2 New Zealand's economic situation
2.1 The main issues
Understanding New Zealand's current economic situation will put this saving problem in context. Over recent decades, New Zealand's economic growth performance has been poor relative to other developed countries and its own aspirations. New Zealand living standards have suffered and the economy faces serious structural and other problems.
2.1.1 Poor economic performance
Over recent decades, New Zealand's economic growth performance has been poor by developed country standards. As a result, New Zealand's relative position in the OECD is well below average.
- Figure 2.1: GDP per capita (US dollars, current prices and PPPs) 2009.
- Source: OECD Factbook 2010
2.1.2 Weak productivity growth
New Zealand's poor economic performance reflects weak productivity growth over several decades and a sharp decline in the last decade. This has undermined competitiveness, incomes and living standards.
- Figure 2.2: Annual percentage change in New Zealand's labour productivity, 1989–2009
- Source: Statistics New Zealand
- Figure 2.3: GDP per hour worked for Australia and NZ, 1987–2009, base: 1987 (=1000)
- Source: Statistics New Zealand and Australian Bureau of Statistics
- Figure 2.4: Labour productivity: selected services industries, 1987-2009[1]
- Source: Statistics New Zealand and Australian Bureau of Statistics
Productivity growth has been constrained by a low capital stock. New Zealand’s ratio of capital to labour hours worked in business (capital intensity) is well below Australia’s and the OECD average.
- Figure 2.5: Capital intensity levels for selected OECD countries, 2002
- Source: OECD; Economic Development Indicators 2005
2.1.3 Low saving relative to investment
A low rate of saving relative to investment has meant that fulfilling New Zealand's investment needs has required savings from overseas and the large and persistent gap between New Zealand’s investment and saving levels is reflected in the current account deficit over several decades.
Notes
- [1]These industries include: property and business services, government administration and defence, education, health and community services, personal and other community services. There are no official productivity measures for these industries. The data are published by Statistics NZ as unofficial statistics owing to their approximate nature.
