FRIDAY GRAPH – MULTI-FACTOR PRODUCTIVITY GROWTH

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.

Click to enlarge

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.

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2 thoughts on “FRIDAY GRAPH – MULTI-FACTOR PRODUCTIVITY GROWTH

  1. An interesting graph, Roger.

    As you quite rightly state, MFP measures the influence of innovation and technological improvements on the productivity of our business enterprises.

    Have you given any thought to the fact that the period of rapid MFP growth depicted in the graph coincides with the widespread adoption of the personal computer in New Zealand workplaces; the opening up of the Internet from 1992 onwards; and the rapid take-up of the mobile phone as an essential tool of business?

    All of these technological changes were responsible for substantial productivity gains, but none of them are attributable to the neoliberal economic reforms introduced by Roger Douglas and Ruth Richardson.

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