The world economy is not a global horse race, but sometimes we talk as if it was — so, let’s see how New Zealand compares to the rest of the world on a bunch of key metrics as recorded by the Organisation for Economic Co-operation and Development (OECD).
Ladies & gents, place your bets!
Inflation
After Statistics NZ reported New Zealand’s annual inflation rate was 6% in the June quarter, some politicians were quick to point out that it was lower in other countries.
Act party leader David Seymour said NZ’s inflation rate was “becoming a global outlier” while National’s Nicola Willis claimed Australia had a lower rate of inflation.
Neither claim was completely true. Australia will report its quarterly inflation rate next week and it is expected to be over 6% — even though its monthly indicator (in May) was just 5.6%.
Not all countries have reported data for the June quarter yet, but the United States’ rate was 3% while the United Kingdom’s was 7.3%.
However, the OECD has forecast that inflation will fall more slowly in New Zealand than in other countries to which we currently compare quite favourably.
By this time next year, it expects our annual rate to have declined to 3.5% but the UK’s rate to have fallen even lower, to 3%. It imagines the United States basically back on target at 2.6%, and Australia a couple of points closer at 3.3%.
These are just forecasts, of course, and things might play out differently but New Zealand has not become an outlier yet.
NZ’s total inflation since the first quarter of 2020 has been about 17%. This was lower than the UK and the US—which were both above 19%—but higher than Australia and Canada at 15% each.
Economic growth
New Zealand may be in a ‘technical recession’ right now, but the economy is forecast to grow about 1% across 2023. That would be a slower rate than Australia (1.8%) and the United States (1.6%), but better than the United Kingdom (0.3%).
New Zealand’s gross domestic product grew 2.2% in 2022. Less than Australia (2.3%), but more than the US (1.6%) and the UK (0.2%). The OECD average was just 1.5%.
The OECD’s nominal gross domestic product (GDP) growth forecasts are relatively depressed in 2024 across our comparison nations: NZ at 1.2%, Australia at 1.4%, while the US and UK struggle at 1%.
However, these numbers shuffle a bit when you look at real GDP, which accounts for inflation.
NZ and the UK were forecast to have an annual growth rate of 1.4%, compared to 1.7% for Australia and the United States.
Our compound annual growth rate from 2012 to 2022 was 2.9%, while Australia’s was 2.2%, the US was 2.1%, and the UK was just 1.5%.
Employment
One reason inflation has been hard to bring down has been that labour markets globally have been very tight. This is true for our comparison countries as well.
New Zealand’s unemployment rate in the March quarter of 2023 was 3.4%. Lower than the US at 3.5%, Australia at 3.6%, the UK at 3.9%, and the OECD average of 4.8%.
However, the OECD does forecast our unemployment rate climbing faster than the other three countries — all the way to 5% by the end of 2024 while the others only reach 4.5%.
Debt
Government debt is an issue that worries many New Zealand, however our debt levels are much lower than other countries — even after the pandemic spending.
The OECD dataset looks at gross debt, which is different from both Labour’s net debt measure and the net core Crown debt measure that was used previously.
It puts NZ’s gross debt at 57% of GDP, compared to Australia’s 70%, the UK’s 104%, and the United States 144%. The OECD average was 80%.
New Zealand likes to carry less debt as its economy is highly reliant on global trade and faces a high risk of natural disasters.
Taxes
New Zealand’s income taxes are among the lowest in the OCED, with a net average rate of 20.1% compared to the group average of 24.6%.
Sadly, average wages in New Zealand were also the lowest in our comparison group. Just US$50,700 in 2022, compared to Australia’s US$59,408 and the United States US$77,463.
The tax wedge (which includes employer social security contributions) for the average NZ worker was also 20.1%, but compared to an OECD average of 34.6%.
But NZ falls more in the middle of OECD countries when you look at tax-to-GDP ratios. It ranked 21 out of 38 in 2021 with a ratio of 33.8%.
The UK was similar at 33.5%, but Australia and the United States were both lower at 28.5% and 26.6%, respectively.
Climate
The steadily warming planet is not an economic metric—per se—but it is a key policy goal for governments around the world and it has myriad implications for the global economy.
