Over the three years to June 2014 per capita GDP grew a cumulative 6.25 per cent but real wages rose 4.2 per cent, or two-thirds of the pace that would be justified by that (somewhat crude) measure of productivity growth.
Source: Statistics NZ
Economic activity grew 0.7 per cent in the June quarter, a slowdown from the 1 or 1.1 per cent pace recorded in the three preceding quarters but enough to lift annual growth to 3.9 per cent, its strongest for 10 years.
"The gains of 1 per cent or more over the previous three quarters were unsustainably fast. Continued growth at that pace would eventually pose a substantial inflation threat," said Westpac economist Michael Gordon.
"Moreover, the June quarter figures gave a clear sense of how embedded the economic upturn has become. While the export-oriented sectors took a hit in the quarter, every other sector recorded a lift in activity."
ANZ economist Mark Smith said there was nothing alarming in lower growth off what were now considerably stronger levels of activity.
"The economy is still in a position of excess demand and with the official cash rate below neutral levels, the bias for future interest rate moves continues to be upward. However, as long as question marks hang over the transmission from growth to inflation, the Reserve Bank is on hold."
The money markets have not got another 25 basis points increase in the OCR fully priced in until July next year.
The June quarter's growth was entirely explained by growth in the services sector, where activity expanded across the board.
Agricultural output by contrast was down 2.2 per cent and manufacturing down 0.3 per cent (though it eked out a 0.1 per cent gain when dairy factories and meatworks are excluded).
Construction grew 2.2 per cent on top of the March quarter's 12.5 per cent increase.
"The underlying momentum in the growth figures was very respectable, particularly given the weaker contributions from sectors that had been driving growth strongly in recent quarters - construction and agriculture," said ASB economist Christina Leung.
"The details show that growth was broad-based over the quarter and that the recovery is about more than just a strong lift in construction and favourable pastoral conditions."
The expenditure measure of GDP shows how much the expansion is driven by domestic demand, which grew 2.2 per cent in the quarter and 5.2 per cent over the year, while net exports dragged it down to 0.5 per cent for the quarter and 3.3 per cent for the year.
Smith said domestic demand was supported by exceptionally strong net immigration flows and the strengthening labour market.
"Financial conditions remain accommodative and business and consumer sentiment, whilst well off their peaks, are at levels consistent with an economy that is trying to grow faster than it sustainably can." But falling commodity prices would eventually hit incomes, he said.
Gordon said the June data backed the view that the economy had already probably passed its peak rate of growth. "However, we still expect relatively strong GDP growth over the year or so ahead, though the divergence that was apparent in today's data between the very strong domestic economy and the weaker export sector may continue or intensify."
