Kiwis work longer but produce less

LAGGING: New Zealand workers trail those from other developed countries in productivity and aren't catching up.PHOTO/FILE

New Zealanders work longer hours than the average of their peers in other developed countries but produce a fifth less, says a Productivity Commission report that finds little evidence of improvement.

On average, Kiwis worked 15 per cent longer than the Organisation for Economic Co-operation and Development as a whole and produced about 20 per cent less output per hour worked, the report, Productivity by the numbers: The New Zealand Experience, said.

It suggested low-productive economies in theory caught up to those on the "frontier" or leading the charge as new technologies, capital and ideas flowed across borders. But that hadn't been so for New Zealand.

"At the aggregate level, New Zealand's productivity performance shows no evidence of catching up, with labour productivity declining relative to other OECD countries for a number of decades," the report said.

"So despite having one of the lowest levels of labour productivity in the OECD in the 1980s, labour productivity growth in New Zealand has still been among the lowest."

New Zealand "shows no sign of 'catching up' towards higher productivity countries," it said.

The report made no recommendations and was intended to "set the backdrop" for the commission's work "which aims to address the causes underlying New Zealand's productivity performance".

It noted data showing that since the early 1990s, labour productivity growth had accounted for over half of New Zealand's average income growth. More improvements in labour productivity would be needed, given labour market participation had "a natural limit" and was already high by international and historical standards.

"Given an ageing population, this suggests that raising average incomes via increased labour input is becoming progressively more difficult," it said. "Improvements in the terms of trade, which have contributed about 30 per cent of average income growth over the 2000s, are unlikely to continue increasing indefinitely."

A growing gap in labour productivity had been the main driver of increasing disparity in GDP per capita between New Zealand and Australia, the report said. While growth in labour input in the past four decades had been "remarkably similar", Australia had done better, with its real GDP in 2011 4.4 times higher than in 1967, while New Zealand's improvement was only 2.8 times.

The ongoing divergence in New Zealand's labour productivity, with no sign of productivity "catch up" towards more productive countries, was unusual within the OECD group of countries, the report said. BusinessDesk