Productivity

Strong government support to protect jobs and incomes in the face of the pandemic helped New Zealand recover rapidly from the severe Covid-19-induced downturn, but challenges remain to set the economy on a sustainable growth path, according to a new OECD report. The unemployment rate fell to its lowest level since 2007 while the employment rate rose to its highest level on record in the third quarter of 2021. However, inflation and house prices have picked up significantly and both household and government debt have increased. The latest OECD Economic Survey of New Zealand recommends that fiscal policy be adjusted in the near term to help stabilise the economy. Boosting productivity, particularly by making better use of digital technologies, would support further increases in living standards. Economic growth is expected to slow as capacity constraints bite and macroeconomic policies are tightened. Consumption growth is also expected to ease to a more sustainable pace as employment growth slows. After surging to 4.7% in 2021, New Zealand’s GDP is expected to rise by 3.8% this year before easing to 2.5% growth in 2023. “The near-term economic outlook is positive. The New Zealand economy has recovered strongly from the pandemic. The need for policy action is pressing in a number of areas to make economic growth sustainable. For instance, helping the digital sector to grow would help boost labour productivity.” OECD Secretary-General Mathias Cormann said, presenting the Survey alongside Finance Minister and Deputy Prime Minister Grant Robertson and Minister for the Digital Economy and Communications David Clark. “Linking pension eligibility to life expectancy and adopting long-term debt-to-GDP targets would help address the projected increase in government debt.” With affordability for first homebuyers at low levels and a buoyant housing market, it is important for the government to complete reforms to increase housing supply and […]