Annual productivity series for the measured sector from 1978–2008 have been released in this publication. In 2005, the latest year for which current price industry value added data are available, the measured sector covered approximately 73 percent of the economy. It excludes the following industries: government administration and defence, health, education, ownership of owner-occupied dwellings and property services. From 1996 onwards business services, and personal and other community services are included in the measured sector.
The supplementary tables include data for the former measured sector from 1978–2008. This data maintains the previously released time series and maintains comparability with Australia, whose official productivity statistics have the same industrial coverage as Statistics NZ's former measured sector. See 'Industry coverage – the measured sector' in the Technical notes for more detail on the coverage of the measured sector and former measured sector.
Unless otherwise stated, all references to average movements are annual geometric mean movements relating to the measured sector.
Productivity estimates are subject to capacity utilisation rates over the period of a business cycle, making interpretation of annual movements difficult. The series are of most value when analysed as average growth rates from the peak of one growth cycle to the peak of another. Statistics NZ has estimated growth cycles in the data to assist users in interpreting the results of the productivity series. Please note that the latest period (2000–08) is not a complete cycle. The economic picture within this period is assessed as each new data point becomes available. The assessment determines whether a more recent peak has occurred within the series, and therefore whether a new growth cycle has begun. Caution is advised when comparing the latest period with other cycles. For more information, see 'Estimating growth cycles' in the Technical notes.
New to this release
Supplementary tables containing an annual composition-adjusted series from 1998–2008 are now available in this release. The 1998 to 2008 period reflects the availability of datasets needed to compositionally adjust the labour input index. The series provides a more in-depth measure of labour and can provide insight into the effects that changes in labour composition have on productivity. For more information, see 'Composition-adjusted labour input' in the Technical notes.
The measured sector, and former measured sector, productivity series now have an expression base of year ended March 1978=1000 (year ended March 1996=1000 was used in the previous releases). The composition-adjusted productivity series have an expression base year ended March 1998=1000.
Labour productivity
Labour productivity is measured as a ratio of output to labour input. In the year ended March 2008, labour productivity increased by 2.0 percent, due to labour input (up 1.6 percent) increasing by less than the growth in output of 3.6 percent. The continued strength of the labour market was highlighted by a record low unemployment rate of 3.6 percent for the year ended March 2008 (lower than the previous year's rate of 3.7 percent) and a labour force participation rate of 68.3 percent (down slightly on the previous year's record rate of 68.4 percent).
The growth in labour productivity in 2008 is largely attributable to capital deepening (ie an increase of capital input relative to labour input) which contributed 1.1 percent, with multifactor productivity increasing 0.9 percent. See 'Growth accounting for labour productivity' for more details on these components.
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The following table presents the average annual growth in labour productivity for the growth cycles identified within the series.
Labour Productivity Average Annual Growth Rates(1)(2)
Year ended 31 March |
| Cycle |
Output |
Labour input |
Labour productivity |
| Percent(3) |
| 1978–82 |
2.1 |
0.4 |
1.7 |
| 1982–85 |
3.4 |
2.0 |
1.4 |
| 1985–90 |
0.7 |
-2.1 |
2.9 |
| 1990–97 |
3.3 |
0.8 |
2.5 |
| 1997–2000 |
3.0 |
0.1 |
2.9 |
| 2000–08 |
3.4 |
2.1 |
1.3 |
| 1978–2008 |
2.7 |
0.7 |
2.0 |
(1) The average annual growth rate values do not include the movement for the first year of each cycle, eg the 1978–82 average annual growth rate does not include the movement for 1978.
(2) Business services, and personal and other community services are included in the measured sector from 1996 onwards.
(3) Percentage changes are calculated on unrounded index numbers. |
Growth in labour productivity of 2.0 percent for the 2008 year is above the average annual growth rate for the 2000–08 period of 1.3 percent. The growth rate over this latest period is lower than any of the previous cycles. However, caution should be exercised in this comparison as the 2000–08 period is not a complete cycle.
