Bernard Hickey looks inside the spreadsheets of the National Accounts for the 2016 year and finds a fast-growing overall economy, but one that is not generating much output growth per person. Record high net migration and a buoyant services sector helped expand the economy and offset weak manufacturing and farm output in the December quarter.
Productivity, which is the measure of output growth per hour worked and is the ultimate driver of wealth, remains woeful.
It is the great conundrum of the New Zealand economy: the shops and cafes are full, the motorways are packed, construction is roaring and yet wages are soft and there are shortages of housing and skilled workers and a squeeze on disposable incomes.
December quarter national accounts out today reinforced the picture of an economy growing because of strong net migration, construction, a tourism boom and a strong-growing business services sector. But it also showed real GDP actually fell 0.2 percent per capita in the December quarter and was up just 0.6 percent from the same quarter a year ago and was up just 0.9 percent for the full year. GDP per capita also rose just 0.5% in calendar 2015.
These sorts of annual GDP per capita growth rates are half the annual average rate seen since 1993.
It's mostly about population growth, which was 2.1 percent in calendar 2016. This plays straight into the hands of the Opposition, which argues strong economic growth is simply being bought by record high net migration that is creating its own infrastructure and housing cost pressures.
But the total growth was also underwhelming. The 0.4 percent seen during the December quarter was less than economists expected and the stellar growth rate of 1.1 percent previously booked for the September quarter was revised down to 0.8 percent. Growth in the December quarter from the same quarter a year ago was 2.7 percent and the growth for full 2016 from 2015 was 3.1 percent.
Labour Finance Spokesman Grant Robertson described the figures as showing New Zealanders were working harder and harder for less.
"A slump in productivity of this nature exposes National’s failure to build a resilient and adaptable economy," Robertson said.
"What this shows is that population growth, rather than improving productivity, is propping up the New Zealand economy," he said.
Finance Minister Steven Joyce focused on the overall growth being stronger than most other developed countries.
"We have seen particularly impressive growth in construction and services partly offset by a fall in primary production and the related manufacturing sector," Joyce said.
Green Co-Leader James Shaw called for a change away from GDP as the main measure of progress and pointed to his private member's bill that creates a range of development indicators.