Communications heads growth list

Between 1978 and 2008, labour productivity in the communications industry grew by an average of 9.3 per cent a year. Photo / Supplied

Communications wins the prize for the industry with the strongest productivity growth over the past 30 years.

Statistics New Zealand's industry breakdown of productivity performance shows the communications sector - mainly telecommunications but also postal and courier services - top of the table for labour productivity and multifactor productivity.

Productivity is a measure of how efficiently inputs - either labour, or in the case of multifactor productivity, labour and capital - are being used to produce outputs.

Between 1978 and 2008, labour productivity in the communications industry grew by an average of 9.3 per cent a year. Most of that growth, 5.3 percentage points, came from improving multifactor productivity, the rest from increasing inputs of capital.

Communications was also top of the league in the most recent complete growth cycle (measured peak to peak), between 2000-2006. But its average labour productivity growth in that period, 6.8 per cent, was only half what it had been in the 1990s.

The electricity, gas and water supply sector was runner-up, averaging 4.4 per cent growth a year between 1978 and 2008.

The great majority came from increased inputs of capital; multifactor productivity improved by a modest 0.7 per cent a year. By contrast, agriculture's labour productivity growth of 4 per cent a year was driven by multifactor productivity, which grew by 3.4 per cent a year.

Agriculture's record in productivity improvement entirely accounts for its average 3 per cent annual growth in output over the 30-year period; inputs of labour shrank.

Productivity growth has been weakest in labour-intensive industries, such as construction, retailing, and accommodation, cafes and restaurants.

In the construction industry, which is similar to agriculture as a share of the economy, labour productivity has grown by just 0.5 per cent a year since 1978 and since 1990, hardly at all.

In the most recent complete growth cycle, 2000 to 2006, the construction industry's output grew at a rate of 5.6 per cent a year, but three-quarters of that reflected increased labour input.

Overall, labour productivity growth averaged 2.1 per cent a year between 1978-2008, explained almost equally by capital deepening (more capital per worker) and multifactor productivity (more effective use of labour and capital).

In the 2000 to 2006 cycle, labour productivity growth fell to 1.3 per cent - half its rate during the 1990s - while multifactor productivity growth at 0.7 per cent a year was a third of its rate in the preceding decade.

Statistics New Zealand said that over the 22 years from 1986 to 2008, productivity growth (labour and multifactor) had outstripped that of Australia.

Productivity levels are a different matter, however, as reflected in the income gap between the two countries.

Over the same period, output growth in Australia was 3.4 per cent, against 2.4 per cent in New Zealand.

Making Gains

Sectors with the strongest labour productivity growth, 1978 to 2008:

* Communications: 9.3 per cent

* Electricity, gas, water: 4.4 per cent

* Agriculture, forestry, fishing: 4 per cent

* Transport and storage: 3.6 per cent

* Finance and insurance: 3.4 per cent