Productivity growth: still missing in action

We get some annual multi-factor productivity data from Statistics New Zealand next week, but for more a more timely read on productivity what we have is data on real GDP per hour worked.   This chart compares New Zealand and Australian real GDP per hour worked since just prior to the recession of 2008/09.   As previously, for New Zealand, I’ve average the two GDP series, and used the HLFS hours worked series.  There is a break in the series in June last year, on account of changes in the HLFS methodology.  That lifted hours worked (as measured) by about 2 per cent, and in this chart I’ve silently adjusted for that (while still hankering for an offical SNZ series that corrected for the break).

real gdp phw dec 16 release

Still going nowhere – perhaps even backwards – after five years.     Diverging ever further below Australia over that five years.  And for the full nine years, less than 5 per cent productivity growth in total.

You’d like to think this sort of gross underperformance would be getting some attention in the run-up to the election.  But there isn’t much sign of that.

Perhaps we are just supposed to think of it as some sort of “quality problem”, or a “problem of success”?  Mark me down as unconvinced.






5 thoughts on “Productivity growth: still missing in action

  1. Given all the delays and extra expenses I’ve faced in just getting a simple car deck constructed I’m not surprised at all – and the other thing is all the extra congestion around the place even in Wellington.


  2. Would a growing population be a hindrance to productivity? If labour is in short supply would that not mean companies would have to compete by being more productive to stay profitable?

    It seems businesses at the moment are forced into a race to the bottom importing ever more labour units?


    • Broadly speaking, and over long periods of time, I think the evidence suggests population growth makes little or no difference to productivity. In fact, over the very long term, productivity growth has facilitated massive population growth (cf say Malthus). And people tend to gravitate towards where the best opportunities are – complicated by the fact that some countries are more open to immigration than others (thus most of the people who come to NZ would prob prefer to go to wealthier, more central, countries if they could get in there) There may be exceptions in some times/places, especially those that are heavily dependent on natural resources for their wealth, and where the opportunities to develop other internationally competitive industries are relatively few. I argue that NZ is a plausible candidate on both counts. But so might some individual states in the US, or regions of Russia or Australia or Argentina.


  3. Hours worked has little to do with productivity, productivity is the ‘output’ per hour. I’d agree with Minor Kemp that most lower wage workers are employed simply to ‘get the work done’ where they have no incentive to do more work per hour for a higher wage, as most businesses in NZ do not pay in this way, but where staff are instead paid according to a ‘yearly budget’ where wages are ‘reviewed’ – what ever that means.

    A monthly bonus based upon several factors within a business is one way to increase both individual and national productivity – and everyone’s wealth.


  4. With dairy prices dropping by more than 50% and GDP still recording a growth of 3% plus is a significant achievement in the face of shocks like the GFC and the Christchurch and Kaikoura earthquakes. You would have to thank John Key as the previous tourism minister. Better to have growth than a lousy recession.


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