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National Accounts (Industry Benchmarks): Year ended March 2012
Embargoed until 10:45am  –  21 November 2014
Commentary

Overview

This release presents some key features of changes in the structure of the New Zealand economy between 1972 to 2012. It draws on a selection of the detailed economic data that is available in the accompanying tables and via our Infoshare series.

We incorporate changes in international standards for the first time, as recommended in the System of National Accounts 2008 (2008SNA) and the Balance of Payments and International Investment Position Manual (6th edition). We describe selected effects of these changes in this commentary.

This release shows the full time series of changes from incorporating the new standards, details of other improvements and corrections, and regular annual GDP revisions made to the 2011 and 2012 years after new annual data was introduced.

 Effect of improvements on GDP
 Improvement  Effect of improvement (%)
 1972-99  2000-10  2011
 International standards  1.0  1.2 1.2
 Of which, R&D was  0.9  1.0 1.1 
 Other improvements and corrections  -0.1  -0.1 0.0 
 Regular annual updates  ... 0.0 
 Total revision  0.9 1.1  1.3 

 Note: Figures may not sum due to rounding.
Symbol: ... not applicable

For a full time series of revisions (1972–2011) see supplementary table 15 in the 'Downloads' box.

See National Accounts (Income and Expenditure): Year ended March 2014 for international standards' effect on saving.

New Zealand economy's structure changes

A common theme across developed countries is a rise in the contribution to GDP of service industries, as a proportion of GDP. New Zealand is consistent with this trend. The proportions in this section were calculated excluding GST on production, import duties, and stamp duties. Since 1972, the contribution to GDP from services industries has risen from 52.5 percent to 69.7 percent (in 2012).

 Graph, Broad industry group contributions to current-price GDP, 1972 to 2012.

Balanced industry data allows analysis of how the structure of the economy changes over time. From 1987, more detailed industry data is available, enabling us to see which service industries are driving the change.  

In New Zealand, key contributors to growth in the service industries' contribution to GDP between 1987 and 2012 include:

  • professional, scientific, and technical services (up from 3.8 percent to 7.7 percent)
  • property operators and real estate services (3.5 percent to 5.9 percent)
  • health care and social assistance (4.3 percent to 6.4 percent).

 Graph, Contributions to current-price GDP, selected service industries, 1987 to 2012.

Manufacturing was the biggest driver of the long-term relative decline in the goods-producing industry group, dropping its contribution to GDP from 22.3 percent in 1987 to 12.1 percent in 2012.

The following graph shows details of manufacturing industries' declining proportion to GDP over time.

 Graph, Contributions to current-price GDP, selected goods-producing industries, 1987 to 2012.

Primary industries’ proportional contribution to GDP was smaller in 2012, than in 1972. However it rose from 6.0 percent in 2006 to 9.0 percent in 2012, influenced by increasing milk prices and mining developments in Taranaki. Agriculture contributes a high proportion of GDP in New Zealand when compared with other OECD countries, although this proportion is very volatile due to changing commodity prices.

See Definitions for information on which industries make up the different industry groups.

International standards affect GDP levels

New Zealand's national accounts and balance of payments are based on standards agreed to internationally, to allow for comparison. Periodically, the standards are revised to reflect changes within the global economy.

Preview of 2014 national accounts improvements outlines the conceptual changes of the new international standards and the expected magnitude of revisions to GDP as a result. The revisions from international standards are the same as outlined in that paper. On average, since 2000, the new international standards have revised GDP levels by 1.2 percent a year. As expected, revisions are lower than in other OECD countries.

The biggest change to affect GDP in the new international standards is the expansion of the fixed asset boundary to include new types of assets. This better reflects assets in some industries that have durable and intangible items that are not consumed, but continue to provide a flow of capital services.

The graph below shows the revisions to nominal GDP levels caused by changes in the standards.

 Graph, Change to GDP levels from updated international standards, 1972 to 2011.

As expected, minimal changes occurred to nominal GDP growth rates from implementing the new international standards and other revisions.

International comparisons

This section compares the effect of the updated standards on nominal GDP in a selection of countries. The effect of the changes depends very much on the relative size of the activities or transactions within each country. For example, the relative size of research and development (R&D) expenditure explains much of the inter-country differences.

It is common for countries to also make associated data and methodology improvements when updating international standards. In some cases the effect of the additional updates is considerably greater than that from the updated international standards.

 Effect of improvements on GDP for selected countries
 Improvement  Country and percentage change to GDP level
 New Zealand (2010)  Australia (2008) United Kingdom (2009)  United States (2009)  Canada (2009)
International standards  1.3  1.6  2.3  2.9  1.8
Of which, R&D was  1.1  1.3  1.6  2.4  1.3
Associated updates  0.0  2.8  2.3  0.3  0.8
Total change  1.3  4.4  4.6   3.2   2.5 
Note: Non-New Zealand data from  Summary of ESA10 and BPM6 changes on sector and financial accounts, published by the Office of National Statistics in the UK, which also provides a breakdown of the international standard changes.

Research and development in New Zealand

Recognising R&D expenditure as an investment had the largest effect of the international standard updates on GDP. R&D asset values include the costs of all inputs of labour, materials, and capital goods used in the R&D process.

Capitalising R&D investment increases GDP by between 0.5 percent and 1.1 percent a year from 1972–2011. The greater percentage contribution to GDP in later years reflects the emerging importance of R&D investment.

As expected, New Zealand’s lower level of R&D expenditure relative to other OECD countries has meant the increase to GDP from this change in standards is smaller than for other OECD countries. This reflects New Zealand’s private expenditure on R&D being considerably lower than the OECD average (as a proportion of total GDP).

The industries with the largest expenditure on R&D include professional, scientific, technical, and support services (business services); and education and training.

The graph below shows the increased level of gross fixed capital investment made by the business services industry from 1987 to 2011.

 Graph, Gross fixed capital formation for business services, revisions from capitalisation of R&D, 1987 to 2011.

R&D adds to the level of intangible assets for these industries. After implementing the new standards, we are better reflecting the proportion of intangible investment in industries like business services.

The graph below shows the change in the percent of investment in intangible assets made by the business services industry, following R&D being recognised as an asset.

 Graph, Proportion of investment in intangible fixed assets for business services, revisions from capitalisation of R&D, 1987 to 2011.

See Data quality for details of other international standard updates.

Other updates and corrections

Other revisions made to GDP in this release are due to:

  • method improvements and corrections to non-life insurance
  • updates to calculating depreciation
  • balance of payments data revisions
  • updated 2011 industry benchmarks and new 2012 benchmarks.

This release provides comprehensive industry data on production, investment, and capital stock. This data we analysed in a supply-use balancing framework to reconcile the production, expenditure, and income measures of GDP. This release focuses on industry data and the benchmarks for the level of economic activity, which update and maintain the quality of quarterly GDP statistics. These industry estimates are available up to the year ended March 2012.

See Data quality section for more details on the updates and corrections mentioned above.

See Revisions for percentage changes to the different measures of GDP.

See Definitions for more information about the different measures of GDP.

Change for series identifiers

We have changed our series identifiers as a result of the new international standards. 

See Preview of 2014 national accounts improvements for a concordance from the old series (SNDA) to the new (SNEA) series. No revision flags are in the new series, even where data has been revised.

For more detailed data see the Excel tables in the ‘Downloads’ box.

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