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Summarised by Centrist
New Zealand has slipped near the bottom of international rankings for income growth, reflecting both post-COVID economic cycles and long-standing productivity issues.
Real GDP per capita, adjusted for purchasing power parity, places New Zealand 25th of 43 countries over the past decade, but just 37th over the last two years. Only Germany, Canada, Luxembourg, Austria, Ireland, and Estonia have fared worse in that period.
Economists say the downturn is partly the hangover from the COVID stimulus. Infometrics’ Gareth Kiernan noted that ultra-low interest rates and heavy government borrowing during the pandemic “borrowed growth from the future”, leaving today’s economy weaker by comparison.
BNZ’s Mike Jones pointed to a cooling labour market, with wage growth dropping faster in New Zealand than in the US, Australia, or the UK. Seek’s advertised salary index shows New Zealand at 2.2 percent year-on-year, compared with 3.3 percent in Australia and nearly 6 percent in the UK.
Longer-term, economists agree that low productivity is the key drag. Westpac’s Kelly Eckhold said that while other economies also slowed after COVID, the US was the exception, boosted by technology, consumer demand, and labour market flexibility.
He added that New Zealand’s distance from major markets, lack of competition in some sectors, and patchy productivity growth will continue to weigh on incomes unless structural changes are made.
