’s capabilities to handle challenges independently over time.

Wrapping Up

Improving how our public services work isn’t just about cutting costs or bringing in experts. It’s about finding a balance where we use external help wisely but also invest in our own people. Wellington needs to foster an environment where our public servants can continuously improve and adapt, ensuring that our public services remain efficient and responsive to New Zealand’s needs.