Agribusiness commentator Keith Woodford has issued a sobering assessment of New Zealand’s economic prospects, arguing the country’s productivity stagnation now leaves it ranked 63rd out of 67 mid to high income countries, with goods producing industries back at 2008 levels and limited pathways out of the slump.
Writing for Interest.co.nz, the long time rural economics analyst pointed to the latest Deloitte ranking and Stats NZ productivity data that show labour productivity has lifted just over 1 percent over the past five years, capital productivity has fallen 6.7 percent, and multi-factor productivity has dropped 3 percent. The numbers cover the period from 2020 to 2025 and capture both the pandemic disruption and the subsequent recovery, which has been weaker than in most peer economies.
Woodford broke the picture down by sector to explain why a national average that already looks poor masks an even harder reality in the parts of the economy that make physical things. Primary industries lifted labour productivity by 72 percent between 1996 and 2025, and service industries by 48 percent over the same window. Goods producing industries, which includes manufacturing, construction and utilities, managed just 17 percent growth across the full 29 years, and has actually slid 10 percent backwards since 2013.
“From there through to 2025, labour productivity in the goods-producing sector declined by 10 percent, right back to where it was in 2008,” Woodford wrote of the slide since 2013. “To put it bluntly, our goods-producing industries are a basket case.” He argued that without significant change in that part of the economy New Zealand is unlikely to lift overall productivity, because services tend to track close to global benchmarks once the country is open to skilled migration and primary industries are already operating at the technological frontier.
Dairy production provides a striking illustration of how far that frontier has moved. Woodford noted that two people can now milk 1000 cows in a little over two hours, a workload that would have required the same two people to handle just 140 cows in 1965. Wearable technology, including electronic collars and ear tags, now allows individual cow monitoring and precision grazing management that would have been impossible even a decade ago. Sheep and beef have followed a similar arc, with genetics, animal health and pasture management all delivering measurable annual gains.
But that same example exposes the limit Woodford keeps returning to. “There is no more land to be developed into pastoral farms,” he wrote. “And in the last 25 years, science has been unable to improve the efficiency of converting solar energy via photosynthesis into grass.” In other words, the country has already done most of the easy work in its most productive sector, and any further national gains will need to come from somewhere other than expanding the dairy and sheep and beef estates.
That somewhere is what Woodford sees as the structural problem. Services lift living standards but rarely deliver the export earnings that fund imports, and goods producing industries have been hollowed out by competition from larger trading partners with cheaper energy, deeper capital pools and bigger domestic markets. Construction sits inside the goods producing category too, and Newswire reported earlier this week that building the same New Zealand house now costs roughly twice what it did in 1984 in real terms, a figure that points to the same productivity collapse Woodford is describing.
The argument turns political at the end. Woodford raised a question that he says successive governments have avoided. “Do we need an increasing population to raise productivity in the economy?” he asked. “Or does an increasing population simply mean that we have to spread our national export earnings, constrained by nature’s boundaries, across more people?” Migration policy has been used for two decades as a way to add demand to the economy, fill labour gaps and lift headline growth, but if the productivity engine has stalled, then more people may simply mean a smaller slice of the same pie each.
The Reserve Bank’s latest Financial Stability Report, also released this week, reinforced the gloomier reading. The bank warned that rising mortgage rates could push house prices lower, that insurance affordability is becoming a financial stability concern, and that an additional fuel price shock from the Middle East could slow the recovery further. None of those signals point to a fast rebound in the goods producing sectors Woodford is worried about.
For everyday households the implications are uncomfortable. Wage growth ultimately depends on productivity growth, and if New Zealand cannot lift output per hour worked then the cost of living squeeze that has dominated headlines for the past three years has no obvious endpoint. The OECD’s recent suggestion that New Zealand flip how KiwiSaver is taxed, with potentially $90,000 more in retirement for an average earner, addresses one symptom, but the underlying disease that Woodford is naming, of an economy that is not actually getting more efficient, is much harder to treat.
What would you like to see New Zealand do to lift productivity in goods producing industries, invest more in capital, change migration settings, support different export sectors, or something else entirely? Leave a comment below and join the discussion.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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