Drop in phone use has big impact on GDP figures

Photo / Janna Dixon

This week's GDP figures have thrown up a surprising trend with a significant drop in the use of voice calls.

According to gross domestic product data released by Statistics New Zealand, the number of minutes spent on mobiles and landlines fell for the third consecutive quarter. Westpac economists described the drop as "absolutely stunning" given telecommunications had been one of the fastest-growing sectors.

The communications services component of GDP, which also includes postal services, fell 2.6 per cent in the quarter to the end of June, compounding a 2.2 per cent decline in the previous two quarters.

The figures are based on information provided by the telcos, but they do not reveal whether it is mobile or landline calling which has borne the brunt of the dropoff.

Westpac's Dominick Stephens said it reversed a trend that had seen the communications sector rising by around 2 per cent a quarter for the past 20 years. "It's actually the strongest growth sector of the New Zealand economy, and any modern economy, over the last 20 years."

Stephens said it was unlikely to be a case of people reducing the number of calls they made, but rather substituting internet-based calling services such as Skype for traditional landline calls.

Commerce Commission figures show there were more than one million broadband connections in New Zealand at the end of last year - close to double the number midway through 2007.

The Commerce Commission statistics also show a dwindling amount of time spent on landline calls, but this has been more than made up for by calling minutes on mobile phones.

Stephens said the effect on GDP might be larger than the effect on the industry itself because GDP was measured in 1995/96 prices.

He said if consumers were substituting calls over Skype for landline calls, the call was still being made but was not currently being picked up in the GDP figures.

"I remain reluctant to believe we are spending, physically, less time on the phone."

ABN Amro telecommunications analyst Geoff Zame said there was a discretionary element to mobile which meant that people were likely to reduce their spending in tough times. But that dynamic had not been seen with broadband.

He said that while some of the effect was cyclical or event driven, there was still a structural element. This included the shift to Skype-type services, email or other forms of online communication, and competitive impacts.

Stephens said the mass-market uptake of broadband had in fact made people better off as they substituted traditional voice calls for broadband-based services.

"This is an interesting industry trend but the point of what we are saying is that it isn't such a big deal for the economy as the figures are making it look."

In a research note Westpac says the impact on GDP has been significant: "Had communication services grown at trend instead of declining, GDP growth in the second quarter would have been 0.5 per cent instead of 0.2 per cent. Had it grown at trend for all of the past three quarters, annual GDP growth would have been 2.8 per cent instead of 1.9 per cent.

"It looks like a silly little thing but it has had a massive effect on growth and GDP over the last year, so we're saying the economy is not performing as badly as the official figures are suggesting."

Stephens expects a revision of the GDP figures as the measurement of the internet-based activity is improved.

Statistics NZ now counts the number of connections but not the intensity of use.

"Some of the traditional measures of production were based in a world where the stuff we wanted was physical and nowadays it's not physical, it comes in bytes down through the internet and it's still economic activity but it is a lot harder to measure."

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