I’ve seen a few suggestions lately (eg. in the Fin) that Australians should envy the New Zealand economy’s performance. Here are a few charts to keep in mind when comparing the two countries.
Our average incomes are much higher. Our GDP per capita is worth around $US50 000, when converted at purchasing power parity (and much more when converted at market exchange rates). GDP per capita in New Zealand is only about two-thirds of the Australian level. A gap between our nations’ living standards started opening up in the 1960s and has widened since then.
We’ve fared much better than the Kiwis since the financial crisis. Our GDP per capita is nearly 10% bigger than it was in 2007; theirs is about 2.2% bigger than its pre-crisis level.
Our living standards are higher mostly because we’re more productive. On average, Australian workers produce goods and services worth about 50% more than Kiwi workers (in USD, converted at PPP) for each hour of work. Some of this gap is likely due to our endowment of natural resources, but mining is far from the whole story. Over the past decade, when mining has grown a lot as a share of our economy, the productivity gap has been more or less stable, after rising in the 1990s and 1970s.
Their unemployment rate fell in 2013, while ours rose. It looks like they’re about to cross over. Still, the Kiwis have now had half a decade of 6%+ unemployment, while our unemployment rate has just nudged 6% for the first time in over a decade.
On the fiscal front, governments in both countries were running surpluses before the GFC. New Zealand’s were about twice as large, as a percentage of GDP, as Australia’s (including State & local). The New Zealand budget balance fell further during the crisis than Australia’s did. The IMF projects surpluses for NZ from 2015 onwards, with Australia following the year after.
The path of government net debt is virtually identical in both countries, with the only difference being that NZ has been carrying about 15 percentage points of GDP more debt than Australia for the past decade, and is projected to continue to do so.
I’m assured by reliable sources that New Zealand is quite a beautiful place. But, should we envy their economy? Yeah, nah.