4  Comparative productivity at sector level

In order to carry out benchmark comparisons of ALP levels in 2002, nominal value added in each country was first converted to US dollar values using sector-specific PPP exchange rates (Table 4). For measures of labour inputs, total annual hours worked in the UK at sector level were estimated by multiplying total employment (employees plus self-employed) by estimates of average annual hours worked per person derived from the UK Labour Force Survey. For New Zealand estimates of total annual hours worked were derived from SNZ estimates of paid hours for all employed persons, described in SNZ (2006b), with an upward adjustment to an hours worked basis using NZ Household Labour Force Survey data (see Appendix Section A1.2 for further details).

The results in Table 5 show that the UK lead over New Zealand in total market sectors applies to both aggregate manufacturing and aggregate market services. In some manufacturing sectors the UK lead even exceeds 50 pp (for example, textiles and clothing, printing and publishing and petroleum and chemicals) and the New Zealand deficit is also substantial in large service sectors such as retail. However, the results also highlight areas of relatively strong performance in New Zealand which have hitherto been masked by comparisons at aggregate economy level.

Five sectors stand out where our estimates point to a New Zealand lead of 5 pp or more over the UK:

• Food, drink and tobacco
• Accommodation, restaurants and bars
• Communication services
• Finance and insurance
• Cultural and recreational services

In addition in metal product manufacturing New Zealand ALP is estimated to be just ahead of the UK level at 102. These six sectors account for roughly 30% of total output in New Zealand market sectors and 22% of total hours worked (Table 5, Columns 2 and 4).

Notes:  UK PPP exchange rates are taken from Mason et al (2006). New Zealand PPP exchange rates are GGDC estimates for 1997 updated to 2002 on the basis of producer price changes at sector level between 1997-2002 in New Zealand and the US, with additional adjustments for electricity, gas and water, wholesale and retail based on updated 1999 OECD expenditure PPPs in order to make the New Zealand PPPs for those industries more comparable with UK PPPs. GDP PPPs and market exchange rates are taken from OECD (2005, Table 1.12). Estimated PPPs for total market sectors are those implied by summing value added in US$ for each sector, as derived by using sector-specific PPPs, and then dividing these US$ totals by the sum of value added in New Zealand and UK domestic currencies. A similar approach derives estimated PPPs for aggregate manufacturing and market services. See Appendix Section A2  for further details.

Note:  All estimates are for calendar years in contrast to the typical presentation of National Accounts data for years ending March 31st in New Zealand (see Appendix Section A1 for further details).