zealand ’ s official gdp. these are not definitive, we accept there are counter - arguments to these numbers. bis central bankers ’ speeches but what does this mean for new zealanders? of course, revising gdp does not lift the actual incomes ( wages and salaries ) and purchasing power of individual new zealanders, and does not raise the tax base for the government either. we cannot make ourselves better off directly just by measuring things differently. and the steady outflow of new zealanders to live in australia – one of the largest relative outflows of a country ’ s citizens seen anywhere in the oecd – will not principally be because of gdp statistics, but because of individuals ’ actual and perceived sense of the opportunities for themselves and their families. but reducing measurement differences is important for many other reasons : households may not make optimal decisions regarding employment, training, migration, saving and investment if they believe that our gdp per capita is significantly lower than it actually is, and that they might be better off elsewhere. financial markets need accurate measures of new zealand ’ s ability to borrow and repay debt. this impacts our financial institutions and our sovereign borrowing. measuring new zealand ’ s gdp properly is a key concern of credit rating agencies. we need well - focused informed economic and social policy. clearly it is more difficult to know whether these are working if there are doubts about the level of gdp per capita, and whether our measure is truly comparable with that of other countries, including that of our large trans - tasman neighbour. new zealanders rightly worry about the extent to which new zealand incomes have drifted below the world ’ s highest in the last 40 years, but how large is that drift, and how have the gaps changed in more recent times? for helping answer those questions, good and economically comparable data are vital. this paper does not answer the question “ are we closing the trans - tasman gap ”? however it does argue that the gap is not as wide as most people think. bis central bankers ’ speeches at the 2012 annual leader ’ s meeting, the prime ministers of australia and new zealand agreed that, to promote further reform and economic integration, the productivity commissions of each country would conduct a joint study on the options for further reforms that would enhance increased economic integration and improve economic outcomes. given this aim, a useful contribution could be to improve harmonisation of statistical measurement in australia and new zealand, where appropriate, to improve data comparability. while this has not been an exhaustive

a process called supply and use balancing to make the three measures equal. this essentially forces all goods and services produced in an economy to be used by an economic agent. in new zealand supply and use balancing is performed annually and only in nominal terms, or current prices. these estimates are released with approximately a two year lag. many analysts are more interested in timelier, more frequent ( quarterly ) and price adjusted ( real ) gdp estimates. however, for this a trade - off is made. timely, quarterly estimates of real gdp are derived using incomplete data sources and in new zealand, the two measures of gdp produced – production and expenditure – are not forced to equal. given that current price gdp estimates are balanced, the discrepancy in real gdp estimates is the result of an error in either estimating volume growth ( real gdp ) or prices. bis central bankers ’ speeches in recent years the quarterly measures of real gdp have presented quite different views and diverging on the new zealand economy. the headline measure preferred by statistics nz is the production measure, primarily because it exhibits less volatility than the expenditure measure on a quarterly basis. this measure implies that the recession in new zealand was deeper and more prolonged than the expenditure measure. however, since 2007 a relatively large gap between annual real gdp estimates has opened up. production gdp estimates have undershot expenditure gdp estimates for five years running. when expressed in 1995 / 96 dollars the gap in the march 2011 year is $ 5. 9b or 4. 3 percent of gdp12. given that the discrepancy will likely be revised away in future years, which is most reliable measure of new zealand ’ s economic growth? will production based estimates be revised upwards or expenditure based estimates be revised downwards? will these revisions have implications for the level of new zealand ’ s gdp? in australia, all three gdp measures are available on a quarterly basis, and instead of elevating one measure over another, the quarterly gdp movement is calculated by averaging the movements of the three measures. this by nature decreases volatility in the headline gdp estimate. using the average measure of australian gdp, australia avoided a technical recession, apparently the only oecd country to do so. however, based on the production measure of gdp, the headline measure in new zealand, australia experienced a technical recession in the march 2009 quarter. these discrepancies can be expected to decrease in size in june 2012 when statistics nz update annual constant price national accounts estimates. this process