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Government needs to ensure economy raises living standards

Government needs to do more to ensure economy raises living standards for all

Figures out today show that what New Zealanders produced, measured by our Gross Domestic Product (GDP), increased by 1.1 percent in the three months to September.

“But while these figures look good on paper they don’t tell the whole story. These figures hide the reality that too many working Kiwis are struggling to make ends meet. The economy is something that we control and for many people it’s not working. We are still in a low wage, low value trap,” says CTU Economist Bill Rosenberg.

“While GDP increased 1.1 percent over the three months to September, and 3.0 percent year on year, it doesn’t do much to improve our living standards and doesn’t make life fairer. What was produced per person in New Zealand increased only 0.9 percent over the year because of strong population growth at 2.1 percent over the year. That means that what is available to increase our standard of living is increasing only slowly - much more slowly than in the 2000s when it increased by 2.6 percent per year on average.”

“Per hour worked, I estimate that New Zealand’s production went backwards by 1.6 percent over the year. That is, labour productivity fell 1.6 percent* in the year to September compared to the previous year. It fell 0.2 percent in the three months to September alone.

“In the long run wages cannot rise sustainably if productivity is falling,” Rosenberg says.

“The Government has a crucial role to play and can do much more. Kiwis need the Government to take action and move the economy away from low wage industries such as tourism and low value commodity exports like milk powder and logs towards higher value goods and services. We need employers much more committed to raising the skills of the people they employ. We need good employment law that ensures that the income that is created by higher productivity flows into wages and salaries,” Rosenberg said.

*This is after correcting for the changes in the Household Labour Force Survey from June which led an artificially high increase in hours worked in the June quarter.

ENDS

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