Labour input growth, averaging 2.1 percent annually over the 2000–08 period, is higher than any of the previous cycles. In this latest period, labour input growth peaked in 2003 at 3.2 percent and then dropped back over the subsequent years to grow at a rate of 1.5 percent in 2007. In 2008 labour input grew 1.6 percent. The growth in labour input over this period is consistent with the low (arithmetic) average unemployment rate of 4.4 percent. The unemployment rate is for the whole economy, an unemployment rate that covers only the measured sector is not available.
Over the entire time series (1978–2008), average annual growth in labour productivity was 2.0 percent, due to labour input (up 0.7 percent) increasing by less than the growth in output of 2.7 percent
Composition-adjusted labour productivity
In measuring labour productivity, a labour composition-adjusted series (often referred to as a ‘quality-adjusted’ series) is generally considered to provide the most representative measure of labour input. The rationale for adjusting an input series for changes in labour composition is that workers are not homogenous, and as such, have different skill levels. This adjustment provides a more in-depth measure of labour, and an insight into the effects that changes in labour composition have on productivity.
In the year ended March 2008, adjusted labour productivity increased by 1.1 percent. This was due to adjusted labour input (up 2.5 percent) increasing by less than the growth in output of 3.6 percent.
The following graph indicates that on an annual basis, growth in adjusted labour productivity is lower than the growth in the headline (unadjusted) measure of labour productivity, except in the 2005 and 2007 years.
(1) The series begins in 1998, meaning annual percentage changes can only be calculated from 1999 onwards.
Adjusted labour input growth, averaging 2.2 percent annually from 1998–2008, is higher than the corresponding annual growth rate of 1.8 percent for the unadjusted labour input series. This implies that the average skill level of the workforce has increased over the period. The differences in the labour input measures have caused the annual average growth in the adjusted labour productivity series of 1.2 percent to be lower, than the unadjusted labour productivity series (up 1.6 percent) from 1998–2008.
Capital productivity
Capital productivity is measured as a ratio of output to capital input. In the year to March 2008, capital productivity fell 0.5 percent, due to the continued growth in capital inputs (up 4.1 percent) increasing by more than output growth of 3.6 percent.
The following table presents the annual average growth in capital productivity for the growth cycles identified within the series.
Capital Productivity Average Annual Growth Rates(1)(2)
Year ended 31 March |
| Cycle |
Output |
Capital input |
Capital productivity |
| Percent(3) |
| 1978–82 |
2.1 |
1.3 |
0.8 |
| 1982–85 |
3.4 |
5.4 |
-1.9 |
| 1985–90 |
0.7 |
4.5 |
-3.7 |
| 1990–97 |
3.3 |
2.1 |
1.1 |
| 1997–2000 |
3.0 |
2.1 |
0.9 |
| 2000–08 |
3.4 |
3.9 |
-0.4 |
| 1978–2008 |
2.7 |
3.2 |
-0.5 |
(1) The average annual growth rate values do not include the movement for the first year of each cycle, eg the 1978–82 average annual growth rate does not include the movement for 1978.
(2) Business services, and personal and other community services are included in the measured sector from 1996 onwards.
(3) Percentage changes are calculated on unrounded index numbers. |
The decline in capital productivity over the 2000–08 period can be explained by the increase in capital input of 3.9 percent due to strong business investment in fixed assets. This was particularly evident in the construction industry, where the investment supported the strong economic activity that peaked in 2006 and has slowed down in recent years. A decline in capital productivity is seen in three of the six cycles. However, caution should be exercised in this comparison as the 2000–08 period is not a complete cycle.
Over the entire time series (1978–2008), capital productivity fell 0.5 percent on an average annual basis. This was due to annual capital input growth of 3.2 percent increasing by more than the annual growth in output of 2.7 percent.
