The Treasury has published a paper today on the global productivity slowdown and how it is playing out in New Zealand: The productivity slowdown: implications for the Treasury’s forecasts and projections.
The world has been experiencing a productivity slowdown, from which New Zealand has not been exempt. COVID-19 temporarily boosted labour productivity, but more recently, productivity has retreated. The overall trend since 2007 has been one of slow productivity growth.
The paper finds that a range of factors are likely to play a role in the productivity slowdown in New Zealand and across the world. These include lower productivity benefits from innovation, weak investment relative to employment growth, and a slowdown in international trade and connections.
Based on an analysis of current trends in productivity drivers, the Treasury’s view is that productivity growth is most likely to remain slow over the coming years. This supports downward revisions to productivity forecasts in recent Treasury forecast publications. The Treasury will also consider its long-term productivity assumption in the next Long-Term Fiscal Statement to be released in late 2025.
The Treasury’s Chief Economic Advisor Dominick Stephens commented: “The productivity slowdown was a key factor behind the downward economic revisions that the Treasury provided with the 27 March Budget Policy Statement. This matters because sustainable improvements in our living standards depend upon productivity. While not the topic of today’s paper, the Treasury continues to look for opportunities to boost productivity growth in its advice to Government.”
