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forecast of a 0.1 per cent decline in capital per year. Capital declines
because of a low initial investment to capital ratio and because of
relatively weak investment growth through the forecast period. With
low productivity growth, the sector ranks first in employment
growth prospects.
Hospitality, leisure and other services (ranked 9)
The forecast for average annual growth of output in this sector is
3.2 per cent, only slightly above GDP growth. In the forecast period the
sector’s growth will be influenced by two counter-acting forces. On the
positive side is strong growth in tourism exports (see Table C.2). On the
negative side is a weak technological trend against the use of its products.
Prompted initially perhaps by changes in the FBT tax, businesses have
been reducing their use of hotel and restaurant services per unit of
output. The forecasts assume that this trend will continue.
The sector’s employment growth ranking (fifth) is higher in the forecast
than its output growth ranking. This reflects weak productivity growth.
Electricity, gas and water (ranked 10)
The close-to-average forecast for growth in Electricity, gas and water is
explained by the interaction of three forces. First, it is assumed that
recent rapid microeconomic reforms in this sector will continue. This
makes its products relatively cheap and encourages substitution towards
them by consumers. Second, a continuation of a trend towards increased
use of the sector’s products per unit of industrial output is assumed.
Against these forces is an unfavourable sales pattern heavily weighted
towards slower growing sectors such as Public administration and defence
(ranked 19).
With rapid microeconomic reform (see column (III) of Table C.3) it has
been forecast that employment in the sector will continue to decline in
line with recent historical experience.
Mining (ranked 11)
Aggregation of ABARE-based forecasts gives average annual export
growth for mining of 3.6 per cent. This is the main ingredient in the
forecast of average annual output growth of 3.0 per cent.
Over the historical period, productivity growth in the mining sector was
rapid and employment growth was close to zero. This is expected to
continue through the forecast period.
Food, beverages and tobacco (ranked 12)
Food, beverages and tobacco has average annual output growth in the
forecasts of 2.8 per cent. It owes this below-average ranking to several
factors. First weak growth in the exports of meat products is forecast
(see Table C.2). Second, income elasticities of demand are low for most
products produced by the sector. Thus growth in domestic sales from the
sector will be comparatively insensitive to per capital income growth in
the forecast period. Third, several of the sector’s products (e.g. tobacco
and alcohol) are subject to adverse shifts in consumer’s preferences,
though some industries such as fruit and vegetable production and milk
products benefit from preference shifts.
At the beginning of the forecast period the ratio of investment to capital
in this sector was quite low and the sector is forecast to experience
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