By Bernard Hickey
The silent revolt has started again. New Zealanders are voting with their feet over our comparatively low wages.
The issue of closing the wages gap with Australia seems to have gone quiet in recent months since the 2025 Taskforce report was quickly dismissed by Prime Minister John Key as too extreme.
In the previous year the exodus of New Zealand's best, brightest and hardest working young people across the Tasman seemed to have slowed and turned around. This may have allowed some complacency to creep into the government's thinking.
Since Don Brash's report was released with a dull thud, the Budget tax reform package has emerged and some may have hoped this would be enough to start closing the gap and slowing the flow of economic migrants across to the lucky country.
Unfortunately for us and the government, the lucky country has gotten even luckier in recent months and the pressures to emigrate have gotten even more intense.
The events of the last week confirm the growing threat of another exodus. Employment figures out this week show slow wages growth and a rise in unemployment in New Zealand. Meanwhile, Australia just posted a record trade surplus for June because of its booming minerals trade with China.
Australia's unemployment rate now sits at 5.1% versus New Zealand's on 6.8%. Australia's wages are growing at an annual rate of 5.5% while our wage growth is now running at 1.6%. That means the wages gap with Australia is not just growing fast. It is exploding, as is Australian demand for New Zealand labour. The likely reduction in non-New Zealand immigration to Australia after the upcoming Australian election will intensify the pressure.
The wage gap between Australia's average weekly earnings and New Zealand average weekly earnings has blown out to NZ$643 from NZ$565 in the last two years. That translates into an annual gross wage gap of NZ$33,400, up from NZ$23,000 two years ago.
New Zealand wages are now on average worth 60% of the Australian equivalent, down from 66% two years earlier. See this interactive chart.
At current wage growth and exchange rates, New Zealand wages will be half those in Australia within 7 years. By then annual wages will be NZ$65,000 higher in Australia than New Zealand.
This is already starting to show in our migration figures and flow through to weaker demand in the housing market In June alone, 2,923 New Zealand residents left to live in Australia permanently, up from 2,201 in June 2009. We're still not near the pre-2008 election exodus levels of June 2008 of 3,797, but we're headed in that direction. See the second tab in this interactive chart.
Where has the sense of urgency gone?
Why is the government pursuing a policy of incremental and non-controversial economic changes when something more radical is needed if we are to turn the ship around. We are losing a whole generation of workers before our eyes and our government appears to be sitting on its hands hoping the problem will go away.
The nation's economic future is flying out of Auckland, Wellington and Christchurch airports at a rate of almost 100 workers a day. They are people we can least afford to lose. They are often educated or trained in the professions or skills.
They will need to be working and paying taxes in New Zealand in 20 years time if we are to have any hope of avoiding national bankruptcy when the baby boomers retire and start claiming universal pensions and using the universal health care system in droves.
Do we really want to end up a bankrupt nation of retirees, beneficiaries and farmers watching their grandkids growing up in Australia?
Earnings differential with Australia
Select chart tabs
6 Comments
John Armstrong has picked up on the government's backsliding on the wage gap too.
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10664140
"The 2025 target is now shot as a political tool as a result of Economic Development Minister Gerry Brownlee's mistake in claiming the income gap has narrowed since National took office in 2008.
His subsequent failure to provide convincing evidence that is the case left the concept's credibility in tatters. John Key, who has not covered himself in glory either, finally had to admit that it was a "statement of fact" that the wage gap had grown.
Again, not a lot of people would have noticed that. Arguments about statistics do not make it to the top of the news bulletins. But such has been the comprehensive mauling of the concept by Labour over the past week or so that National will now be loath to resurrect it. It is now a loser for National and looks like remaining so through to next year's election."
cheers
Bernard
Les,
You make a good point about the How and leading the debate.
"How will you persuade and lead the nation to understand and accept the requisite need for the changes implied and follow you in that direction"
That's my frustration. John Key is a gifted politician with the support of the people. Yet he chooses not to challenge their beliefs and offer them a new way. Instead he waits for the people to lead the way.
That's not leadership. That's management by focus group.
cheers
Bernard .""""
As long as Australian Banks control the New Zealand Dollar it will be hard to plan any thing three months ahead because the ever changing condition of the swinging currency will make living in NZ a jumpy thing.... You will feel wealthy and the next minute you will feel miserable because the volatility in the NZD is very dificult to handle in a household budget.
But mind you Australians don't have it any easier the consummer is totaly choked in interest rates and the only jobs being created are part time jobs so if you feel like part timing then Australia is a great place to be in but I don't think that the promise of a better life will be filled. In the end you will come back to NZ and Australia will be a blurry past.
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