Opinion & Commentary
Smartest Kiwis nest in our warmer climate
For the half a million Kiwis living in Australia, the New Zealand government’s goal of reaching Australia’s living standards by 2025 will come as a welcome tonic, if only for the sake of their relatives at home.
It may even be easier than New Zealanders think the joke going around is that the best chance for New Zealand to catch up on growth is to get Kevin Rudd re-elected.
Jokes aside, it is unlikely to be that simple. New Zealand and Australia have similar economies and culture. Yet the dogged lack of growth in New Zealand has meant that a steady wave of skilled Kiwis are
New Zealand’s decline relative to Australia has been quite remarkable. From per capita living standards similar to those of Australia in the 1970s, New Zealand’s living standards have now dropped to around a third less and are continuing their downward trend. One in nine New Zealanders now lives in Australia. 80% of New Zealand’s skilled migrants also reside here. Before the global financial crisis hit, New Zealanders were flocking in record numbers to these shores, with about 35,000 permanent long-term departures in October last year. Although this flow has reduced, once the world economy stabilises we can expect the migration to continue.
Great news for Australia. New Zealand cares, rears, educates and exports an increasing number of Kiwis to Australia at no cost to the Australian taxpayer. Research suggests that New Zealanders are among Australia’s most productive workers in their given professions. No wonder that, as treasurer, Peter Costello appealed to New Zealanders to move to Australia.
However, this is bad news for New Zealand. No country can stay dynamic and healthy while losing 1% of its most productive citizens every year. While New Zealanders have always travelled and the great OE (overseas experience) is as Kiwi as pavlova, they have not always stayed abroad. But open borders and cultural similarities make moving and staying in Australia particularly easy.
What went wrong?
Both Australia and New Zealand had a pretty difficult time in the 1970s and 1980s. New Zealand in particular was badly hit by the combined pressures of oil shocks and Britain’s entry into the European common market.
By the mid-1980s, New Zealand’s then prime minister Sir Robert Muldoon had brought the country to the brink of bankruptcy days away from an IMF bailout. Sir Robert steered New Zealand into the wrong direction, prompting the label ‘the Polish shipyard’ for its inefficiency and bureaucracy.
The subsequent reforms by the Lange/Douglas Labour government were, therefore, more urgent and further reaching than the parallel reforms being undertaken by the Hawke/Keating government in Australia. New Zealand didn’t have the luxury of time, but it had a group of ministers committed to dragging the country out of the mire.
However, the pace of change was too fast and took too large a toll on the community in too short a space of time for reformist government to survive politically. New Zealanders were used to the cradle-to-grave welfare and the right to a certain kind of living standard guaranteed by the government.
Australian policy has been, for the most part, pro-growth for the past 25 years under two long and stable governments. Policy disagreements aside, the basic tenets of Australian reform have been continued: deregulation, privatisation, liberalisation, and better institutions. It has been so successful that both Labor and Liberals fight over who is the real reformist party.
In contrast, New Zealand politics and society was spooked by reform and remains so today. Privatisation and any rigorous deregulation are firmly off the agenda. A policy funk has descended over a country that hasn’t quite grappled with the problems it faces: primarily, how to lift productivity and trend growth. Although our tax system is simpler than Australia’s, high tax rates kick in much lower on the income scale and reflect the previous Clark government’s penchant for measuring results by money spent.
The catch cry has been that ‘together we can achieve anything’, disguising a New Zealand increasingly inward-looking and with a small-island attitude.
New Zealand’s economy must grow at least 1.8% more quickly than Australia to bridge the gap. This will require some tough decisions and fiscal restraint in order to lower the tax burden and remove impediments to wealth creation.
So, instead of depending on Mr Rudd for the 2025 goal, perhaps the New Zealand Government should get serious on reform for growth. Otherwise the only growth will be in well-paid and warm Kiwis on these shores.
Luke Malpass is a Policy Analyst with the New Zealand Policy Unit at The Centre for Independent Studies.
