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Productivity Figures Dispel Myths

Productivity Figures Dispel Myths

“The productivity figures released by Statistics New Zealand today dispel myths about New Zealand’s productivity record”, Roger Kerr, executive director of the New Zealand Business Roundtable, said today.

They suggest that New Zealand’s labour productivity growth rate in the business sector of 2.6 percent per annum since 1988 is slightly higher than Australia’s and matches many other OECD countries.

Experts in the measurement of productivity have been saying for many years that New Zealand’s performance appears to have been more or less in line with Australia’s, especially when wider measures of productivity are used. Many media and political commentators have chosen to ignore such evidence.

It stands to reason that New Zealand’s stronger economic growth performance since the early 1990s, when the benefits of the economic reforms showed up, would not have happened without improvements in productivity.

Claims about low productivity growth were also inconsistent with the practical experience of many firms in increasing their efficiency, especially after the labour market was freed up.

The fact that measured Australian productivity growth has owed more to capital investment is not necessarily a point in Australia’s favour. With its freer labour market, New Zealand did better in absorbing more low-skilled, low-productivity workers from the ranks of the unemployed into the labour force.

The data also indicate that overall (multifactor) productivity growth in the business sector has been lower on average since 2000 – 1.1 percent per annum in the period 2000-05 compared with 2.1 percent per annum in the decade 1990-2000. This suggests that recent anti-growth policies such as high government spending and taxation and labour market re-regulation may be having an impact, as business organisations have argued.

“Although the Statistics New Zealand series may not be the last word on the subject, the findings turn much of the debate about productivity on its head”, Mr Kerr said. “New Zealand does not need interventions such as forced savings or a payroll tax to encourage productivity growth.

“Instead it needs to press on with policies that produced the earlier gains, such as lower taxes, greater labour market freedom, less regulation of the business sector and greater attention by the government to problems of low productivity in the public sector, in areas such as health.”


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