Growth in labour productivity subdued since 2000

Labour productivity grew 2.0 percent in the March 2008 year, Statistics New Zealand reported today. From 2000 to 2008, there has been subdued growth in labour productivity, averaging 1.3 percent annually.

Labour input has grown at a record rate of 2.1 percent annually since 2000, while growth in output (real GDP) averaged 3.4 percent. This combination has resulted in labour productivity growth halving, from an annual average of 2.6 percent during the 1990s, down to 1.3 percent since 2000. Since 2000, there has been increasing labour force participation rates, with strong employment growth and continual low unemployment.

Increased business investment in fixed assets such as buildings, plant, machinery and equipment drove capital input rates up by an average of 3.9 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 0.4 percent over the period. From 1990 to 2000, the combination of lower capital input and higher output growth lead to an annual average increase of 1.1 percent in capital productivity.

Multifactor productivity (MFP) represents the growth that cannot be specifically attributed to capital or labour, such as process improvements and technological changes. Since 2000, MFP has grown by 0.6 percent annually. This compares with an average annual growth of 2.0 percent during the 1990s.

The productivity measures cover a subset of the economy referred to as the ‘measured sector’. Industries excluded are government administration and defence, health, education, and commercial and residential property services.