Multifactor productivity
Multifactor productivity (MFP) is measured as a ratio of output to total inputs. It can also be defined as growth that cannot be attributed to capital or labour, such as technological change or improvements in knowledge, methods and processes. In the year to March 2008, MFP grew 0.9 percent, due to total inputs increasing (2.6 percent) by less than output growth of 3.6 percent.
The following table presents the annual average growth in multifactor productivity within the growth cycles identified for the series.
Multifactor Productivity Average Annual Growth Rates(1)(2)
Year ended 31 March |
| Cycle |
Output |
Total inputs |
Multifactor productivity |
| Percent(3) |
| 1978–82 |
2.1 |
0.7 |
1.4 |
| 1982–85 |
3.4 |
3.3 |
0.1 |
| 1985–90 |
0.7 |
0.3 |
0.4 |
| 1990–97 |
3.3 |
1.3 |
2.0 |
| 1997–2000 |
3.0 |
0.9 |
2.1 |
| 2000–08 |
3.4 |
2.9 |
0.6 |
| 1978–2008 |
2.7 |
1.6 |
1.1 |
(1) The average annual growth rate values do not include the movement for the first year of each cycle, eg the 1978–82 average annual growth rate does not include the movement for 1978.
(2) Business services, and personal and other community services are included in the measured sector from 1996 onwards.
(3) Percentage changes are calculated on unrounded index numbers. |
From 2000–08, MFP has grown, but at a slower rate than two previous cycles (caution should be exercised in this comparison as the 2000–08 period is not a complete cycle), with an average increase of 0.6 percent annually. Output rose 3.4 percent on an average annual basis, while total inputs rose 2.9 percent. The main contributor to the growth in total inputs was capital input.
The average annual increase of 1.1 percent in MFP over the entire 1978–2008 series was due to output (up 2.7 percent) rising more than input growth of 1.6 percent.
Composition-adjusted MFP
In the year ended March 2008, composition-adjusted multifactor productivity increased by 0.4 percent for the measured sector. This was due to adjusted total inputs (up 3.2 percent) increasing by less than output growth of 3.6 percent.
The following graph shows that on an annual basis adjusted MFP growth is lower than the headline (unadjusted) measure of MFP, except for the 2005 and 2007 years (where the adjusted MFP growth is marginally higher).
(1) The series begins in 1998, meaning annual percentage changes can only be calculated from 1999 onwards.
From 1998 to 2008 average annual growth in adjusted MFP (0.7 percent) is lower than it is for unadjusted MFP (0.9 percent).
Growth accounting for real GDP
Growth accounting examines how much of the economy’s growth in output can be explained by the growth of combined inputs. In particular, growth in real GDP (output) can arise from three different sources: an increase in labour input, an increase in capital input, or an increase in MFP. The following graph presents growth in output between 1978 and 2008 for the growth cycles identified in the series.
In 2008, growth in output was 3.6 percent. This was driven by capital input (contributing 1.7 percent to the growth in output), and to a lesser extent by labour input and multifactor productivity (both contributing 0.9 percent).
The following table presents the annual average growth in output and its contributing factors for the growth cycles identified within the series.
Contribution to Measured Sector Real GDP Growth
Average annual growth rates (1)(2)
Year ended 31 March |
| Cycle |
Real GDP |
Contribution of
capital input(3) |
Contribution of
labour input(4) |
Multifactor productivity |
| Percent(5) |
| 1978–82 |
2.1 |
0.4 |
0.3 |
1.4 |
| 1982–85 |
3.4 |
2.0 |
1.2 |
0.1 |
| 1985–90 |
0.7 |
1.7 |
-1.3 |
0.4 |
| 1990–97 |
3.3 |
0.8 |
0.4 |
2.0 |
| 1997–2000 |
3.0 |
0.8 |
0.1 |
2.1 |
| 2000–08 |
3.4 |
1.6 |
1.2 |
0.6 |
| 1978–2008 |
2.7 |
1.2 |
0.4 |
1.1 |
(1) The average annual growth rate values do not include the movement for the first year of each cycle, eg the 1978–82 average annual growth rate does not include the movement for 1978.
