KEY POINTS:
Productivity growth has hit a low point, even as the Government continues to emphasise its importance in transforming the economy.
Figures released today by Statistics New Zealand (SNZ) show labour productivity growth of 0.4 per cent in the measured sector for the year to March 2006.
That was the lowest since the series began in 1988, and compares with an 18-year annual growth average of 2.5 per cent.
Capital productivity decreased 2.9 per cent, compared with an 18-year average of 0.1 per cent growth.
Multifactor productivity -- growth in output that cannot be attributed to either labour or capital -- fell 1.1 per cent, compared to average growth of 1.5 per cent.
The publication of the figures comes just a day after Economic Development Minister Trevor Mallard told a meeting in Auckland that increasing productivity was the key to economic growth that would in turn strengthen and underpin the "great Kiwi lifestyle".
SNZ said today the comparatively low growth for the March 2006 year was driven by relatively weak output growth of 1.4 per cent and sustained employment growth.
Several factors could explain strong falls in the rate of labour productivity.
One theory was that the utilisation of capital capacity fell as demand slowed, leading to a fall in output growth.
Another possible influence would be a change in the skill composition of the employed labour force, due to skill shortages resulting from a buoyant labour market, SNZ said.
Other potential factors included firms holding on to existing staff, despite a slowing of the economy, to minimise the cost of re-hiring when the economy picked up.
The fall in capital productivity was the result of strong 4.4 per cent growth in capital input, combined with output growth of only 1.4 per cent.
Strong growth in capital input from 2004 to 2006 may have had a lagged effect on output, SNZ said.
That lag would be due to learning effects involved in the adoption of new capital.
Coverage of the productivity measures is restricted to a subset of the economy which excludes government administration and defence, health, education, property and business services, and personal and other community services.
- NZPA
