What's 30 years betweeen cobbers? Presentation to the NZ Initiative
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Transcript of What's 30 years betweeen cobbers? Presentation to the NZ Initiative
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What is 30 years between Cobbers?
21 March 2013
Presentation to the NZ Initiative ConferenceMurray Sherwin, ChairNew Zealand Productivity Commission
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CER marked a fundamental shift
• 30 years since CER signed, in the midst of Muldoon’s freeze phase
• NZ’s relative economic performance had been sliding since the 1950s
• Terms of trade part of the story, but a sclerosis in policy settings impinged on adjustment
• 1984 (and beyond) reforms built on CER thinking
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Adjusting to change is critical
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Impacts from a profound policy shift
• Increased adaptability and resilience to a rapidly changing global environment
• Primary industries re-asserted, manufacturing declined, services expanded
• NZ is a services-based economy – 70% of GDP• Comparable experience to other OECD
countries, but NZ adjustments delayed initially
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Adaptability increased post-reform
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We have stopped falling
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Impacts from a profound policy shift
• The OECD/IMF poster child has been a disappointing youth
•Macro-policy reforms have yielded real but under-appreciated benefits:
–greater resilience (GFC etc.)
–the relative decline in GDP per capita since the 1950s stabilised from the early 1990s at about 15-20% below OECD average
• But no sign of convergence back to levels of more advanced OECD economies (contrast the trajectory of South Korea!)
• Gap vs Australia has continued to widen
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Employment grows, productivity slows
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Impacts from a profound policy shift (cont…)
• Better GDP per capita performance driven by improved employment growth after labour shedding of the late 1980s-early 1990s
• But GDP per hour worked continues to edge down• If labour productivity had matched major OECD
economies since 1980s, incomes would now be 18% higher ($8000 per capita), GDP $37 billion larger.
• A little productivity goes a long way
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Same labour increase, much lower risein output
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Our productivity falls behind
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Falling behind the neighbours
• New Zealand’s productivity under-performance relative to Australia is stark
• Total hours worked roughly matched in NZ and Australia – x 2.5 since 1956
• Output in NZ from those hours, x 4• Output in Australia, x 7.5• NZ GDP/hour worked from 110% of Australia in
1960 to less than 70% today• This makes a difference!
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Low productivity bites
Trans-Tasman migration
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Turning it around
• NZ is far more resilient and dynamic but productivity continues to underperform
• Openness to international trade and domestic competition is key in driving productivity
• Improving productivity in services is critical– Large and diverse sector– Often sheltered from trade and competition
• Cross-country productivity differences are large in services
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New Zealand’s service industries
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The services sector – our next inquiry
• High level overview of the services sector, characteristics and productivity performance
• In-depth explorations of key parts of the sector, or topics that span it, to pull out lessons to assist in improving productivity
• Issues document out shortly, asking for expressions of interest and seeking input
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More information
www.productivity.govt.nz Follow us on Twitter: @nzprocom