(2) Business services, and personal and other community services are included in the measured sector from 1996 onwards.
(3) Contribution of capital input is equal to the growth rate in capital input weighted by capital's share of total income.
(4) Contribution of labour input is equal to the growth rate of labour input weighted by labour's share of total income.
(5) Percentage changes are calculated on unrounded index numbers. |
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For the latest period, 2000–08, average annual growth in output was 3.4 percent. This was driven by growth in capital and labour inputs, contributing 1.6 and 1.2 percent respectively on an average annual basis. Multifactor productivity contributed 0.6 percent to the increase in growth on an average annual basis. Growth in output was due to a combination of factors. High world prices for export commodities and a relatively low exchange rate in the early part of the period boosted export growth, while a thriving construction sector, which peaked in 2006 then slowed in recent years, were key drivers in strong output growth during this cycle.
Over the entire 1978–2008 series, output growth averaged 2.7 percent. Capital input was the largest contributor, averaging 1.2 percent on an annual basis. Labour input contributed 0.4 percent to this rise in output and MFP contributed 1.1 percent.
Composition-adjusted productivity growth accounting for real GDP
The inclusion of a compositionally adjusted labour input series allows for the decomposition of growth in real GDP (output) into capital input, hours worked, labour composition and, composition-adjusted MFP.
The following graph presents the contributions to annual growth in output for the adjusted series from 1998 to 2008. Labour composition changes have not been a major driver of increases in GDP over this time period.
1) The series begins in 1998, meaning annual percentage changes can only be calculated from 1999 onwards.
In 2008, growth in output was 3.6 percent. This was largely driven by capital input (contributing 1.7 percent to the growth in output), and to a lesser extent by hours worked and labour composition (contributing 0.9 percent and 0.5 percent respectively). Adjusted MFP contributed 0.4 percent to the rise in output.
Capital-labour ratio
The capital-labour ratio is calculated as the capital input index divided by the labour input index. An increase in the ratio is referred to as capital deepening, while a decrease is called capital shallowing. In the year to March 2008, the capital-labour ratio rose 2.5 percent, compared with a 2.2 percent rise in the year to March 2007.
The following table presents the average annual growth in the capital-labour ratio and capital and labour inputs for the growth cycles identified within the series.
Capital-Labour Ratio Average Annual Growth Rates (percent) (1)(2)
Year ended 31 March |
| Cycle |
Capital input |
Labour input |
Capital-labour ratio |
Percent(3) |
| 1978–82 |
1.3 |
0.4 |
0.9 |
| 1982–85 |
5.4 |
2.0 |
3.3 |
| 1985–90 |
4.5 |
-2.1 |
6.8 |
| 1990–97 |
2.1 |
0.8 |
1.3 |
| 1997–2000 |
2.1 |
0.1 |
2.0 |
| 2000–08 |
3.9 |
2.1 |
1.7 |
| 1978–2008 |
3.2 |
0.7 |
2.5 |
(1) The average annual growth rate values do not include the movement for the first year of each cycle, eg the 1978–82 average annual growth rate does not include the movement for 1978.
(2) Business services, and personal and other community services are included in the measured sector from 1996 onwards.
(3) Percentage changes are calculated on unrounded index numbers. |
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In the latest period, 2000–08, the capital-labour ratio has continued to increase with an annual growth rate of 1.7 percent, due to 3.9 percent average annual growth in capital input coupled with 2.1 percent growth in average labour input.
The New Zealand economy has experienced capital deepening during the last 30 years. The average annual growth in the capital-labour ratio was 2.5 percent over the entire 1978–2008 series, due to 3.2 percent average annual growth in capital input, compared with 0.7 percent average annual growth in labour input.
