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Productivity Statistics: 1978–2014
Embargoed until 10:45am  –  30 June 2015
Commentary

See Definitions for explanations of terms used in this commentary.

Key aggregates for the measured sector

The changes in the key indicators for the year ended March 2014 closely track the changes for the long-run average 1996–14. The output and labour productivity growth rates experienced in the year ended March 2014 have had positive contributions to the growth rates in the latest incomplete cycle, 2008–14.

The table below shows average annual rates across growth cycles. The benefit of breaking the data into cycles is that we better account for factors that tend to vary within a cycle, such as capacity utilisation. This way, we can make comparisons of productivity performance between periods with the effect of these additional factors minimised. Growth cycles are the span of years between the peak of one cycle and the peak of a following cycle; the 2008–14 period will not be complete until the next peak in output occurs.

See Data quality for more information on growth cycles.

 

Key aggregates for the measured sector(1)
Variable 1997–2000(2) 2000–2008(2) 2008–2014(2) 2014(3) 1996–2014(2)

Percent

Output (value added) 2.8 3.5 1.0 2.5 2.6
Labour input 0.0 2.0 -0.1 1.2 1.0
Labour productivity 2.8 1.4 1.0 1.4 1.5
Capital input 2.4 3.9 2.0 2.9 3.0
Capital productivity 0.4 -0.4 -1.1 -0.3 -0.4
Total input 1.0 2.8 0.8 1.9 1.9
Multifactor productivity (MFP) 1.8 0.6 0.1 0.6 0.7
1. The measured sector series begins in 1996.
2. Average annual growth rates, year ended March.
3. Year ended March.

Output growth driven by contributions of capital inputs

Growth accounting examines how much of the economy’s growth in output can be explained by one or more of the following:  

  • contribution of additional labour
  • contribution of additional capital
  • MFP.

The 2.5 percent increase in output growth in the year ended March 2014 was driven by increased contributions from capital inputs (up 1.3 percent), and increased contributions from labour inputs and MFP (both up 0.6 percent). The contribution to output from labour is significantly higher in the latest year compared with the latest incomplete growth cycle.

The following graph presents the contribution of additional labour, additional capital, MFP, and growth in output, measured across three growth cycles (the latest cycle incomplete), for the whole series and for the year ended March 2014.

 

Graph, Measured sector's contribution to output growth, average annual percentage change, year ended March 1997 to 2014.   

Labour inputs and MFP contribute to strong construction output growth in 2013

Industry-level data is now available to the year ended March 2013, so we can provide more detail at the industry level. The construction industry had high growth in output in the March 2013 year (up 10.8 percent). The following graph, which breaks down the percentage increase in construction output for 2013 and previous growth cycles, shows the growth came from additional labour inputs and MFP.

The contribution to output from labour inputs was significantly higher in 2013 (up 3.4 percent) than for the 2008–13 cycle (down 1.2 percent), and was almost the same as the contribution from labour inputs in the 2000–08 cycle (up 3.6 percent).

Agriculture, forestry, and fishing also had increases in labour productivity in 2013.

 Graph, Measured sector's contribution to output growth, average annual percentage change, year ended March 1997 to 2014.

Labour productivity increases in 2014

The 1.4 percent growth in labour productivity in the year ended March 2014 was due to stronger growth in output (up 2.5 percent) than in labour inputs (up 1.2 percent). Provisional data shows the growth in labour inputs for the year ended March 2014 was largely driven by increased labour hours in the manufacturing and construction industries.

We will publish detailed industry information for 2014 in next year’s Productivity Statistics release.

The average annual growth in labour productivity over the 2008–14 period was 1.0 percent, compared with the series (1996–2014) average annual growth of 1.5 percent.

Capital deepening and MFP contribute to labour productivity growth

A change in labour productivity can come from two sources:

  • a change in capital available per hour of paid labour (known as capital deepening or capital shallowing)
  • a change in MFP.

