In its recently released Building Innovation progress report, the government rightly recognises that innovation is critical for improving New Zealand’s global competitiveness. Unfortunately, innovation remains the country’s weakest area, according to the Global Competitiveness Report 2012–13 released this week by the World Economic Forum (WEF).

The WEF report is one of the most respected assessments of national competitiveness (The New Zealand Initiative is its partner institute in New Zealand). It assesses a nation’s economic environment and its ability to achieve sustained levels of prosperity and growth. Rankings are calculated from publicly available international and national data and an annual survey of business leaders. This year, 14,059 surveys were completed in 144 economies.

New Zealand has lifted its overall competitiveness score and gone up by two places to the 23^rd place, arresting a previous decline. Of the measured economies, New Zealand ranks 1^st in 15 indicators out of the 111 measured. Performance is strongest in institutions, health and education, goods and labour market efficiency, and financial market development. However, macroeconomic factors, infrastructure and innovation are constraining overall performance.

The poorest rankings include the government’s budget and debt management, gross national savings, insufficient clustering, and low numbers of scientists and engineers.

This year, the Executive Opinion Survey was completed by 55 New Zealand business leaders who were asked to identify the five most problematic factors for doing business from a list of 16. Four factors stood out: inadequate supply of infrastructure, inefficient government bureaucracy, insufficient capacity to innovate, and access to financing.

Government is addressing many of these factors in its Business Growth Agenda. However, the WEF report also notes that business will need to make changes to better harness innovative practices.

In November Auckland will host a meeting of small advanced economies such as Finland, Israel, Singapore and Denmark, with the aim of sharing information and studying different approaches to innovation. New Zealand needs to lift its game and learning off better performing nations is a good start.