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New Zealand's Productivity Performance - TPRP 08/02

New Zealand and Australia comparison

We focus on the New Zealand and Australia comparison because such comparisons are common in economic debates and also because the two countries have comparable measured sector productivity statistics. The series for New Zealand we use in this trans-Tasman comparison differs from the series used above in that it is for the “narrow” definition of the measured sector. This is because the Australian market sector has a narrower coverage of industries (it excludes business services and personal and other community services).

Productivity growth in the measured sector has been similar in New Zealand and Australia since 1978, although it has been higher in Australia since 2000.

Table 3 shows the trans-Tasman comparison across New Zealand’s growth cycles. Labour productivity growth of 2.1% per annum in New Zealand’s measured sector matched that of Australia’s market sector from 1978 to 2007, while MFP growth was also similar. Notwithstanding the point that the growth cycles of the two economies may not coincide, Australian annual labour productivity growth of 2.0% since 2000 was higher than New Zealand’s 1.2%. MFP growth was similar in the two countries since 2000 (0.5% per annum in New Zealand and 0.7% per annum in Australia), which means the higher labour productivity growth in Australia since 2000 can largely be explained by a greater degree of capital deepening in Australia.

Table 3: New Zealand and Australia comparison across growth cycles (comparable “narrow” measured sectors)
Cycles
(March years for NZ, June years for Aus)
Output Labour Labour productivity Multifactor productivity
NZ Aus NZ Aus NZ Aus NZ Aus
1978-2007 2.5% 3.1% 0.4% 1.0% 2.1% 2.1% 1.0% 1.1%
1978-1982 2.1% 3.1% 0.4% 1.2% 1.7% 1.9% 1.2% 1.0%
1982-1985 3.4% 1.8% 2.0% -0.6% 1.4% 2.4% -0.5% 1.2%
1985-1990 0.7% 4.0% -2.1% 3.1% 2.9% 0.9% 0.2% 0.6%
1990-1997 3.2% 2.6% 0.6% 0.0% 2.6% 2.5% 2.1% 1.5%
1997-2000 2.6% 4.6% -0.8% 1.6% 3.4% 2.9% 2.3% 2.0%
2000-latest 3.1% 2.9% 1.9% 0.9% 1.2% 2.0% 0.5% 0.7%

Percentage changes are geometric annual growth rates calculated on unrounded index numbers; numbers may not add to totaldue to rounding; cycles relate to New Zealand; 2000-latest is an incomplete cycle

Source: Statistics New Zealand, Australian Bureau of Statistics

Although labour productivity growth in New Zealand’s measured sector matched that of Australia’s market sector from 1978 to 2007 (Figure 8), differences in economy-wide labour productivity levels, noted above, suggest a difference in the levels of measured sector labour productivity.

Reconciling this “on par” productivity growth performance for the measured sector with the economy-wide performance of Figure 3 is challenging. First, Figure 3 indicates that there were periods when New Zealand’s economy-wide labour productivity growth performance was above that of Australia, and other periods when it was below. Second, a complete reconciliation would need to assess any differences in the way the non-measured sectors are compiled and the relative growth of outputs and labour inputs in the non-measured sectors.

Figure 8: Labour productivity growth in Australia and New Zealand (1978-2007, comparable “narrow” measured sectors)
Figure 8: Labour productivity growth in Australia and New Zealand (1978-2007, comparable “narrow” measured sectors).
Source: Statistics New Zealand, Australian Bureau ofStatistics, Treasury calculations
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