'We don't know how lucky we are' - Bollard

Economic growth in New Zealand could be as much as 10% higher than we think, says Reserve Bank governor Alan Bollard.

In a speech in Auckland today, Dr Bollard said New Zealand has historically used some quite conservative statistical methods for calculating economic performance compared to other countries.

In comparing with New Zealand and Australia – to take the most sensitive comparison, “a very rough, broad, ballpark might put this up to 10% higher than official data, compared with Australia,” Dr Bollard told a Trans Tasman Business Circle lunch in Auckland today.

There are different ways of measuring GDP and, over the years, Dr Bollard said, “Australia has tended to take the optimistic alternative and New Zealand the conservative one.

“Could this be a reflection on our national characters?”

The work done by the Reserve Bank thus far does not deal with the question of whether New Zealand is “catching up to Australia” and he also notes that simply changing the way data is calculated is not going to put any more money in anyone’s pockets.

The increasing harmonisation of the two economies –and the recent directive from the prime ministers of both countries to respective Productivity Commissions to look at increasing that integration – means the question of comparable economic data needs to be looked at.

“A useful contribution could be to improve harmonisation of statistical measurement in Australia and New Zealand, where appropriate, to improve data comparability.”

New Zealand adopts a new international standard in the 2013/14 year and that alone could add 3% to GDP, he said.

Other factors are changing the way the “unobserved economy” - cash jobs, work undertaken by households for their own usage, and the like, which could add about 2% to GDP; changes to the valuation of residential buildings could add another 1.5%.

Taken along with a batch of smaller and more technical changes, “ a rough estimate might put our GDP at up to 10% higher than official data, compared with Australia.”