NZ at tipping point

March 19, 2014

The sharp increase in productivity suggests the New Zealand economy is at a tipping point, ANZ Bank’s chief economist, Cameron Bagrie, says.

Productivity figures released by Statistics New Zealand today show productivity growth in the year to March 2013 of 2.1 percent, well above the average annual rate of 1.6 percent recorded during the 17-year period since the crucial measure of economic competitiveness was first collected, and equivalent with average annual productivity growth in Australia.

The increase reflected both an increase of 1.2 percent in multifactor productivity – a complex measure of factors including skills, costs, and value added per worker – and a 0.9 percent growth in the amount of capital available per worker,” Statistics NZ said.

Bagrie said improving productivity was an unsung part of the current economic recovery.

Everyone’s looking at the obvious factors that are driving New Zealand’s renaissance,” he said, citing strong terms of trade, the Christchurch rebuild, and high population inflows, “but no one’s talking about the productivity story.”

“I reckon we hit that tipping point about the middle of last year.”

Bagrie said the productivity improvements suggested that business management was improving.

“2008 to 20012 (the recession after the global financial crisis) was a huge wake-up call for New Zealand businesses,” said Bagrie, although they had a long way to go to catch up to Australia, which remained “a moving target” despite its productivity record slowing. . . .

Productivity is a key indicator for economic performance.

If, as Bagrie says, we’ve reached a tipping point, that’s a very good sign that the growth will be sustained.

 


Labour productivity improving

March 18, 2014

The good news continues:

Labour productivity increased 2.1 percent in the March 2013 year, Statistics New Zealand said today. This is higher than the average annual rate of 1.6 percent for the 17-year period since 1996, when the series began.

“The 2.1 percent increase in labour productivity was driven by both an increase of 1.2 percent in multifactor productivity and a 0.9 percent growth in the amount of capital available per worker,” national accounts manager Michele Lloyd said.

Labour productivity measures the quantity of goods and services (output) produced for each hour of labour. The latest figures show that 100 products could have been produced in one hour of labour in 1996, compared with 132 in one hour of labour in 2013.

In the March 2013 year, multifactor productivity, which measures how efficiently goods and services are produced in the economy, grew 1.2 percent. This was because outputs (goods and services) grew faster than the inputs (hours of labour, and capital, like land and buildings) used to produce them. Growth in this area shows more efficient production and is often associated with technological change, organisational change, or economies of scale. 

From 1996 to 2013, labour productivity grew more in Australia than in New Zealand, up by an average of 2.1 percent and 1.6 percent per year, respectively. Over the same period, Australia’s annual average output growth was also higher, at 3.5 percent compared with 2.6 percent in New Zealand. 

Productivity is regarded as key to increasing New Zealand’s standard of living and is a major driver of gross domestic product – the main indicator of economic activity. Productivity statistics cover approximately 80 percent of the economy and exclude government administration and defence, health, and education.

Productivity  is one of the positive indicators which has been lagging.

The improvement means production is more efficient and that an important ingredient in economic growth.


Reef fish rule

June 30, 2008

New Zealand’s low productivity is a national disaster  according to professional company director Kerry McDonald.

Newly elected Federated Farmers president Don Nicolson  wasn’t referring to that when he made the following comments, but the reef fish he criticises contribute to the problem:

“I saw the reforms (subsidy removals) that hurt farmers, and then a transformation in the economy where we stopped seeing people leaning on shovels and growing a career through legislation, like planners and consultants. I call them the reef fish. If you analyse it, the reef fish diminished in the 1980s. We are in a revival of them again from the mid-1990s when the RMA (Resource Management Act) gave them a whole lot of ideas.

“I saw these reef fish nibbling at my production and I didn’t like it. Why should we produce more and more and more to keep these reef fish in a job?”

Carrying the analogy further, Nicolson believes the reef fish have grown to become “piranhas and sharks” – contentious perhaps, but that is how he feels.

It is not only planners and consultants, it’s many armies of people in make-work activity which goes hand in hand with the tick-box mentality bedevilling us and sabotaging productivity.  

Computers were supposed to reduce paper work, instead they’ve increased it and a lot of the paper is generated by people in jobs which require other people to set aside the productive work they are doing to deal with it.


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