Over the next few decades governments will increasingly need to balance the new and growing demands facing the health system with a tighter fiscal outlook. The best way to protect standards while responding to these pressures will be to lift productivity. This article draws on a recent New Zealand Productivity Commission inquiry into state sector productivity and discusses the implications of this work for the health sector. It begins by highlighting the importance of health sector productivity, particularly given the fiscal outlook. It then discusses recent efforts to measure productivity in the health system, before outlining possible next steps in measuring the sector’s productivity.