Thursday, 20 March 2008

New Zealand's productivity (updated)

Frederic Sautet has a good posting on New Zealand's productivity statistics at The Austrian Economists log. He notes
The recent productivity figures in NZ show that for the period covering the current Labour government's term of office (2000-2007), labor and multifactor productivity growth have fallen compared to the 1990s. For instance multifactor productivity growth fell to 0.4% p.a. during 2000-2007 from 2.3% p.a. during 1992-2000 (these are annual averages, point-to-point).
Also he points out
The current Labour-led government has criticized the "failed policies of the past" (i.e. the reform period and the deregulation of the 1980s and 1990s) for not delivering enough. Instead of continuing to improve the institutional context for socially-beneficial entrepreneurship, Prime Minister Helen Clark decided, among other things, to increase government spending (and the number of government bureaucrats), re-regulate the labo[u]r market, increase taxes (i.e. distort the tax structure, thereby rejuvenating the tax planning industry), intervene in utilities markets, provide more welfare, reintroduce corporate welfare, and renationalize businesses. All this is surely reflected in the weak growth in multifactor productivity, and eventually in economic growth statistics. As time goes by, statistics seem to show how wrong this position was.
The whole post is well worth a read, see The "Failed Policies of the Past" vs. the Bad Policies of the Present: Can Productivity Figures in NZ Tell Us the Truth?

The problem with our productivity figures has also been noted by Roger Kerr in this media release Dismal Productivity Figures: We Could Do So Much Better (pdf).

Kerr makes the point that
On present trends there is no prospect that the government's former 'top priority' goal of getting New Zealand back into the top half of the OECD income range will be achieved. Annual productivity growth rates of 3 percent or more on average would be needed for fast economic growth.
The issue is that productivity growth is the key to long-term increases in material standards of living. Given that we have slow labour productivity growth we can have little in the way of real wage growth. That could hurt a lot of people.

Update: Not PC comments on The failing policies of the present.

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