This is another reply to a comment that I chose to do as a blog so I that could include a graph. In a comment on my Reply to Chris Trotter blog Robert Winter wrote:
I note that both MED and Treasury point to MFP in NZ and Australia preforming very similarly especially since 1988 across the “easy to measure” sectors (which is still very much in the “reform” period).
But, as MED also points out: “While Australia, the UK, the US and Denmark have all had positive five-year average annual growth rates since 1970, New Zealand has had several five-year periods where growth in labour productivity has been negative; that is, the level of labour productivity has declined.” (http://www.med.govt.nz/templates/MultipageDocumentPage____38446.aspx)
The point is that out MFP is nothing special, in comparative terms, but our labour productivity, coupled to our labour utilisation, is lamentable. And that poor labour productivity, is, as Paul Dalziel suggests, primarily an effect of the low-road model of the economy promoted in the reform period.
Labour productivity in the measured sector of the economy grew markedly from the early 1990s when the benefits of the reforms materialised, as the graph below shows. On a point to point basis, annual labour productivity growth between 1992 and 2000 was around 3%, a huge improvement and high by OECD standards.
Click to enlarge
Then it slumped to below the growth rate of the Muldoon years with policy backsliding and reversals.
The “low road” model is a myth.