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4 Puzzles and reconciliations

The similar labour productivity growth performance over 1978 to 2008 for the New Zealand and Australian measured sectors (figure 4) contrasts with the difference in economy-wide labour productivity performance (figure 3). Table 2 decomposes this puzzle by summarising output, labour input, and labour productivity growth for the economy as a whole, the former measured sector and other parts of the economy.

In order to analyse both the total economy and industries outside the measured sector, table 2 uses hours worked from the Household Labour Force Survey (HLFS) for New Zealand and hours worked from the Labour Force Survey (LFS) for Australia. The HLFS is available from the 1987 March year and so the use of this labour data restricts the start point relative to figure 3 and figure 4. For the reasons discussed in section 2, the decomposition ends in 2008.

For the measured sector, table 2 uses official statistics, and the associated labour input series, prepared by Statistics NZ and the ABS (see section 4.1 below).

As discussed in section 2, the economy outside the measured sector consists of not only industries for which output is difficult to measure but also components not allocated to industries (eg FISIM in the New Zealand case) and/or components with no labour input (eg residential dwellings). In the case of labour productivity outside the measured sector, it is therefore more appropriate to focus on the five relevant industries.

Table 2 - Labour productivity growth (average annual growth) 1988-2008*
  Economy-wide Measured sector** Other industries*** Other industries
plus other components****
  Aus NZ Aus NZ Aus NZ Aus NZ

ABS / Statistics NZ

               
Output 3.3 2.6 3.3 2.7 3.6 2.9 3.5 2.4
Labour input 1.7 1.3 1.1 0.3 3.0 3.0 3.0 3.0
Productivity 1.6 1.3 2.2 2.4 0.5 -0.1 0.5 -0.5

OECD

               
Output 3.3 2.7            
Labour input 1.7 1.2            
Productivity 1.6 1.5            

* OECD New Zealand data is calendar years (1987-2007) for hours worked and March years (1988-2008) for GDP. ABS is June years and Statistics NZ is March years (1988-2008).

** Former measured sector/market sector industries A to K plus P (refer to table 1 above).

*** Industries L, M, N, O, and Q (refer to table 1 above).

**** Other components include FISIM (for New Zealand) and ownership of occupied dwellings.

From table 2 we observe that over the 1988 to 2008 period:

  • Australia's economy-wide labour productivity growth was higher than New Zealand's, and the gap also exists when using OECD data. This particular gap is sensitive to the time period used. For example, if the period is 1987 to 2007 then OECD-derived Australian labour productivity growth is 1.7 percent and for New Zealand it is 1.3 percent (ie a larger difference than that shown in Table 2 for the period 1988-2008).
  • As with the 1978 to 2008 period, New Zealand's former measured sector labour productivity growth is slightly ahead of the comparable Australian measured sector (2.4 percent versus 2.2 percent).
  • Labour productivity growth in the aggregate of the five industries in the non-measured sector has been slower in New Zealand, although average annual labour input growth has been identical in both countries at 3.0 percent.

In trying to reconcile the different pictures of productivity growth in Australia and New Zealand presented by economy-wide OECD measures and official measured-sector statistics from the ABS and Statistics NZ, there is a clear need to understand what is going on in the parts of the economy not included in the measured sector. A key question is whether the underlying productivity performance in these areas in Australia is sufficiently superior to that in New Zealand to explain its higher economy-wide productivity growth?

The following sub-sections examine measurement issues over the 1988 to 2008 period (where possible) in labour input as well as the areas outside the measured sector. In the latter case we start by looking at two components where treatment appears obviously different in New Zealand and Australia - FISIM and residential dwellings - and then at the industries which are not in the measured/market sectors that are used for trans-Tasman comparisons. As in table 2, for the industries outside the measured/market sectors we rely on unofficial measures of labour productivity.

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