National Accounts: Year ended March 2008

All dollar figures given below are in current prices unless otherwise stated.

Overview

Gross domestic product (GDP) increased 7.0 percent in the year ended March 2008, following a 5.1 percent increase in the previous March year. National saving (all sectors) increased to $2,934 million, from the lowest level in fourteen years of $1,586 million recorded in the March 2007 year. Strong business profits contributed to the increase in GDP, gross operating surplus (business profits) increased 8.5 percent, mainly driven by agriculture and manufacturing. Increased business profits, combined with lower increases in household consumption (up 5.0 percent), contributed to improved national saving. The increase in household consumption was the lowest increase since the year ended March 2001 (up 4.1 percent). National disposable income, which measures the income available to New Zealand residents for current consumption or saving, rose 6.7 percent.

 

Components of gross domestic product

The latest increase in current price GDP has been driven by a rise in gross operating surplus (business profits) of 8.5 percent, the highest annual increase since the year ended March 2000. Compensation of employees (wages and salaries, together with employer social contributions) increased 6.0 percent in the year ended March 2008.

Strong internal demand (gross national expenditure) increasing 6.5 percent, was the main contributor to expenditure on GDP. Household consumption expenditure increased 5.0 percent, the lowest percentage increase since the year ended March 2001 (up 4.1 percent). Central and local government spending rose 8.2 percent and 6.1 percent, respectively. Business and government investment (excluding residential building) in fixed assets increased 4.9 percent, with increases in other construction activity, such as roads, bridges and dams (up 10.0 percent) and plant machinery and equipment (up 5.0 percent). New residential housing increased 9.0 percent, following a 3.1 percent increase in the March 2007 year.

Increased prices and volumes for coal, crude petroleum and ores, minerals and gases, together with strong international prices for dairy products contributed to the increase in exports, although dairy export volumes decreased in the March 2008 year (down 0.9 percent). This resulted in a narrowing deficit for net trade (reducing from a deficit of $2,451 million in the year ended March 2007 to a deficit of $1,556 million in the year ended March 2008). The balance on the external current account deficit grew from $13,785 million to $14,211 million in the March 2008 year, with increased property income (such as dividends and interest) flows to the rest of the world (up 16.5 percent).

National disposable income

Business profits and compensation of employees are the two key components of national income.

Gross operating surplus (business profits) rose 8.5 percent in the March 2008 year with increases across all aggregate industry groupings with the exception of the owner-occupied dwellings. When the provision for consumption of fixed capital (economic depreciation) is deducted, net operating surplus rose 9.6 percent. The main contributors to increased business profits were agriculture and manufacturing. The concept of net operating surplus approximates pre-tax business profits before the deduction of net interest payments.

Compensation of employees increased 6.0 percent in the March 2008 year, following a 7.1 percent increase in the March 2007 year. This is the lowest increase since the year ended March 2001 (up 5.1 percent). Compensation of employees comprises salaries and wages, employers' contributions to superannuation funds, ACC levies, fringe benefits and redundancy payments, with salaries and wages as the major component. 

Both employment and average earnings increased during the March 2008 year. The increase in earnings (as measured by the Quarterly Employment Survey) can be attributed to both a rise in wage rates and an increase in paid hours in the year to March 2008. 

Net investment income paid to the rest of the world rose to $13,387 million in the March 2008 year. Investment income paid to the rest of the world increased $2,480 million (up 16.5 percent) from the previous year, with investment income receipts increasing $1,057 million (up 34.7 percent). 

National disposable income, which measures the total income available to New Zealanders (from all sources, both domestic and overseas) for consumption or saving, rose 6.7 percent. This followed a 4.7 percent rise in the March 2007 year. Final consumption expenditure (both households and government) rose 5.7 percent.

Use of national disposable income

National disposable income is the amount available for current consumption expenditure or saving.

Household consumption expenditure, which measures the expenditure by New Zealand households, increased 5.0 percent in the year ended March 2008, following a 5.6 percent increase in the March 2007 year. Household spending in New Zealand increased 4.7 percent on services, 5.4 percent on non-durable goods (such as food and beverages) and 2.2 percent on durable goods. The largest increases were recorded in food and beverages (up 5.5 percent) and purchases of other goods and services (up 5.7 percent). Other goods and services consists of personal goods and services, tobacco, postal and telecommunication services, and services not elsewhere classified. The experimental household income and outlay accounts show that household consumer debt interest on housing increased 20.8 percent, up $2.1 billion in the March 2008 year, following annual increases in excess of 20 percent for the past four years.

Central government expenditure increased 8.2 percent in the March 2008 year, largely the result of increased spending on salaries and wages (up 7.9 percent or $1,120 million). Local government consumption expenditure grew 6.1 percent in the March 2008 year, following an increase of 6.3 percent in the previous year.

Investment and borrowing

Investment in fixed assets grew 6.0 percent in the March 2008 year. Spending on residential building increased 9.0 percent in the year ended March 2008, following rises of 3.1 percent, 1.5 percent and 12.5 percent in the March 2005–2007 years. Other construction increased 10.0 percent and plant machinery and equipment increased 5.0 percent. Transport equipment increased 0.3 percent, after a fall of 9.6 percent in the March 2007 year and a 13.6 percent increase in the year ended March 2006. Transport equipment can be volatile from period to period, due to investment in high value items such as aircraft and ships.

  

During the year to March 2008, there was a $1,395 million build-up in inventories. When the natural growth of standing timber and livestock is excluded, inventory levels increased $1,113 million.

National saving increased to $2,934 million, its first increase since the March 2004 year. Net borrowing from the rest of the world increased from $14,243 million to $14,984 million in the March 2008 year. Relative to GDP net borrowing from the rest of the world improved from 8.6 percent of GDP to 8.4 percent of GDP in the March 2008 year, due to GDP growing at a faster rate than net borrowing.

External account

The New Zealand balance on goods and services narrowed from a $2,451 million deficit in the year ended March 2007 to a $1,556 million deficit in the year ended March 2008. Strong international dairy export prices, together with increased prices and volumes of coal, crude petroleum and ores, minerals and gases, were the main contributors.

Exports of goods in the March 2008 year increased $3,083 million, while imports of goods increased $2,000 million. The surplus on trade in services decreased from $377 million in the March 2007 year to $189 million in the March 2008 year.

Change to the release schedule

Statistics New Zealand intends to publish the next release of National Accounts: Year ended March 2009 in November 2009. We will no longer release a revised set of annual accounts in April. This change is required as work on the incorporation of the new Australian and New Zealand Standard Industrial Classification 2006, scheduled for release in 2011, has commenced.

For technical information contact:
Piyasena Liyanage or Tristan Winter
Wellington 04 931 4600
Email: national.accounts@stats.govt.nz