If there were one chart I would use to illustrate the story of New Zealand’s economic performance over the last 25 years, this would be it.
The chart is taken from a presentation to a Business Roundtable retreat last month by Dr Roderick Deane (the presentation is on our website).
It illustrates the trend in multifactor productivity growth, which is perhaps the most important productivity measure. MFP captures productivity changes (due to things like innovation and technology improvements) that cannot be attributed to capital and labour.
The story is that New Zealand’s multifactor productivity performance improved dramatically, to become among the best in the OECD, in the post-reform period.
Then, for all the Labour-led government’s talk about ‘growth and innovation’, it slumped in the last decade, with the retreat from reform and policy reversals, to a rate not seen since the Muldoon years.
There is still far too little appreciation of the appalling economic mismanagement of this period.