Growth accounting for labour productivity
As with growth in real GDP (output), growth in labour productivity can be broken down into components. In particular, a change in labour productivity can come from two possible sources: a change in the weighted capital-labour ratio (that is, capital deepening or capital shallowing) and a change in MFP. The following graph presents the contributions to labour productivity growth between 1978 and 2008 for the growth cycles identified in the series.
In 2008, growth in labour productivity was 2.0 percent. The annual contribution from capital deepening was 1.1 percent closely followed by a 0.9 percent annual contribution from MFP.
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The following table presents the annual average growth in labour productivity and its contributing factors for the growth cycles identified for the series.
Contribution to Measured Sector Labour Productivity Growth Average annual growth rates(1)(2)
Year ended 31 March |
| Cycle |
Labour productivity |
Contribution of capital deepening(3) |
Multifactor productivity |
Percent (4) |
| 1978–82 |
1.7 |
0.3 |
1.4 |
| 1982–85 |
1.4 |
1.3 |
0.1 |
| 1985–90 |
2.9 |
2.5 |
0.4 |
| 1990–97 |
2.5 |
0.5 |
2.0 |
| 1997–2000 |
2.9 |
0.7 |
2.1 |
| 2000–08 |
1.3 |
0.7 |
0.6 |
| 1978–2008 |
2.0 |
1.0 |
1.1 |
(1) The average annual growth rate values do not include the movement for the first year of each cycle, eg the 1978–82 average annual growth rate does not include the movement for 1978.
(2) Business services, and personal and other services are included in the measured sector from 1996 onwards.
(3) Contribution of capital deepening is equal to the growth rate in the capital-labour ratio weighted by capital's share of total income.
(4) Percentage changes are calculated on unrounded index numbers. |
Labour productivity over the latest 2000–08 period was relatively low, averaging 1.3 percent annually. Contributing to this was subdued capital deepening and MFP growth (0.7 and 0.6 percent, respectively, on an average annual basis). In the latter half of this period, capital deepening has grown at a faster rate, whilst MFP growth has slowed.
Over the entire 1978–2008 series, the average annual contribution to labour productivity growth from capital deepening was 1.0 percent. The average contribution of MFP growth was 1.1 percent on an annual basis. Labour productivity growth averaged 2.0 percent annually.
Revisions
Updates in data sources and ongoing methodology improvements have caused a number of revisions to the previously published productivity series. Please refer to tables 7 and 1.7 in the downloadable excel spreadsheets for the magnitude and direction of these revisions.
Regular revisions (due to updates in data sources) have arisen from the following:
- revised constant price GDP data, feeding into the output series
- revised current price national accounts data, with current price industry data now available for 2005, feeding into the industry income-based weights
- revised current and constant price productive capital stock data for selected assets and industries for March years 2006 and 2007, feeding into the capital input series
- the addition of Linked Employer-Employee Data (LEED) to replace survey-based data for working proprietor counts for the March 2007 year, and employee counts for the March 2007 quarter, feeding into the labour input series.
Revisions resulting from improved methodology are:
- a modification to the method for calculating asset user costs, which are used in the determination of asset weights in the capital input series. The main impact of this on the capital input series (which flows into capital productivity, total inputs, and MFP) is for years prior to 1989
- the addition of commercial, industrial, mining and other non-agricultural land to the set of assets within the capital input series, from 1996 onwards
- revisions to LEED for the labour volume series of employee counts from 2000 onwards.
Due to the amount of provisional data that is used in productivity calculation for the most recent years, the last four years of the series are released with provisional status. While there have been revisions to some annual movements, the underlying trend of the productivity series has remained unchanged.
For technical information contact:
Brendan Mai or Thomas McNaughton
Wellington 04 931 4600
Email: info@stats.govt.nz
Next release...
Productivity Statistics: 1978–2009 is scheduled to be released in March 2010.