Are we the Lucky Country?
19 February 2011

The solo mother from Ashburton who makes her living driving a dump truck in a West Australia coal mine could have talked as eloquently as Julia Gillard this week about the special relationship between Australia and New Zealand.
It’s thanks to this that she, the truck driver, earns $130,000 a year. Leaving New Zealand three years ago with nothing after the break up of her marriage she now owns one investment property in Ashburton and is planning to buy a second.
The Australian Prime Minister’s visit to New Zealand this week was wrapped in the usual ANZAC spirit of mateship but it couldn’t help but kick a bit of Aussie dust in our eyes. We may have a special relationship but increasingly it is not an equal one.
In economic terms New Zealand has become a branch office of AustraliaCorp. In human terms we are an incubator. In the past 3 years 75,000 kiwis have crossed the ditch to join the 400,000 or so already living in the Lucky Country. We breed ‘em, grow ‘em, educate ‘em and lose ‘em to the Aussie dream. To Julia Gillard that must look like a pretty special relationship.
An Aussie jobs fair in Auckland last weekend saw thousands of people queuing up to make the shift. Their reason for wanting to go was, with a few variations, due to one thing - money. The National government’s promise to close the wage gap has blown up in its face, with Australian wages now 25-30% higher than New Zealand.
The wage gap is driven by a huge difference in productivity between Australia and New Zealand. Productivity is not measured in how hard we work. By international standards kiwis work harder than most, and probably harder than Australians.
Productivity is a measure of how much wealth is created by our labour. In 2010 each person in New Zealand generated $27,000 of wealth (as measured by Gross Domestic Product per capita). Each Australian generated $40,000. In simple terms, the wage gap follows the wealth gap.
New Zealand has been discussing productivity all my adult life. As early as I can remember we’ve been exhorted to add value to the things we produce. There’s more money to be earned by turning wool into carpets and logs into furniture. Electronic goods and sometimes knowledge itself commands an even greater premium.
While this may generally be true, the growing wealth gap spanning the Tasman is not because Australia is brainier than us, or better governed, or simply bigger. Much of it is purely luck. The Ashburton woman driving the dump truck is more productive than a Methven shearer not because she’s adding value to the coal she’s carting, but because the price of coal has gone ballistic on the back of Chinese demand. Lucky Country indeed.
A recent study by the Legatum Institute hammers home the message we see in countless surveys. On its Prosperity Index Australia is the 8th wealthiest country in the world while we languish at 17th.
But the Legatum survey does something interesting. Reflecting the dim awakening in the minds of economists that GDP-based criteria are no longer enough to describe a country’s well-being, they include measures like governance (New Zealand ranks 4th in the world), personal freedom (3rd), social capital (3rd) and education (1st). In all these fields New Zealand outranks Australia. When all measures are taken into account Australia ranks 4th in the world on Legatum’s Prosperity Index and New Zealand 5th.
The solo mum from Ashburton says she will come home in about five years, once she has made her fortune. We notice many who leave our shores do not return, but if it’s the money that draws them away it is the quality of life that draws them back.