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

About the productivity statistics

Productivity is a measure of how efficiently inputs (capital and labour) are used within the economy to produce outputs. Productivity is commonly defined as a ratio of a volume measure of output to a volume measure of input.

Growth in productivity means that a nation can, for example, produce more output from the same amount of input, or the same level of output from fewer inputs. Productivity growth is an important contributing factor to a nation’s long-term material standard of living.

More definitions

ANZSIC 2006: the Australian and New Zealand Standard Industrial Classification 2006. This classification is used to allocate enterprises undertaking similar productive activities to the same industry. 

Average annual growth rate: reflects the average increase (or decrease) in a variable across a period of time. Rates are calculated as geometric means, which take account of the compounding of growth rates over time. Arithmetic averages give higher growth rates and would lead to a different index figure for the latest year when applied to the base year.

Capacity utilisation: the difference between the potential and actual use of an input. Capacity utilisation is high when actual output is close to potential output because the most use is being made of labour and capital. In the productivity measures produced by Statistics NZ, it is assumed that capital and labour are utilised at a constant rate over time.

Capital-to-labour ratio: is a measure of the capital input index divided by the labour input index.

Capital deepening: is positive growth in the capital-to-labour ratio. See also ‘contribution of capital deepening’.

Capital income: is that part of the cost of producing gross domestic product (GDP) that consists of gross payments to capital. It represents the value added by capital in production, and is equivalent to the gross operating surplus, less the labour income of working proprietors, plus the capital proportion of taxes, less subsidies on production.

Capital productivity: is measured as a ratio of output to capital input. The ratio is derived by dividing the index of the chain-volume measure of GDP by an index of capital services. Capital productivity reflects not only the contribution of capital to changes in production, but also the contribution by labour and other factors affecting production.

Capital services: reflect the amount of 'service' each asset provides during a period. For each asset, the services provided in a period are directly proportional to the asset's productive capital value in the period. As an asset ages and its efficiency declines so does the productive capital value and the services the asset provides. Capital services is the appropriate measure of capital input in production analysis.

Capital shallowing: a decline in the capital-to-labour ratio.

Chain volume measures: annually-reweighted chain Laspeyres volume indexes referenced to the current-price values in a chosen reference year (ie the year when the quarterly chain volume measures sum to the current-price annual values). Chain Laspeyres volume measures are compiled by linking together (compounding) movements in volumes, calculated using the average prices of the previous financial year, and applying the compounded movements to the current-price estimates of the reference year.

Compensation of employees: the total remuneration, in cash or in kind, payable by an enterprise to an employee in return for work done by the employee during the accounting period. It has two sub-components: wages and salaries; and employers' social contributions. Compensation of employees is not payable for unpaid work undertaken voluntarily, including the work done by members of a household within an unincorporated enterprise owned by the same household. Compensation of employees excludes any taxes payable by the employer on the wage and salary bill (eg payroll tax, fringe benefits tax).

Contribution of capital deepening: the growth in the capital-to-labour ratio, weighted by capital’s share of total income. Given that capital’s share of total income is always less than 100 percent, the contribution of capital deepening is always less than the growth in capital deepening. It is used for growth accounting for labour productivity.

Contribution of capital input: the growth in the capital input index, weighted by capital’s share of total income. Given that capital’s share of total income is always less than 100 percent, the contribution of capital input is always less than the growth in capital input. It is used for growth accounting for output.

Contribution of labour input: the growth in the labour input index, weighted by labour’s share of total income. Given that labour’s share of total income is always less than 100 percent, the contribution of labour input is always less than the growth in labour input. It is used for growth accounting for output.

Former measured sector: this is similar to the measured sector but has a narrower industry coverage, but longer time series. It includes industries AA1-KK1 and RS1. The series are available from 1978.

