Closer look at statistics lets some of the air out of our buoyant numbers.

The economy's vital signs don't look too bad, at first glance.

Economic output grew 0.7 per cent in the March quarter to be 2.8 per cent higher than a year earlier. That compares with annual growth of 1.8 per cent for the OECD as a whole.

Employment grew 2 per cent during the same year. The employment rate (the proportion of 15- to 64-year-olds who are employed) is 74.4 per cent compared with 71.6 per cent in Australia and 65.7 per cent for the OECD.

And inflation is low - just 0.4 per cent.


However a closer look presents a less cheerful picture. The economic growth numbers are flattered by rapid population growth.

The March quarter's 0.7 per cent growth in gross domestic product (GDP) shrinks to just 0.1 per cent in per capita terms. For the year, per capita growth was 0.5 per cent, the weakest since 2011.

That meagre growth in per capita output was from an internationally unimpressive level.

The average Australian produces one-third more than the average New Zealander, and takes 8 per cent fewer hours to do it.

Compared with the 37 members of the OECD New Zealanders' output per capita is 10 per cent lower, despite working 13 per cent more hours.

Meanwhile the inflation rate only reflects consumer prices. House price inflation is notoriously a very different story. The Real Estate Institute reports the national median house price rose 10 per cent in the year ended May, while its stratified, or quality-adjusted, house price index rose 14.7 per cent.

In the labour market the 2 per cent rise in employment in the year to March only matched the 2 per cent growth in the total population during the same period and did not keep pace with 2.5 per cent growth in the working age population.

The net effect is that the number of people unemployed rose 10,000 in the latest quarter and is almost unchanged on a year earlier, 144,000 or just 1000 fewer than in the March 2015 quarter. Nearly one in five part-time workers would like to work longer hours, some 69,000 people.

Half of the jobs growth occurred in Auckland, where the number of people employed grew 2.9 per cent, or 23,400, contributing to the social carnage of the Auckland housing market. More than a third of the employment growth nationwide is explained by 17,500 more jobs in the construction industry.

Indeed, the composition of GDP growth in the latest year is heavily concentrated in those sectors sensitive to population growth.

GDP growth in the latest year is heavily concentrated in those sectors sensitive to population growth.


The March quarter's GDP growth of 0.7 per cent is entirely explained by growth in the construction, retail trade and accommodation, health care and financial services sectors.

By contrast agricultural production declined 0.1 per cent in the quarter, on a seasonally adjusted basis, while manufacturing shrank 0.4per cent.

Over the whole March year growth in the tradeables sector, including tourism which has been going strong, ran at just half the pace of non-tradeables growth: 1.3 per cent versus 2.6 per cent.

National income per capita, which adjusts for investment income flows (a net deficit of $9 billion in the year ended March) and for changes in the terms of trade (relative prices of things we export and import) as well as population, recorded no growth at all in the latest year compared with the year before. Zero, zip, zilch.

To be fair that is a slight improvement from the calendar 2015 year, in which per capita national income shrank 0.4 per cent.

Ultimately what matters from the standpoint of raising living standards is labour productivity. If we want a better standard of living we must earn it by producing more per hour worked.

Here again the latest statistics are not encouraging.

While the economy produced 2.8 per cent more goods and services in the March quarter than it did a year earlier, the lion's share of that came from a 2.5 per cent increase in hours worked in the same period. That suggests the contribution from a higher output per hour was nothing to write home about.

That modest gain in productivity was off a low base, around 20 per cent below the OECD average and 30 per cent below Australia's.

So we are left with a picture of economic growth that is all about population gain rather than the kind of growth that would lift living standards or help us pay our way as a trading nation.

The big drive of the population growth is migration.

In the year ended May the net migration gain was 68,400, enough to raise the population 1.5 per cent from its estimated level a year ago, before any contribution from natural increase (births minus deaths).

The net migration inflow reflected a net loss of 3500 New Zealand citizens and a net gain of 71,900 non-New Zealand citizens.

The net loss of New Zealanders was small by the standards of recent years. It included a net flow of just 3700 to Australia, compared with an average net loss of 24,700 over the previous 10 years.

As Australia's unemployment rate is now the same as New Zealand's at 5.7 per cent and its GDP growth in the latest March year was higher, 3.1 per cent against New Zealand's 2.8 per cent, the transtasman migration trend may start to turn around.

As it for the migration flows as a whole, the monthly net gain peaked at 6200 last November and has been trending lower since then, reaching 5500 last month. But at an annualised rate of 66,000, it remains strong.