Kiwis work longer but produce less

Last updated 14:52 23/09/2013

MIND THE GAP: Aggregate labour productivity levels and growth rates compared (Source: OECD; authors’ calculations).

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New Zealand's economy will continue to slide down the global rankings unless new technologies and techniques are properly adopted, a study has warned.

The Productivity Commissions' report, Productivity by the Numbers, raises "serious concerns" over New Zealand's stalled growth in labour productivity.

The report by Paul Conway and Lisa Meehan said growth in labour productivity - the efficiency of converting resources into economic output - had stalled since 2000.

Economic growth before then had relied heavily on lifting labour market participation, but this had levelled out.

With an ageing population, lifting the productivity of workers was one of the few ways remaining to boost the economy, the report said.

"Given an ageing population, this suggests that raising average incomes via increased labour input is becoming progressively more difficult," the report said.

New Zealand's poor showing compared to peers raised concerns new technologies and techniques that would improve efficiencies were not being assimilated quickly enough.

"There are serious concerns about the diffusion of improved technologies into the New Zealand economy," the report said.

"We need to better understand the barriers to superior technologies and production techniques spreading from high to low-productivity firms within the domestic economy."

The study found New Zealanders work longer hours than their international counterparts, but still produce less.

Compared to the Organisation for Economic Co-operation and Development (OECD) average, New Zealanders work 15 per cent more hours, but produce 20 per cent less per hour worked.

The results put New Zealand in the lower third of the OECD, similar to Slovenia and the Slovak Republic.

The commission, an independent crown entity, said this low growth combined with a relatively low GDP was concerning: "This is highly unusual internationally and raises serious concerns."

Within New Zealand certain industries performed better than others, the report found.

The IT, telecommunications and finance sectors "punch above their weight" in terms of productivity gains, the report said, while overall growth was dragged down by the performance of the transport and agricultural, forestry and fishing industries.

Despite good performances in isolated industries, the report said the news was mostly grim.

"The available evidence indicates that the productivity performance of most New Zealand industries does not compare well internationally," it said.

The report said Australia's performance was significantly better than New Zealand's, even accounting for the recent mining boom.

"Even within the same industries, New Zealand's productivity lags Australia over most of the economy," the report said.

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