To counter inflation, you need to increase productivity. Inflation is projected to run at 4.7% this year. The Government makes up a third of the economy. If Key was to bring that down to 2% by increasing Government productivity how much would he have to increase Government productivity? About 7.5% a year.
Productivity growth during New Zealand’s history has averaged about 2% a year. The idea that Key will magically lift that number to 7.5% for the public sector, especially when he has no experience and no plans, is laughable.
[Bear in mind also, all the stories you hear about productivity in the public sector being low are just stories. Most of what the Government produces is not bought by the consumer there is no price on the outputs it makes and that means the normal way of measuring productivity ($ of output/$ of input or labour) doesn’t work. How do you work out whether productivity of the Army or the Police or teachers is up or down? You can’t.]
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