IT and telecomms worth 7.5% of NZ GDP

New Zealand is not as low-tech as is often assumed, says the Reserve Bank.

New Zealand is not as low-tech as is often assumed, says the Reserve Bank.

In an analysis of the "new economy" by the central bank, economists have concluded that the expansion of the technology sector is happening at a much faster rate than is commonly acknowledged. Add telecommunications to the IT sector and the two combined were worth about 7.5% of the country's GDP last year, the study says.

"This number is broadly comparable to the estimates for the United States," the study says. The US Department of Commerce estimates IT and telecommunications is worth just over 8% of that country’s GDP.

Since the mid-1990s investment in IT by New Zealand firms has accelerated, according to the bank. Purchase of IT equipment is now running at about a third of firms' entire investment in plant and machinery. But most of that equipment is imported.

The New Zealand dollar value of IT hardware imports grew 60% over the 1990–1999 period, the study found. At the same time exports have also risen dramatically, although this is from a comparatively low base. Hardware exports amount to 0.3% of GDP, or 1% of total exports, for 1998, the most recently available figures. Software is worth about 0.5% of GDP, or 1.7% of total exports.

"As a point of comparison, in 1998 exports of kiwifruit made up about 0.4% of GDP and 1.5% of total exports," the study says.

At the same timer Internet access in New Zealand has kept pace with the rest of the OECD, with the number of Internet hosts rising about 60% a year.

However, IT and Internet investment by New Zealand companies has not yet led to the sort of productivity boost that has been observed in the US economy.

The bank speculates on the reason for this, although it does not come to any conclusions. One reason may be that the US had a head start in the area. Another may be that that "new economy" sceptics are right, and that the productivity gains in the US have not arisen from the use of IT by companies, but rather from the high-growth IT sector itself.

If that is the case, the study says, "then there may be little scope for New Zealand (and to a lesser extent other countries) to emulate the performance of the US economy".

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