Researchers at the Climate Action Tracker rate New Zealand’s policies and goals as being “highly insufficient” largely due to our reliance on carbon offsets and exemptions for agricultural emissions.
The United States and Australia get “insufficient” ratings, while the United Kingdom gets a (relatively glowing) overall rating of “almost sufficient”.
Overall
It is clear that New Zealand is doing less well on some metrics than other countries.
For example, inflation is falling more slowly which will likely have downstream effects on growth and employment.
But overall, the conditions in the local economy are broadly similar to those overseas and NZ is not facing economic ruin while others nations boom — as some may have you believe.
60 Comments
NZ may not be facing economic ruin but it is certainly facing the societal ruin as the gap between the rich and poor is broadening by the second.
This is due to the policies pushed in by the political parties to divide the people and win the election. This is done just to be in power for a few years and feel good about it.
The sad part is that public falls for these traps and does as said. If this not slave mentality sucking up to the royalty, then what?
The Indian government has recently put a ban on rice exports (cheaper non-basmati variants) and is considering adding more food commodities to the list in an attempt to tackle grocery inflation in the country that was last reported at 4-5%.
Hard to find any meaningful action from the NZ government on battling >12% food inflation in the country. Increasing welfare payments for consumers to scramble over limited food supply is clearly making things worse but who cares.
Inequality is a very complex but important subject. It’s important to acknowledge the complexities.
one mistake the general public make is that there is a pie of a certain size and that by having a concentration at the top this means there will be less overall for everyone else.
it depends on what the wealthy do with this money, because if they invest wisely they can increase the pie size for everyone. This is the ideal outcome and a situation where inequality is actually good for everyone.
This was the one very encouraging part of the governments study into the super wealthy. It showed they were often self made business owners and usually reinvested this wealth into new and existing businesses. They simply weren’t hoarding it into property the way people often thought.
A complex subject indeed. My mother told me that the Jarrow hunger matchers had faces thin from lack of food. NZ has its poor but they are not starving; they have internet access to a library of information that the wealtiest man when I was born couldn't have dreamt of.They have TVs and often have cars. Poverty today are the rioters in Paris looting the fashionable sneakers and ignoring whatever was not fashionable. Those living a 'wealthy lifestyle' include young people with massive student debts or immense mortgages.
Inequality today is my son playing both Rugby and Basketball at school while his best friend had to chose since his mother couldn't afford both.
I can live with inequality based on merit, hard-work or even luck with the lottery but not on massive inherited wealth.
singautam,
As total non-sequiters, both these statements take some beating. Of what use is all that information to those struggling to put food on the table? I am involved with our local foodbank and they have never been more stretched. They are seeing people who have never before needed help.
As for the Paris rioters, your statement is literally, nonsensical.
My objection is being told one in six don't have enough food. There is poverty in NZ; there are homeless and people sleeping in garages and families in motels but they are a minority that we could deal with (ref Finland solving homelessness) if we discussed poverty not inequality. Poverty is real and can be defined in real terms such as use of foodbanks - it is when poverty is defined as some measure of inequality that we take our eye off the issue.
Don't agree at all that we have poverty. We have a well funded, functional social welfare system that provides food, clothing and shelter (along with other things). But I agree with you that inequality should not enter the poverty debate. Inequality of what? If it is income, should everyone be getting the same income? I'd imagine that would appeal to some.
High-level comparison looks good but the house price-to-income unravels anything positive.
Too much private debt for many people that’s not shown here. Not specific to NZ, but we are near the top of the leaderboard on that one.
Trading houses between each other does not have great outcomes.
The high house prices in London, SF, Seattle, Boston, etc. are caused by an ongoing boom in high-value, high-paying industries.
Meanwhile, it is the tail wagging the dog in our sleepy cities and towns.
For those hoping the construction bust could bring reprieve to labour costs for new builds - Link
Hugh - You are right but consider the reason. Trading houses is tangible and owner occupiers achieve a perceived better lifestyle or at least happiness and this is driven by over regulation and taxation of almost everything else. My business established 75+ years ago is badly affected by quakes and covid, I have the cash to survive and re direct but the economic chaos created by Govts has so dented my will and motivation to fight the sh*te they continue to spew and the uncertainty so created I no longer have the will to fight and instead accept a lower level of trade and profitability which reduces my ability to buy/enjoy what I used to do, the bad side for Govt is lower taxes etc and higher unemployment which eventually leads to social unrest and history tells us what happens next! Investment in funeral homes and Guillotines should be profitable.
