The quarterly national accounts data were out yesterday. They made pretty underwhelming reading.
There was the (rather modest) growth in per capita GDP
This expansion – dating from around 2010 – has been quite a lot weaker than the previous two growth phases. In the chart you can see that almost every peak for the last 25 years has been lower than the one before. And for the last year – full year 2017 over full year 2016 – we managed only 0.8 per cent growth in real GDP per capita. Growth has been slower than that only in the midst of the last two recessions.
At least real per capita GDP grew, you might say. But hours worked per capita (whether measured by the HLFS or the QES) grew by a touch over 0.8 per cent over that same period. In fact, there was no growth in labour productivity at all.
Here is my standard labour productivity chart, averaging the different possible combinations of QES and HLFS hours data and production and expenditure GDP data.
There has been no productivity growth at all in the last year, and in the last five years ( the grey line relative to the orange line) average annual labour productivity growth has been only around 0.3 per cent per annum. And this in an economy that the previous government liked to boast – and the new government seemed happy to concede – was doing pretty well. Productivity growth is the only sustained basis for long-term improvement in material living standards. We have very little of it – even as we start so far behind most other advanced countries.
Perhaps our firms have been managing more success in taking in world markets?
There was bounce in the terms of trade – dairy prices were improving – so nominal exports as a share of nominal GDP did improve.
Unfortunately, it looks like another of those series in which each peak is a bit lower than the one before it. And services exports – the wave that was much talked of a year or two back – look to be dropping away again. Exports of services – often talked of as the way of the future – first got to the current level (share of GDP) in 1998.
I don’t often show charts of export volumes. As a share of GDP such charts aren’t very meaningful. But one can compare growth rates, in this case for the last decade, since just prior to the 2008/09 recession.
Over the decade as a whole, export volume growth has barely kept pace with the unimpressive growth in real GDP, and even the services surge in 2014/15 only ‘made up’ for the severe underperformance of that sector in the previous few years. Recall that, for a country with a small population, New Zealand’s export share of GDP is very low to start with, and over this decade there has been no progress in closing that gap (something probably an integral mark of any sucessful policy programme to close the overall productivity gaps). The result isn’t very surprising given how out of line with relative productivity our real exchange rate has become, but it can be (soberingly) useful to see the hypothesis confirmed in the data.
And one last chart. Here is the proxy for business investment spending as a share of GDP (total investment less government and residential investment).
Yet another chart in which each peak seems lower than the one before it – and this in a country where, with very rapid population growth at present, one might have hoped to see a temporarily larger than usual share of current GDP going to business investment, to maintain the capital stock per worker. But no. If anything – and there is noise in the series so I wouldn’t make anything much of it – things may have been falling off again in the last few quarters.
These weren’t outcomes the previous government showed any sign of caring about. In Opposition, Grant Robertson would regularly release statements when the national accounts came out lamenting the relatively poor performance. In office, there was no statement yesterday. And despite the occasional ritual obeisance to the idea of lifting productivity performance, there is no sign that government – or their Treasury advisers – has any serious idea how such outcomes might be brought about, or any very serious commitment to trying.