Gross domestic product (GDP): the total market value of goods and services produced in New Zealand within a given period, after deducting the cost of goods and services used up in the process of production, but before deducting allowances for the consumption of fixed capital. Thus, GDP is 'at market prices'. It is equivalent to gross national expenditure, plus exports of goods and services, less imports of goods and services.

Gross mixed income: the surplus due to owners of unincorporated businesses. It is often referred to as profit, although only a subset of total costs is subtracted from the output of unincorporated businesses to calculate it. Gross mixed income is split and allocated to capital and labour as factors of production.

Growth accounting: decomposes the growth rate of an industry’s output into the part due to the increase in factors of production (labour and capital) – and that which cannot be accounted for by changes in labour and capital utilisation. This residual growth in output that can't be accounted for is known as multifactor productivity (the extent to which an industry is getting more output from the same amount of inputs).

Growth cycle: the span of years between the peak of one cycle and the peak of a following cycle. Peaks are determined using statistical techniques, and are chosen to represent high points in capacity utilisation of the economy. Productivity is best analysed over growth cycles, as annual movements can be volatile and don’t usually represent true changes to the underlying production function.

Index: a simple way of expressing, in percentage terms, the change in some variable from a given point-in-time to another point-in-time.

Inventories: a class of produced non-financial assets consisting of: stocks of outputs that are still held by the units that produced them before being further processed, sold, delivered to other units, or used in any other ways; and stocks of products acquired from other units that are intended to be used for intermediate consumption or for resale without further processing.

Labour income: the part of the cost of producing GDP that consists of gross payments to labour. It represents the value added by labour in production, and is equivalent to compensation of employees, plus the labour income of working proprietors, plus the labour proportion of taxes, less subsidies on production.

Labour input index: an index of the weighted number of hours paid in the measured sector. It is created by weighting together the industry-level labour volume series using labour income weights.

Labour productivity: measured as a ratio of output to labour input. Labour productivity estimates are indexes of real GDP per hour paid. Labour productivity reflects the contribution of labour to changes in product per labour unit, but is also influenced by the contribution of capital and other factors affecting production.

Labour volume series (LVS): an estimate of the total number of hours paid in paid employment per week, for the whole economy or for a given industry.

Measured sector: the industry coverage of the productivity statistics is defined as the ‘measured sector’. It consists of industries AA1-MN2 (except LL2), RS1, and RS2. These industries mainly contain enterprises that are market producers. This means they sell their products for economically significant prices that affect the quantity that consumers are willing to purchase. The series is available from 1996.

Multifactor productivity (MFP): estimates are indexes of real GDP per combined unit of labour and capital. They are derived by dividing chain-volume estimates of market sector GDP by a combined measure of hours paid and capital services. An increase in value is referred to as technical change or efficiency growth. However, it is more accurately interpreted as some combination of technological progress, efficiency gain, deviation from constant returns to scale, unobserved change in capacity utilisation, or departure from economy-wide long-run equilibrium. MFP is essentially a residual, and so also captures the impact of unobserved inputs on production.

Output: chain-volume value added. Annual value added for the measured sector is derived following the same procedures used to derive constant-price GDP, a chained Laspeyres volume index of the constant-price value added of the industries making up the measured sector. The resulting chained volume series is re-expressed as an index with an expression base of 1000 in the March 1978 year.

Productive capital stock: a measure of productive capacity that forms the basis for the measure of capital services. Productive capital stock estimates are derived as the written-down value of each asset its efficiency decline due to age. This stock is measured in units of ‘standardised efficiency’.

Rental prices: also referred to as the 'user cost of capital'. It is the unit cost for the use of an asset for one period. That is, the price for employing or obtaining one unit of capital services. The rental price for an asset is determined by its price index when new, its rate of economic depreciation, the average tax rate on production within the industry, and an exogenous real rate of return (set at 4 percent).

Total income: the part of the cost of producing GDP that consists of gross payments to factors of production (labour and capital). It represents the value added by these factors in the process of production and is equivalent to current-price GDP.

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