As I said earlier, a lot of what’s being described as “capacity limits” aren’t natural ceilings. They’re the result of recent policy choices that cut public investment, cancelled projects, and weakened delivery institutions. That matters, because it changes how we should think about sequencing and what action is actually possible.
Spending blindly into constraints doesn’t work. But using constraints as a reason for inaction is backwards. Capacity isn’t fixed. It varies by sector and is shaped by past policy decisions.
When I say “expand productive capacity”, I mean the practical things that let the economy produce more real goods and services without jamming up: workers, skills, energy, transport, housing, health services, and the institutions that make those systems function. Much of this is collective infrastructure. When it’s missing or underbuilt, costs lift everywhere. When it’s in good shape, businesses can operate with less friction and lower cost.
So if we’re looking for genuine low-hanging fruit in NZ, it isn’t abstract. It’s clear where capacity is binding and where immediate Govt action would expand it.
Health workforce and training capacity.
Make primary healthcare properly free at the point of use. Expand training places, stabilise hiring, and reduce burnout. Close the pay and conditions gap with Australia so staff stop leaving. Health capacity affects labour supply, productivity, and costs across the economy over time. A weak health system is a cost of living pressure in its own right.
Housing, local Govt funding for consenting and infrastructure.
Councils are financially penalised for growth. They carry the cost of consenting teams, compliance, and major infrastructure, and mostly fund it through rates. That pushes up housing costs and fees without expanding capacity. Direct central Govt funding for planning capacity and associated infrastructure would unblock housing delivery far more reliably than RMA reform alone. A dedicated infrastructure fund for local Govt would lower the rates burden and remove a major choke point to development.
Energy generation and grid capacity.
Cheap, reliable power lowers costs everywhere. When upgrades are delayed or supply is tight, it shows up in power bills first, then across the wider economy. If you want high leverage, this is it.
Transport and logistics, especially rail and ferries.
NZ’s freight system is fragile. Rail is constrained, ports are under pressure, and the Cook Strait is a single point of failure. When freight is inefficient, households pay for it through food and consumer prices.
The cancelled rail-enabled ferry programme is a clear example of capacity being cut, not expanded. Sunk costs were written off and reliance on ageing vessels was extended well past their use by date. Rail-enabled ferries and port upgrades aren’t optional.
Mode-shift infrastructure belongs in the same bucket. Safe cycle networks and reliable public transport are cheap compared to the cost of congestion. Every person who can walk, bike, or use public transport is one less car on the road. That frees road space for freight, trades, and people who genuinely need to drive. This isn’t about forcing behaviour. It’s basic efficiency. Congestion is a productivity tax.
Food supply, pricing, and resilience.
Food is expensive here for structural reasons. Supermarket concentration is extreme, logistics costs are baked in, and domestic pricing often gets dragged toward export linked pricing even when local supply is fine. There are policy tools available to ease this without undermining exports. Breaking supermarket market power, improving logistics, and supporting domestic supply for domestic consumption would move the needle on food prices quickly.
Skills, apprenticeships, and R&D.
Make training and education free. Build skills pipelines that line up with long term projects, not stop-start cycles. Increase R&D funding and stop treating universities as an afterthought. Skills and innovation aren’t optional. They’re part of the productive base. When they’re thin, growth doesn’t get far before it stalls.
Primary education, school participation and support.
Expanding school lunches improves attendance, learning outcomes, and long-term workforce quality. It also helps families right now with cost of living pressures. Properly funding primary education, backing teachers, and meaningfully funding ECE strengthens capacity across the entire economy. The cost of raising a family in NZ is extreme, and policy choices are a big part of that.
None of this is exotic. It’s the unglamorous foundation the private sector builds on.
So when people say “focus on productivity before spending”, this is what that looks like in practice. Productivity doesn’t appear by magic. It comes from infrastructure, skills, energy, health, food systems, and institutions that lower real costs and reduce bottlenecks.
Freezing or cutting public investment because we think we’re “at capacity” doesn’t fix the constraint. It hardens it. Then every attempt at growth runs back into the same inflation and bottleneck story.
That’s how NZ stays stuck between stagnation and inflation — not because the Govt can’t act, but because it keeps stepping back from the parts of the economy everything else depends on.
