Valuable economic lessons from New Zealand for us Aussies

Australia has always felt like the superior to New Zealand – they’re like our little brother. We’re bigger, tougher and richer than them, right? Actually, in recent years, New Zealand has been going from strength to strength and we’ve be left in the dust. So what are they doing so right that we could take notes from? We’ve taken a look into it and Aussies, there’s a lot of work to be done to catch up now.

The NZ dollar is almost on parity with our own, showing us that our economy is miles behind theirs. According to HSBC economist Paul Bloxham, the New Zealand economy is outperforming every other OECD economy.

“That’s why we’ve been describing New Zealand as a rock star,” Mr Bloxham told News Corp. “It was the fastest growing of the 34 OECD economies in the last year.

“And, we think that situation’s going to continue this year as well”.

Our economy, on the other hand, is reaching the end of its high – the mining boom.

But how do they have a budget surplus while we have large deficits and raised taxes upon us? Canberra’s budget deficit is more than 3 per cent of GDP where as NZ continues to pile up surpluses… their budget deficit is just 1.3 per cent of GDP.

Another way NZ is getting a leg up on us is by having just one government and not eight. The state system has been the source of much debate and contention over the years. Former Prime Minister Bob Hawke has wanted to abolish the state system since the 70s and in 2013, Hoopla reports Mr Hawke said,

“We have a set of governments that represent the meanderings of the British explorers over the face of the continent 200 years ago.

“They drew lines on a map and then said that is how Australia is going to be governed. If you were drawing up a system of government today, in ideal terms, what we have got now is the last thing you would have”.

With that said, it seems to work for New Zealand, although they do have less people. Nevertheless, state government bureaucracy has massive implications on infrastructure, defence and general government expenditure, which is no doubt the source of a hefty amount of debt.

Now, on to the unemployment rate. We had good news last month when the unemployment rate shocked everyone and dropped to 6.1 per cent, however when compared with NZ, we pale in comparison. They’re unemployment rate is steadily falling, and is now at 5.6 per cent.

We also have vast difference in our tax systems, mainly due to NZ’s higher GST rate of 15 per cent. This presents a strong case for raising the goods and services tax and cutting personal income tax, pointing out that research consistently shows that relying more on indirect taxes, rather than income taxes, can support higher growth and living standards – they’re living proof.

NZ once again is going from strength to strength, this time in trade. Since 2011, New Zealand’s trade has increased by 7 per cent, whereas Australia has declined by 20 per cent.

And last but definitely not least: politics. Need we point out how disastrous our politics have been in the last 5 years? It’s put us on the global stage for the wrong reasons, after we saw the Rudd-Gillard spectacle, followed by often ridiculed Tony Abbott, although some might say he has been less criticised in recent months. However we aren’t anywhere near close to trusting him for the remainder of this term, let alone another two. But in the land of the long white cloud, they’re loving their PM, John Key, as he settles into his third term.

With that all said, us Aussies and Kiwis do share problems that neither of us have solved (yet). There’s the excessive household debt, the dangerous balance of payments deficit, and our near economic addiction to China.