A recent article at the Conversation is titled New Zealand is letting economics rule its environmental policies, which I suppose is meant to shock most Conversation readers. Reading the article it appears to me that NZ mostly appears to have struck a sensible balance between economic development and environmental protection, and that environmental policy is one more area, in addition to labour market policies, where NZ is superior to Australia. Certainly, NZ is doing something right, as HSBC’s Paul Bloxham last year named it a “rock star economy” (see Three things that make NZ better).
The strong NZ economy has meant that NZ has become a much more attractive destination to international migrants and has meant that many Australians are moving to NZ and many expat New Zealanders are returning home. Indeed, as I read in the latest Monocle magazine (September 2016, p. 54) last night:
“For the first time in about a quarter of a century, more Australians are moving to New Zealand than vice versa.”
Statistics NZ data confirm this is indeed the case (see chart below).
So NZ is not just beating us in Rugby; it is beating us in the economic and demographic games, too. For the sake of our national pride, economic reforms have become much more urgent.
We did all these, then radical, reforms 35 years ago. You can’t get there overnight. However, I would add commodity prices and the Christchurch rebuild have been favourable and the current economic and migration upswing is THE first time in all those years that the stats have turned in NZ’s favour. Also, it’s a dumbell economy, very thin middle class now, and thousands of working poor (e.g. on 60% of what they would get in Australia).
*the following wave of consolidating reform was around 25 years ago.
I do agree economic pain and a burning platform create the conditions for ingenuity (survival) and innovation (thriving).
Thanks, Lau. That’s very important context. I’ll have a closer look at the NZ income distribution data.
As a New Zealand born economist, I cannot help but take the bait on this one.
I think the “rock star” analogy might make the economists in the banks sound more funky than they really are, but it really just underlines the fact there is no positive correlation between being a good economist and getting a high-paying job in a bank. The analogy is inappropriate and the facts demonstrate the message is pretty misleading.
A better analogy for comparing the economies of Australia and New Zealand is a 400m running race. For example from 1976 (when GDP per capita PPP was almost identical) to 2016. After the start, Australia ran a lot faster for the first 380 metres and then slowed right down as it coasted across the finish line in 2016. Meanwhile in 2016, New Zealand is still 76 metres short of the finish line (based on the comparisons of relative GDP per capita PPP over the 30 years). In 2016 New Zealand might be instantaneously moving faster, but it is only because Australia is now walking slowly towards to dias to pick up the winners’ medal.
And the “rock star” status of the NZ economy in the last few years came on the back of a major natural disaster (Christchurch earthquake); a massive un-costed externality (water quality decline on the back of poorly managed dairy expansion); and a property market in Auckland (particularly) that has delivered some of the least affordable housing on the planet!
If the NZ economy is a “rock star” it must be Milly Vanilli (the lip-syncing fakes who fooled the world for a little while until the back-up disc jammed).
But the rugby? That is a different (and more serious) story….
Haha! Great analysis, Jim. Looks like I’ll need to do a follow up post setting out more of the facts. There is a lot of excitement about NZ at the moment, though, partly I suspect because the political leadership over there appears much better than we have here.
And never trust an economist on a blog to check their maths…
“(based on the comparisons of relative GDP per capita PPP over the 30 years)”. That would be 40 years since 1976.