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.
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