Good initiative!
If tackling the subject in the future I'd like to see comparisons with the wider OECD, or at least G7. I get why we compare ourselves to the Anglosphere, but sometimes they all have the same problems due to the similar culture. Would be interesting to see how Japan, Germany, France, the Netherlands or the Scandinavian countries fare compared to us
Nevertheless, keep the fresh ideas going!
Dani - Germany, France and the Netherlands are all in the early stages of Political upheaval as voter move to the right hopefully having realized the left over promise and under/totally fail to deliver anything of real value to their citizens, hopefully NZ will follow this trend,
Alan Laurie
https://www.laurieforestry.co.nz/news/monthly-reports-july-2023/
https://www.youtube.com/watch?v=V7En1hELQPc
Europe deindustrializing
Global Planned Financial Tsunami Has Just Begun
https://www.globalresearch.ca/global-planned-financial-tsunami-has-just…
"Government debt is an issue that worries many New Zealanders"
I think NZ needs to be lower than the other OECD countries, because of size, location and not much going for on exports other than agriculture.
What if debt were much higher say 70-100%? Exchange rate NZD 50c/USD?
Government debt is all held in NZ Dollar currency and which only the government has the legal authority to issue. There is no actual necessity for the government to issue debt, it is a monetary procedure and doesn't finance spending. All government spending is made by issuing new digital currency as reserves to the commercial banking systems exchange settlement accounts. If the Treasury feels the need to issue bonds it could issue them directly to the central bank and the Reserve Bank can then pay interest on these reserves as happens now since QE was undertaken.
https://www.levyinstitute.org/publications/can-taxes-and-bonds-finance-…
https://www.levyinstitute.org/pubs/Wray_Understanding_Modern.pdf
https://clintballinger.com/2018/11/13/decouple-spending-from-bond-sales/
See what happens when our outstanding mortgage debt (RBNZ C32) increases from $200b to $350b in 7 years.
Inflation. Not in consumer goods per se, but the primary thing that mortgages are used to purchase. Housing.
Arguably this money materialized from nowhere, not so different to when as you say govt creates money out of fresh air. Only difference being on which balance sheet that money resides.
The enthusiasm for climate policies in NZ will drag our economy down, while countries like China and India pay lip service. There are not yet sufficient alternatives to fossil fuels to stop using them at the rate climate fanatics demand. We are told that we have to act, and the NZ govt. has spent billions achieving nothing. Meantime the major industrial countries do little or nothing, leaving it to NZ to ruin its economy.
”Spent billions - really? Our climate action policies barely reach a few hundred million dollars, but repeated clean ups after damaging storms will indeed cost us billions.
Your understanding of the issues is clearly poor. Us “climate fanatics” see an achievable transition to at least 95% renewable electricity, supporting an equally achievable transition to sustainable transport. I can’t speak to fossil fuels used in fertiliser production, but that’s for cleverer people to think about.
If we make no moves in any of these spaces, your precious “economy” will be undercut by Indians, Chinese, Chileans and others who invested in producing greener better products.
Dear Mr Dan, you have forgotten one important economic benchmark: Trade- and Current Accounts surplus/deficit!! If you compare New Zealand on that metric with countries we aspire to be like Danmark, Taiwan, Netherlands, Switzerland, Sweden and so on, you will find New Zealand is hopeless at the bottom of that row. It tells you what the economic capacity is to pay of debt and fund future investments. Almost non existent in New Zealand. Our only achievement is (was??) selling 11 bags of milk powder to China in stead of 10.
Very true and what ever money we made from that selling of milk, we spent it to buy houses from each other at unrealistic high prices and in the end foreign banks were laughing as they were making all the money.
So net result is we are poorer than before and no one realises that. Our resources are being used and money taken abroad.
God save NZ.
Also, does not seem to mention how heavily indebted our households are:
Nation of Debt: How does NZ compare? - NZ Herald
"As a percentage of GDP, New Zealand's household debt level was 91.3 per cent in the three months to September 30, 2015 - ranking us seventh highest out of 42 economies in data collected by the Bank for International Settlements."
