With both the annual and quarterly national accounts data having come out recently it is time for a quick update of some old charts.
First, labour productivity (real GDP per hour worked). This chart is from the period since just prior to Covid, and for both New Zealand and Australia
If you want some slight consolation, at least we haven’t lost any ground relative to Australia over this period, but for both countries it is (on current readings) almost four wasted years, with no economywide productivity growth at all.
And whereas Australia’s terms of trade have risen by 11 per cent over that period New Zealand’s have fallen by about 5 per cent. That’s an additional income difference in their favour of 2-3 per cent.
(NB for resident UK pessimists, note that on current readings the UK has done less badly on labour productivity than either New Zealand or Australia over the Covid/inflation period.)
What about the longer-run series? This one is since just prior to the last big recession.
Pretty dismal productivity growth in both countries - less than 1 per cent per annum on average over the full period – but, as usually, we have done a bit worse than them over the full period. Note that although Australia is much more productive on average than New Zealand, it is also well behind the global frontier advanced economies.
Here is another of my longstanding charts, an inevitably crude breakdown of GDP (per capita) into tradables and non-tradables components.
First, covering the entire period back to 1991
and then just for the Covid/inflation period, when the gap between the two lines has widened markedly (as you would have expected initially) and (so far) stayed wide.
On this measure, per capita (real) tradables sector production now is about where it was almost 30 years ago and is about 15 per cent less than it was at the peak 20 years ago.
And then one final graph. This one shows (nominal) exports as a share of GDP
Total exports as a share of GDP have recovered somewhat after the Covid border restrictions but to a level (share of GDP) not seen pre-Covid since 1972 (off this chart, but using SNZ annual data).
And somewhat to my surprise, it is goods exports - not materially hindered by the border restrictions of 2020-2022 – that look really weak, now making new multi-decade lows as a share of GDP. Perhaps one shouldn’t have to say it: exports aren’t special. But successful economies tend to be ones where firms find more and more opportunities (and more firms find those opportunities) to take on world markets and succeed. The economy’s problems can’t be solved by exporting per se (which would be to put the cart before the horse), but successful and competitive economies will typically have a lot of firms succeeding internationally. New Zealand, by contrast (and for all the individual success stories that can be found) is an economy that seems to have become increasingly inward-oriented, increasingly less successful competing internationally. And these aren’t just narratives about one government, or one term in office; they are multi-decade failures.
But each government bears responsibility for their acts of commission and omission, and we now have a new government.
Sadly, there is little sign that senior ministers have absorbed just how poorly things have gone in New Zealand - and were doing when the National Party was last in office - or to have any driving commitment to much better outcomes, or (and the two are no doubt related) any driving narrative for what has gone wrong and what might make a difference. And, of course, there is little sign of an engaged and energetic bureaucracy offering the sort of analysis and advice that might, just possibly, engage a minister or Prime Minister who one day wondered what sort of economy their kids and grandchildren might inherit, if those generations are rash enough to stay.
For reference, and least those Australia comparisons at the top provide some sort of excuse for do-nothing complacency, recall that over the last 10 years half a dozen countries have gone past us on the OECD productivity (GDP per hour worked) league table.
