It takes a while for all the data to come together, and it is only annual, so the most recent near-complete data set is for 2023. On the OECD’s estimates – using national data, but converted at (estimated) PPP exchange rates – New Zealand stood 29th out of the 38 OECD countries (remembering that the OECD now has four Latin American “diversity hires” – all much poorer and less productive than the rest of the “club”).
Treasury highlighted a few years ago that the absolute level of reported New Zealand labour productivity may be understated (because of technical issues around how hours worked numbers are calculated/used, relative to the approach used for a number of other countries). The difference isn’t small but, as they noted, what is involved is largely a level-shift, and doesn’t affect materially comparisons of growth rates (of productivity) over time. Nor, of course, does it make any difference whatever to actual wages or living standards.
It is now quite well-recognised that productivity growth has been quite poor in many countries over the last decade or so (and the contrast between the US and some of bigger European economies has been remarked on often). Productivity growth in the typical high productivity OECD country has not been great – for example, for the eight years from 2015 to 2023, the median total growth in labour productivity for the top 10 countries [excluding Ireland and Luxembourg, for international tax reasons] was 4.9 per cent.
But much as we might like to catch up again with these high productivity countries, perhaps the most relevant comparators for us are the countries either side of us on the league tables, well behind the global productivity frontiers. In 2015, the start of our period, these were the countries with real GDP per hour worked already within 20 per cent either side of New Zealand’s. There are big gaps both above Slovenia and below Latvia (and, thus, even if the hours issue is fixed up, and there are no changes for any of these other countries, we wouldn’t even come close to the next country above Slovenia),
Treasury highlighted a few years ago that the absolute level of reported New Zealand labour productivity may be understated (because of technical issues around how hours worked numbers are calculated/used, relative to the approach used for a number of other countries). The difference isn’t small but, as they noted, what is involved is largely a level-shift, and doesn’t affect materially comparisons of growth rates (of productivity) over time. Nor, of course, does it make any difference whatever to actual wages or living standards.
It is now quite well-recognised that productivity growth has been quite poor in many countries over the last decade or so (and the contrast between the US and some of bigger European economies has been remarked on often). Productivity growth in the typical high productivity OECD country has not been great – for example, for the eight years from 2015 to 2023, the median total growth in labour productivity for the top 10 countries [excluding Ireland and Luxembourg, for international tax reasons] was 4.9 per cent.
But much as we might like to catch up again with these high productivity countries, perhaps the most relevant comparators for us are the countries either side of us on the league tables, well behind the global productivity frontiers. In 2015, the start of our period, these were the countries with real GDP per hour worked already within 20 per cent either side of New Zealand’s. There are big gaps both above Slovenia and below Latvia (and, thus, even if the hours issue is fixed up, and there are no changes for any of these other countries, we wouldn’t even come close to the next country above Slovenia),
How has our labour productivity growth compared against these countries over 2015 to 2023?
Click to view
The median productivity growth rate for this group of middle-to-lower (levels) countries was 17 per cent. New Zealand, by contrast, managed 3.5 per cent growth, not even managing to keep up with the median growth rate of the group of highest productivity countries (see above).
It really is a woeful record. And in case you are wondering if perhaps 2024 might have made all the difference, on national data (GDP per HLFS hours worked) average productivity in 2024 was about half a per cent higher than the average for 2023, so no, not really. Just possibly SNZ data revisions might lift our past productivity growth a bit, but (a) these 2023 estimates should already include last year’s SNZ updates, and b) even at the most hopeful, it is doubtful any revision would lift our past productivity growth even to Japanese rates. It seems pretty likely that we were in fact better only than Greece among this mid to lower productivity group of countries.
People tend to push back and say “yes, but so many of those other countries are in Europe”, and sure, about two-thirds are. But it isn’t as if being next to the US has done much for Canada’s recent productivity growth (productivity growth over this period was a touch worse than New Zealand’s, and the level of Canadian productivity is far below that of the United States), and quite a few of these countries border either Russia or Ukraine (Estonia appears to have taken quite a hit), and Israel has been fighting a war (there is 2024 data for them, no higher than the 2022 numbers). And to the extent geography matters, and it almost certainly does, it is a binding constraint we have to live with, not an excuse for perpetual underperformance (we were, after all, even in my lifetime – just – still in upper tier of advanced countries). It is a reflection of a series of poor policy choices, and the evident growing indifference of our politicians (and bureaucrats?).
And worse, there is no sense of urgency, about outcomes that shape the lives and options of this generation and the next. The glib “oh, they can always go to Australia” – itself not a stellar performer – is no decent basis on which to build a country.
Michael Reddell spent most of his career at the Reserve Bank of New Zealand, where he was heavily involved with monetary policy formulation, and in financial markets and financial regulatory policy, serving for a time as Head of Financial Markets. Michael blogs at Croaking Cassandra - where this article was sourced.
2 comments:
Sir John Glubb’s Fate of Empires will explain why we are where we are.
Drive from Auckland to Wellington and look at the amount of road works. Look at the amount of ?? workers ?? present and decide for yourself where those low numbers come from.
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