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When will New Zealand catch up with Australia?


  • Le, Trinh

    (New Zealand Institute of Economic Research)


New Zealand’s average income, defined as GDP per capita, is now three quarters that of Australia and even lower than in Australia’s poorest state, Tasmania. Over the last seven years, New Zealand has grown slightly faster than Australia,but at these rates, it would still take 140 years to close the trans-Tasman incomegap. To catch up with Australia in five to 10 years, New Zealand would need to grow at between 4.7% and 7.6% per year. This exceed s New Zealand’s highest average annual growth rate over a five-year period of 4.6%, in the early 1960s. These calculations hold Australian growth rates constant at its annual average over 2000 to 2007. If Australia were to grow faster than its recent performance, the growth rates required of New Zealand to catch up with Australia would be even higher. While such growth rates are not impractical, New Zealand is not currently on track to achieve them, given its recent poor record on labour productivity. Catching up with Australia is not impossible, but very unlikely without major changes to New Zealand’s policy directions. The challenge is for its policy makers to put forward sensible policies and to carry them through to fruition in the years to come.

Suggested Citation

  • Le, Trinh, 2008. "When will New Zealand catch up with Australia?," NZIER Working Paper 2008/3, New Zealand Institute of Economic Research.
  • Handle: RePEc:ris:nzierw:2008_003

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    References listed on IDEAS

    1. Anella Munro & Rishab Sethi, 2007. "Understanding the New Zealand current account: A structural approach," Reserve Bank of New Zealand Discussion Paper Series DP2007/10, Reserve Bank of New Zealand.
    2. Sebastian Edwards, 2006. "External Imbalances in an Advanced, Commodity-Exporting Country: The Case of New Zealand," NBER Working Papers 12620, National Bureau of Economic Research, Inc.
    3. Alan Bollard, 2005. "Imbalances in the New Zealand Economy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 68, December.
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    Cited by:

    1. Andrew Coleman & Hugh McDonald, 2010. "“No Country for Old Men”: a Note on the trans-Tasman Income Divide," Working Papers 10_08, Motu Economic and Public Policy Research.

    More about this item


    New Zealand; Australia; economic growth;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General


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