Fact-checking English on income and exports

Exports: dairy's share rising

National Leader Bill English has claimed on the campaign trail that incomes have risen twice as fast as the rate of inflation in the last nine years. He also said exports are diversifying. Rod Oram has fact-checked both claims and finds English is mostly wrong on incomes and just plain wrong on exports.

He is right on income on two of the four main measures from Statistics NZ. But wrong on the other two. Moreover, he ignores the negative impact fast-rising housing costs have had on households.

He is wrong on export diversification. He was also wrong to claim that productivity was growing, as Bernard Hickey reported earlier in this Newsroom article.

Income:

The Consumer Price Index, the headline measure of inflation, rose by 14.4% from the December quarter of 2008, when National took office, to this year’s June quarter, the latest data available, which is a period of eight-and-a-half years.

However, the rise in incomes over the same period varied widely across the four main measures by Statistics New Zealand. Each uses a different methodology.

The closest income comparator to the CPI is the Labour Cost Index, which measures employers’ costs. Those rose 15.6% over the eight-and-a-half years. That is only 1.3% more than the rise in inflation.

The LCI is a quarterly survey of some 2,000 businesses across all sectors of the economy which tracks the pay for doing the same job. It does not include bonuses, promotions and other income improvements individuals get, or the pay of some contract workers.

The Quarterly Employment Survey measures average hours worked (which have risen across the economy), and ordinary and overtime pay. It surveys 16,000 businesses and more than 550,000 employees. But it excludes people in agriculture, self-employment and the defence forces.

This measure of income has risen by 22%. In real terms, that is only 6.75% over eight-and-a-half years, and less than half the rise in inflation.

The Household Labour Force Survey runs an Income Survey supplement once a year. It asks more detailed income questions of 15,000 households of some 30,000 people. Over the past eight-and-a-half years average weekly earnings have risen 32.6%, median weekly earnings 31.6%, average hourly earnings 30.2% and median hourly earnings 29.3%.

On this measure English is right. But for some people longer hours would have contributed to their higher earnings.

The Household Economic Survey is done once a year on a sample of 3,500 households. This covers all sources of income including beneficiary payments, and rental income, interest and dividends.

In the year to June 2008, the median household income was $55,000; in the year to June 2016 (the latest data available) it was $78,000, a rise of 30.2% including inflation, or 12.8% excluding inflation, a real gain of 1.6% a year.

Over the same period average household income rose from just under $77,000 to $99,000, a rise of 28.4% including inflation, or 11.3% excluding inflation, or 1.4% a year. On these measures English is almost right.

However, all these measures are judged against CPI, which only measures changes in prices. On housing, this includes mortgage interest and rental rates but not actual housing costs.

The Household Expenditure Index does have a housing cost component covering mortgage and rental payments, insurance, rates and other housing costs. The average weekly housing cost for households was $235.10 in the year to June 2008. It was $327.10 in the year to June 2016 (the latest available data), a rise of 40%, almost three times the rate of inflation.

Thus, English is right to say incomes have risen twice as fast as inflation on average across all households on two of Statistics NZ’s four measures. But people who are working longer hours, or are suffering from soaring housing costs or from less-than-average pay increases, might not be impressed.

Diversification of exports:

English said on TVNZ’s Q&A programme last weekend: “Our exports are diversifying more quickly and more broadly than they have for a long time – a burgeoning IT industry. In fact, you’re going to see a burgeoning agri-tech industry because a lot of these solutions around nitrate emissions and climate change – methane emissions – are technology solutions which we’re investing internationally with research to carry out.”

He is wrong. Our exports haven’t diversified in the past 20 years. In fact, dairy exports are contributing a higher share, according to his government’s Trade Agenda 2030 report.

Dairy’s share rose from 16% of exports in 1995, to 19% in 2005 and to 25% in 2016. In total, the primary sector’s share rose from 59% in 1995 to 61% in 2016. Meanwhile, high value-added machinery exports rose from 7% of exports in 1995 to 9% in 2005 but fell to 5% in 2016.

Agri-tech exports of any kind remain modest indeed. English specifically identified new technology to curb agriculture’s nitrate and methane emissions. There is government funding for such research but that is public good science so the benefits are available to all to use. It is hard to commercialise that without a lot more customised research.

That’s true at the national level, and even more so for the money the government spends on NZ’s contributions to the Global Research Alliance on Agricultural Greenhouse Gases. New Zealand co-leads with the Dutch on the ruminant animals work stream in it. But relative to the scale of the global problem of animal emissions our funding is barely a drop in the bucket.

Moreover, there remains very little government or private sector effort in New Zealand to commercialise this science yet.