The Treasury

Global Navigation

Personal tools

Outcome: Improved Economic Performance

What are we seeking to achieve?

New Zealand's average GDP per capitagrowth for the last six decades has been poorer than all other OECD countries. New Zealand's GDP per capita ranked third among OECD countries in 1950 and 22nd in 2009 (of 34 OECD member countries). In order to maintain New Zealand's living standards we need to materially narrow the income gap between New Zealand and the most advanced economies. In our previous Statement of Intent we indicated that to close the gap with Australia within 15 years would require average GDP per capital growth of above 4%. We still consider this is a relevant long-term target. Reflecting the current global economic environment, a more feasible target for the period of this Statement of Intent is real GDP per capita growth of 2% to 3%. For a country of New Zealand's size, much of this growth will need to be driven by strong export performance as reflected in tradable sector growth.

New Zealand's poor performance reflects its labour productivity, associated with relatively low levels of both capital intensity and multi-factor productivity. To reverse this decline requires policy changes with the potential to lift productivity across the economy and support a substantial lift in export performance. This will require:

  • restoring fiscal buffers and supporting rebalancing of activity towards the tradable sector through continued restraint in government spending (expanded under the A Stable and Sustainable Macroeconomic Environment outcome)
  • avoiding macroeconomic instability (expanded under the A Stable and Sustainable Macroeconomic Environment outcome)
  • encouraging increased savings relative to investment to lower the cost of capital and reduce pressure on interest rates and the exchange rate (expanded under the A Stable and Sustainable Macroeconomic Environment outcome and below)
  • improving the domestic business environment by raising the productivity performance of firms, minimising the cost pressures they face and maintaining their ability to adjust to changing circumstances (the Treasury’s role and focus in achieving this are outlined below)
  • maximising the long-term value of New Zealand’s significant natural resource endowment, by providing certainty and efficient allocation (the Treasury’s role and focus in achieving this are outlined below)
  • improving international competitiveness to overcome the disadvantages of size and remoteness and to increase incentives to invest and conduct business in New Zealand (the Treasury’s role and focus in achieving this are outlined below), and
  • enhancing our human capital and labour supply to improve our labour productivity and utilisation (the Treasury’s role and focus in achieving this are outlined below).
How we will assess whether we are achieving Improved Economic Performance
Indicator Current performance Target
Real GDP per capita growth.

Real per capita GDP was 1.8% lower in the year ending December 2011 than in the year ending December 2006. 2011 was the first year we have had positive GDP per capita growth since 2008.

NZ's GDP per capita would need to increase 36% to reach Australia's GDP per capita level, 20% to reach the UK's, 56% to reach USA's, and 14% to reach the OECD average.

Growth rates sufficient to deliver high incomes to New Zealanders. A solid recovery in 2013 is sustained, lifting five-year average real GDP per capita above the OECD average and ultimately reaching 4% per annum.

This requires real GDP per capita growth of between 2% and 3% per annum over 2012-17.

Tradable sector growth. Tradable sector output was 4.9% lower in the year ending December 2011 than in the year ending December 2006. 2.5% to 3.5% per annum over 2012-17 and ultimately reaching a rate consistent with achieving GDP per capita growth of 4%.
Page top