Regular reminder that your house isn't really yours until you've paid of the mortgage
https://www.google.com/amp/s/www.newshub.co.nz/home/money/2023/07/auckl…
Government debt is an issue that worries many New Zealand, however our debt levels are much lower than other countries — even after the pandemic spending.
We all know why NZ has lower public debt. The hoi polloi does the donkey work when it comes to debt. The comparatively lower public debt is also the "trade off" for the infrastructure deficit.
Your point is accurate re infratructure. Sicily, an island with 5m people, has incredible road infrastructure. I lost count of the tunnels and spans/bridges/viaducts, maybe 50 tunnels equivalent to Mt Vic and Waterview? Some bridges were 3km long, motorways mostly dual carriage way. yes it's Italy with debt to GDP of 110% which is your point. They wouldn't f+++ around like we are with SH25 in Coromandel, they would tunnel straight through. Same in Majorca, a small island and they tunnelled through the equivalent of the Coro. We have low debt to gdp and it's because of sh1+ infrastructure.
Italy's debt is all held in Euros and which it doesn't even issue and so that puts it in a much worse position than our government which spends in its own sovereign currency.
The MMT spiel that being able to spend in its own currency is some kind of panacea to economic health is a cop out in my opinion. But I cannot prove that my 'reckon' is wrong (or right). It's my gut feeling. Therefore, I cannot be convinced.
Greece is the perfect example of the failings of using a shared currency. A country may be operating in a currency that is overvalued relative to its economy and is unable to finance its current account deficits and with a government that cannot finance its budget deficits.
Your point is accurate re infrastructure.
Cheers. Important to remember that Italy has an industrial history and typically this goes hand-in-hand with infrastructure investment. We can always take the example of Japan - huge public debt but infrastructure surplus. I tend to think S'pore is a good example.
"The OECD’s nominal gross domestic product (GDP) growth forecasts are relatively depressed in 2024 across our comparison nations: NZ at 1.2%, Australia at 1.4%, while the US and UK struggle at 1%.
However, these numbers shuffle a bit when you look at real GDP, which accounts for inflation.
NZ and the UK were forecast to have an annual growth rate of 1.4%, compared to 1.7% for Australia and the United States"
Need to make a correction? Real GDP growth rate should be less than nominal unless deflation is anticipated...
It really riles me when I see labour apologist like Mr Brunskill compare our national debt to other countries and say we are doing well. The fact is that labour came into power when NZ had debt to GDP of approximately 30% which has now blown out to just under 60%. Yes we had a pandemic but we can all see the wasteful spending still going on. Basically Robertson inherited a very low debt country and has blown it faster than a Big Wednesday lotto winner. We have had two very successful prior governments that have worked hard to reduce our debt to GDP levels, Cullen was very responsible and so was English. Robertson will go down as the worst finance minister since the Muldoon ear.
Government debt is simply a measure of our monetary base of NZ Dollar currency which the government has created through its spending but hasn't taxed away and then chooses to hold in the form of bonds and this represents the private sectors net savings held in this currency.
https://theconversation.com/how-government-deficits-fund-private-saving…
Its straight forward accounting, as described by economist Wynne Godleys sectoral balance accounting identity (S-I) = (G-T) + (X-M).
https://en.wikipedia.org/wiki/Wynne_Godley
https://en.wikipedia.org/wiki/Sectoral_balances
https://gimms.org.uk/fact-sheets/sectoral-balances/
QE was used to repurchase some of the governments 'debt' and it is now held by the Reserve Bank. The government now owes money to itself in other words and which proves that issuing debt is not necessary in the first place. All it does is drain reserves from the banking system which the governments spending put there and so has nothing to do with financing spending. Standard and Poor's explain here that it is purely a monetary procedure.
https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/…
"New Zealand’s income taxes are among the lowest in the OCED". Not true. Comparisons of tax rates are made via "tax wedge". Many OECD countries therefore count contributions to their social security accounts, both personal and employer in their tax wedge. In NZ, income tax makes up the entirety of the tax wedge, in OECD countries overall, the income tax tax only contributes 38% of the total tax wedge. Sorry, but I'd expect a "journalist" to at least make some effort to compare apples with apples.
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