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Labour productivity growth subdued since 2000

13 March 2008

Labour productivity growth subdued since 2000

Labour productivity grew 0.5 percent in the year ending March 2007, Statistics New Zealand reported today. There has been subdued growth in labour productivity since 2000, averaging 1.1 percent annually.

Labour input has grown at a record rate of 2.2 percent annually since 2000, while growth in output (real GDP) averaged 3.3 percent, which is stronger than the 1978–2007 annual average of 2.6 percent. This combination resulted in slower growth in labour productivity than the overall annual average of 2.0 percent from 1978–2007.

Continuously low unemployment from 2000–2007, along with a growing labour force and high participation rates, drove the strong labour input growth. Increased business investment in fixed assets such as buildings and transport equipment drove capital input rates up by an average of 3.8 percent annually since 2000. The rate of output growth was less than the rate of input growth, leading to an annual fall in capital productivity of 0.5 percent over the period. The annual average decrease over the entire 1978 to 2007 period was 0.7 percent.

Multifactor productivity (MFP) represents the growth that cannot be specifically attributed to capital or labour, such as process improvements and technological changes. Multifactor productivity grew by an average of 0.9 percent from 1978 to 2007, peaking between 1997 and 2000. In the current business cycle (2000–2007) MFP grew by 0.4 percent annually.

The productivity measures cover a subset of the economy referred to as the ‘measured sector’. The measured sector has been expanded to now include the business services industry and the personal and other community services industry from 1996 onwards. Industries excluded are government administration and defence, health, education, and commercial and residential property services.

Geoff Bascand

Government Statistician


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