NZ's labour productivity dips on strong jobs market

Growth in labour inputs were largely driven by increased labour hours in the construction. Photo / Thinkstock

New Zealand's labour productivity fell 0.7 per cent in the year to March 2016 bolstered by the strong labour market as waves of migrants look for work.

Labour productivity fell as inputs rose 3.3 per cent, outstripping outputs, which were up 2.6 per cent, Statistics New Zealand said. The department noted that the 0.7 per cent slide was "markedly lower" than the current incomplete cycle average (2008-2016) of a 0.7 per cent increase and the long-term average of 1.3 per cent growth.

Bank of New Zealand senior economist Craig Ebert cautioned, however, the complex data should be viewed over the long term as "things can jump around on the input and output side from year-to-year."

In the year to March 2016, a "growing labour market saw a record rise in labour available to produce goods and services," Stats NZ national accounts senior manager Gary Dunnet said.

Provisional data shows the growth in labour inputs was largely driven by increased labour hours in the construction, accommodation and business service industries.

"We are seeing really strong growth in the labour force so it's not surprising that we've seen a bit of a tick down in labour productivity. Labour is ample and the price isn't that high so firms have grown production by using more labour as opposed to using more capital," said ASB Bank economist Nathan Penny.

The situation is likely to have continued over the past 12 months with data this week showing migrants continued to flock to New Zealand in record numbers in the year to February as annual net migration rose to a record 71,333 in the 12 months ended Feb. 28, up from 67,391 in the same period a year earlier.

The latest jobs data showed New Zealand's unemployment rate rose to 5.2 per cent in the three months ended Dec. 31 from a revised 4.9 per cent in the September quarter employment grew 0.8 per cent in the quarter to 2.51 million while the working-age population grew 0.5 per cent to 3.76 million. The participation rate was an all-time high of 70.5 per cent.

Opposition Labour Party finance spokesman Grant Robertson said in a release that the data shows "kiwis are working harder than ever before and getting less and less for their hard work."

Growing labour market saw a record rise in labour available to produce goods and services.

Statistics NZ

Robertson also noted Australia experienced a higher rate of growth in labour productivity over the long run average, as it was an average 2.2 per cent compared with 1.3 per cent a year in New Zealand.

Productivity is regarded as key to increasing New Zealand's standard of living in the long run and growth in productivity means a nation can produce more output from the same amount of input, or the same level of output from fewer inputs.

Multifactor productivity, which captures the effects of unobserved inputs such as technological progress, efficiency gains, and economies of scale, fell 0.4 per cent in the year to March 2016 while capital productivity inched up 0.1 per cent.

Capital inputs, which include land, building and machinery, grew 2.6 per cent while outputs also grew 2.6 per cent, Stats NZ said.

Productivity statistics cover approximately 80 per cent of the country's economy, and exclude government administration and defence, health, and education.