For the year ended March 2014, the 1.4 percent increase in labour productivity can be disaggregated as positive contributions from capital deepening (0.8 percent) and MFP (0.6 percent), with growth in MFP in 2014 exceeding MFP growth in the latest incomplete cycle 2008–14 (up 0.1 percent).

The following graph presents the contributions to labour productivity over the three economic growth cycles (last one incomplete), over the entire series, and during the year to March 2014.

 Graph, Measured sector's contribution to labour productivity growth, average annual percentage change, year ended March 1997 to 2014.

Capital productivity declines slightly

Growth in capital productivity had a 0.3 percent decrease for the year ended March 2014, due to higher growth in capital inputs (up 2.9 percent) than in output (up 2.5 percent). The increase in capital inputs is mainly attributable to the transport, financial services, and construction industries.

Productivity statistics do not account for changes in capacity utilisation of capital, as we assume capital assets are used at a constant rate throughout the growth cycle, and over their life. Due to this assumption, growth in capital input may be understated when capacity utilisation is increasing (as for most of the 2013 and 2014 March years), and capital productivity may be overstated.

Graph, Measured sector's capital, and output indexes, year ended March 1996 to 2014.

R&D investment affects capital productivity

One update to the international standards implemented in the National Accounts (Industry Benchmarks): Year ended March 2012, was the capitalisation of research and development (R&D). We now consider expenditure on R&D to be investment in fixed assets and include it in gross fixed capital formation. This consequently increases the productive capital stock of the economy.

Business services is the industry most affected by the addition of R&D as a fixed asset – R&D comprised about one-third of the industry’s productive capital stock between 2008 and 2014. We now see a slower decline in capital productivity in this industry (as the graph below shows) caused by a slower increase in the industry’s capital inputs. This is because R&D makes up a significant proportion of this industry’s productive capital stock, but has grown at a slower rate than other asset types, such as software and non-residential buildings. As a result, each asset’s share of the industry’s cost of capital has declined with the inclusion of R&D. 

Graph, Professional, scientific, and technical services capital productivity, year ended March 1996 to 2013.

Successful innovation needs more than just R&D was released on 29 June by the New Zealand Productivity Commission. This media release introduces two papers that explore the relationship between R&D expenditure and innovation at the firm level, using data from Statistics New Zealand’s Longitudinal Business Database.

Increase in MFP

MFP is measured as a ratio of output to combined capital and labour inputs (total inputs). MFP reflects growth in output that cannot be attributed to growth in capital or labour inputs. Examples are technological change, or improvements in knowledge, methods, and processes.

In the year ended March 2014, MFP increased 0.6 percent, as output growth (up 2.5 percent) exceeded growth in total inputs (1.9 percent).

 

Graph, Measured sector's input, output, and productivity indexes, year ended March 1996 to 2014.

Over the latest incomplete growth cycle (2008–14), total output grew 1.0 percent and total inputs grew 0.8 percent, resulting in MFP growth of 0.1 percent a year on average.

An Australia–New Zealand comparison

The data used in this comparison starts in 1996, as this is when the industry coverage of the series are comparable.

New Zealand experienced higher rates of growth in capital productivity and MFP than Australia over the long-run average of the period 1996–2014. Australia had relatively higher growth in labour productivity over the period, with growth in the capital-to-labour ratio that was more than double that of New Zealand’s.

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

Australia and New Zealand productivity(1)
Average annual growth rates
1996–2014
Variable Australia New Zealand
Percent
Output 3.5 2.6
Labour productivity 2.3 1.5
Capital productivity -1.8 -0.4
Multifactor productivity 0.6 0.7
Labour input 1.2 1.0
Capital input 5.3 3.0
Total inputs 2.9 1.9
Capital-to-labour-ratio 4.1 2.0
1. Australia's market-sector industries aggregate, compared with New Zealand's measured sector series.
See Data quality for more detail.
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