​Uncovered… Why NZ businesses are failing to reach full potential

An ageing population has been cited as one of the main reasons why New Zealand businesses are failing to reach full potential, both at home and overseas.

Grant Thornton’s 2015 Global Dynamism Index (GDI) currently ranks New Zealand as the world’s 13th most dynamic country compared to 4th out of 60 countries in the 2013 index.

More worryingly perhaps, the country’s labour productivity ranking has slipped even lower, with New Zealand ranked 27th in 2013 and now 52nd in 2015.

Consequently, an ageing population has been cited in both indexes as one of the reasons holding Kiwi organisations back in the global market.

The GDI, developed in conjunction with the Economist Intelligence Unit, ranks 60 of the world’s leading economies on dynamism, which indicates changes in an economy that are likely to lead to a faster rate of future growth.

The GDI reveals that a low percentage of the country’s population is under 30 and ranks New Zealand 25th out of 60 countries.

The Treasury forecast that a ratio of working age people to retirement age people of 5:1 in 2006 will shift to 4:1 by 2020 and rapidly accelerate to only 2:1 by 2050.

“In New Zealand, the Government has yet to address the productivity dilemma the ageing population of New Zealand will present,” says Tim Downes, National Managing Partner, Grant Thornton New Zealand.

“While the ageing population debate to date has focussed on the affordability of universal superannuation and the ever-increasing financial burden on the health sector, an ageing population has a direct impact on productive capability both of those who look to retire, and the significant number of businesses owned by baby boomers.”

Downes believes the business environment is changing at a fast pace and the succession issue that faces exiting baby boomers is becoming critical given the volume of companies they collectively own and the productive capability of these businesses.

“They will all require transition arrangements, but that doesn’t simply involve removing the baby boomer, it means finding someone suitable to take the business over and keep it viable,” he adds.

“Our ageing population presents a possible fiscal deficit creep and without immediate change to capital investment and efficiency, a productive capability decline will take a lot of time to address and amend.”