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Taking on the West Island: 
How does New Zealand’s labour productivity stack up?

5 Industries within the former measured sector

Overall, the reconciliation of the economy-wide versus measured sector labour productivity puzzle requires a detailed examination of the inputs used to calculate productivity and of the industries outside the measured sector. The non-uniform labour productivity growth across the non-measured industries, some of it measurement and some real, suggests we should also examine the possibility of trans-Tasman industry differences within the former measured sector - even if the aggregate growth rates are similar.

This section focuses on comparisons between New Zealand's and Australia's measured-sector industry growth performances (see Statistics NZ, 2010). Consistent with the earlier sections, comparisons are made over the 1988 to 2008 period, for output, labour input, and labour productivity. The one exception to this is the cultural and recreational services industry (division P in table 1) which commences in 1996.

From 1988 to 2008, measured-sector output increased by 2.7 percent annually in New Zealand, and by 3.2 percent in Australia. For both countries, output was higher in all measured-sector industries in 2008 than it was in 1988. Australia's output growth was higher in 11 industries, with just communication services growing faster in New Zealand. In the agriculture, forestry, and fishing industry, both countries had very similar average annual growth rates.

Australia's strongest performing industries relative to New Zealand were mining and construction. The mining industry recorded growth of 3.6 percent annually in Australia, compared with 1.9 percent in New Zealand. Growth in the construction industry was 4.3 percent and 2.4 percent, in Australia and New Zealand, respectively. From 1988 to 2008, Australia's fastest-growing industries were communication services, finance and insurance, construction, and cultural and recreational services. All grew at more than 4 percent per year over their respective time series.

From 1988 to 2008, measured-sector labour input in New Zealand grew by 0.3 percent annually, compared with 1.1 percent in Australia. In New Zealand, labour input fell in six of the industries, while rising in the other six. This compares with Australia, where labour input declined in three industries. Of these three - electricity, gas, and water supply; manufacturing; and agriculture, forestry, and fishing - labour input also declined in New Zealand.

The three industries with the fastest labour input growth were common to both countries, although ordered differently. These were cultural and recreational services (top in New Zealand but only from 1996 and third in Australia), accommodation, cafes, and restaurants (second in both New Zealand and Australia), and construction (third in New Zealand and top in Australia).

From 1988 to 2008, measured-sector labour productivity in New Zealand grew by 2.4 percent annually, compared with 2.2 percent in Australia (ie, table 2 above). However, there were some marked differences at the industry level. In both countries, the communications services industry was the strongest performer, growing at 11.0 percent per year in New Zealand, and 6.3 percent per year in Australia.

The other industries in which New Zealand outperformed Australia were electricity, gas, and water supply; transport and storage; and finance and insurance. Aside from electricity, gas, and water supply in Australia, these industries were among the strongest performers in both countries.

Industries in which Australia outperformed New Zealand were agriculture, forestry, and fishing; mining; manufacturing; construction; wholesale trade; retail trade; accommodation, cafés, and restaurants; and cultural and recreational services.

As noted above, three of these industries were the fastest growing in terms of labour input in both countries - cultural and recreational services; accommodation, cafes, and restaurants; and construction. In both countries, all three recorded weak productivity growth, or falling productivity.

Figure 13 - New Zealand and Australia labour productivity
Figure 13 - New Zealand and Australia labour productivity.
Source: Statistics New Zealand and Australian Bureau of Statistics

1. Zero for New Zealand

2. Average annual growth rates are for 1996-2008 in both Australia and New Zealand for cultural and recreational services.

Despite manufacturing productivity growth being lower than the measured-sector average in both New Zealand and Australia, it is easily the highest weighted industry in the measured sector, and therefore contributes strongly. Other key contributors in New Zealand are those industries which have had the highest growth rates - communication services; agriculture, forestry, and fishing; transport and storage; and finance and insurance. All have contributed more than 0.3 percent annually to productivity growth. In Australia, the industry drivers are slightly different. Finance and insurance is a key contributor, but this is followed by wholesale trade and retail trade, both contributing more than 0.25 percent to growth annually.

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