The New Zealand economy has been in a productivity recession for five years and is failing to create wealth, says Bernard Doyle, head of strategy with broker JBWere.

GDP has looked good at about 3 per cent but has been driven almost completely by adding more people to the economy and by people working longer hours - harder not smarter, he says.

And with no end insight to the trend, JBWere has advised clients to reduce their NZ sharemarket investments by 25 per cent.

"We have had no contribution from GDP per hours worked and that's the recession we're in at the moment," Doyle told The Economy Hub video show. "GDP per hours worked is how countries get wealthy."


While other commentators and economists have raised these issues, JBWere is putting it money where its mouth is by advising clients to pull back on local stocks.

A lack of productivity growth as been a feature of most OECD economies since the global financial crisis, but Doyle argues that the issue is more acute in New Zealand.

The difference was population growth, he said.

"We're growing population at two percent so that immediately brings in things like housing, infrastructure and capacity pressure in ways that they are not really at play in places like Japan Europe and even the US."

Doyle emphasised that he was not picking an imminent crash.

"It's not obvious to us that there is some looming cliff," he said. It was more that looking to the next five years the economy was pushing against capacity and it was hard to see how that growth rate of three per cent GDP could continue.

"Therefore: How are we going to generate the earnings growth that continues to fuel our sharemarket."

Doyle said he was hoping to see a broader debate about productivity at a political level rather than just among economists.

And, ideally, a less political, more considered nationwide discussion about the level of population growth that was right for New Zealand.
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