Multi-factor productivity (the measure combining changes based on labour output and the changes based on capital investment) declined 0.9%.
“The fall in multi-factor productivity reflects a stronger decline in output, down 1.5% compared with the decrease in total inputs, down 0.7%,” Stats NZ said.
The productivity statistics aim to measure the nation’s economic output relative to labour and capital inputs.
Stats NZ updates New Zealand’s productivity performance every two years.
That last set of data, released in April 2024, showed that in the year ended March 2023, multifactor productivity fell 2.2%.
The bulk of the improvement in the latest set of data came from labour productivity, which experienced a small rise across the period (up 0.8%) in the year to March 2025.
Unfortunately, this wasn’t driven by expansion, but reflected a smaller decline in output (down 1.5%) compared with the decline in labour inputs (down 2.3%).
In other words, firms cut workers faster than production actually fell.
Stats NZ says productivity is best analysed across growth cycles, as annual movements can be volatile.
A growth cycle is the time between peaks in economic growth.
That data confirms a worrying trend towards lower multi-factor productivity (MFP) in New Zealand since 1996.
Stats NZ highlights the following cycles:
New Zealand’s poor capital productivity performance has long been blamed on the nation’s obsession with investment in residential housing, rather than business sectors that generate economic output.
Other factors highlighted by economists include a lack of investment in R&D, infrastructure, failures in the education system, poor policy and regulatory settings, a lack of entrepreneurial culture and higher levels of poverty, which exclude more people from the productive economy.
Countries with high levels of productivity based on capital, like the Scandinavian economies, Germany, the US and South Korea, tend to invest much more in technology and automation to drive efficiency.
The fall in capital productivity reflected that capital inputs increased 1.5%, while output declined 1.5%.
In other words, in aggregate, more money was invested into the economy in the year to 2025, but the total output of the economy still fell 1.5%.
Looking back on New Zealand’s productivity progress since this data series began in 1996, the primary sector clearly leads the way.
In 2025, compared with 1996, primary industries workers produced 72% more goods and services per hour, Stats NZ said.
In contrast, the service sector produced 47.7% more goods and services per hour.
The goods-producing industry workers produced just 16.6% more goods and services per hour.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
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