Weakening labour market results in productivity rebound

Labour productivity grew 3.7 percent in the March 2010 year, Statistics New Zealand said today. New figures from the information release Productivity Statistics: 1978–2010 show that the weaker labour market has boosted productivity. "The increase in labour productivity was the result of a substantial decline in workforce hours, in response to falling demand and consecutive years of falling production in the market economy," economic statistics development manager Jude Hughes said.

Fewer hours were worked in the market economy, which makes up approximately 80 percent of the total economy. It excludes government administration and defence, health, and education. Fewer people were employed in most sectors of the economy, particularly manufacturing and construction, and there was a substantial drop in self-employed hours. The amount of goods and services produced in the economy decreased, but less so than hours worked, resulting in stronger-than-average labour productivity growth.

New Zealand's labour productivity growth has trailed Australia's in recent years. Since 1996, New Zealand's market economy labour productivity has grown at 1.6 percent annually, with Australia at 2.0 percent. Australia had much stronger growth in the amount of capital per worker. This additional capital has resulted in the productivity of Australian workers rising faster than that of New Zealand workers.

Productivity is regarded as key to increasing New Zealand’s standard of living. Multifactor productivity (MFP) is a measure of the efficiency of producing goods and services in the economy. In the March 2010 year, MFP increased 1.5 percent, which is above the average annual rate of 1.0 percent achieved since 1978.

Geoff Bascand 16 March 2011

Government Statistician