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Misery index favours Australia for the first time in 10 years - increased NZ living costs have 'turned the dial'

Personal Finance / analysis
Misery index favours Australia for the first time in 10 years - increased NZ living costs have 'turned the dial'
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Image: preetamrai. Licence: CC BY 2.0

For the first time since the end of 2012, New Zealanders are more 'miserable' than Australians with the misery index tipping in favour of our western neighbours in the final quarter of 2021.

The change in fortunes happened when New Zealand's inflation rate soared from its June 2021 rate of 3.34%, which was lower than Australia's 3.8% at the time.

By September, our inflation had risen to 4.3% and in December it reached 5.95%, topping Australia's rates of 3% and 3.5% respectively.

The difference in unemployment rates in the two countries remained fairly constant through this period, with NZ's rate falling from 4% to 3.2%, and Australia's dropping from 4.9% to 4.2%.

The misery index dates back to the 1960s when it was created by American economist Arthur Okum. It's a simple measure which adds unemployment and inflation rates together to map the level of distress an average person may be feeling at any given time.

When combined, the two rates give a basic idea of financial health or, if the number is high, financial misery.

Over the years, the misery index has provided useful political fodder, particularly in the United States. In NZ, Infometrics calculates a version as a results predictor prior to each general election. If there has been an improvement in the misery index, the theory is that kiwis will give the incumbent government another go.  

As well as the standard inflation and unemployment indicators, the Infometrics data includes changes in long-term real interest rates, real GDP growth and the change in the current account balance.

In its basic (two factor) form, the misery index is not an exact science but may herald turning economic tides. In a NZ context a comparison to Australia, as shown in our chart below, is always popular.

Misery index

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Pre-pandemic, many kiwis were making the leap across the ditch, in search of greener pastures, despite the index typically disagreeing with their optimism.

Brad Olsen, principal economist at Infometrics, says he wouldn’t place too much weight on the NZ line being higher or lower but quite a direct change in direction does highlight a shift in how the two countries are dealing with economic circumstances.

He put continued kiwi enthusiasm for Australia, despite higher misery index in recent years, down to the labour market in both countries remaining strong which meant there wasn't a noticeable quality of life difference.

The opportunities for a better quality of life are also quite dependent on individual circumstances, he says, and mining booms have been a drawcard for some.

"A young kiwi can go over for 5-10 years and make some serious coin, in a location where there's not much to spend it on and set themselves up for a better life."

Olsen says adding 'wage growth' to the index would provide further useful insights as the attraction of Australia, for workers in many industries, is often better pay.

NZ's inflation rate reaching a three-decade high is the kicker when it comes to the recent changing direction of the index, with our Consumer Price Index (CPI)  up 5.9% in the year to December 2021, compared with Australia's 3.5%.

"Until now New Zealand had a better labour market outlook in some respects, and inflation was at a lower level [than Australia]. The increased living costs for New Zealanders has turned the dial," says Olsen.

As the borders re-open, economists at the country's largest bank, ANZ, suggested earlier this month that the reopening of NZ's border could see "a large net outflow of Kiwis" during the rest of this year. If this comes to pass, it would bear out what the misery index is currently suggesting.

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24 Comments

Is there any way to go long on the misery index? I see a lot of potential upside in the next 12-18 months.

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My colleagues leaving for Australia to crunch numbers and write code for mining companies are well aware of the price volatility facing the sector.

What still drives them across the ditch, bags full of money aside, is the assumption that there always will be demand for people with those sort of skills. A tranche of high value NZ-based employers do favour experience in such fast-paced environments.

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It's interesting to note that the misery index in NZ is turning negative at the same time as the Real Estate market is turning negative… 

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8

The un-wealth effect?

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7

It'll be more of Omicron, declining quality of life, domestic socio-political tensions, growing distrust of institutions, politicians and media...

Most of all, it's inflation (pandemic-related, e.g. supply chain crisis, employees are getting burnout despite all the happy reports of WFH, more and more businesses closing down, people losing jobs, etc.). And now more inflation (Ukraine, more supply chain/cost of living crisis)!

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1

Likely to be related, but I imagine more people are worried about why they can no longer afford to drive to work and how they are going to be able to afford enough food for their family.

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But it’s not a survey of people’s sentiment. It’s just pretty much adding the inflation rate and unemployment rate together. NZ has a much higher inflation rate, so we are more miserable apparently.

Not sure how you can raise the price of a roof over peoples heads 30-40% in quick time and not have it flow into wider price inflation.

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7

Not really surprising. Just wait for the recession to start, while inflation remains persistently high, and interest rates increase, and unemployment rises.

One hopes that deflation shows up quickly so that the OCR can be pushed back to zero to save asset prices and remove everyones misery (for now).

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Good honest report.

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I was looking for a rental and then I found a rental, and heaven knows I'm miserable now.

Sums up my time in this country nicely.

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5

Nice!

You are from up Mighty Manchester way, right? Hence 'Northman'?

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Yep! My hometowns not far away from Mancfester

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Pity about the football teams :)

But top, top music. The Stone Roses are one of my all time faves, along with The Smiths, Happy Mondays, New Order. 

 

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4

Consecutive governments in NZ have sold the future of our young people down the river...

Slow hand claps...

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7

As Jacinda probably wants to say but can't "It's all in your head, get over it" in stead we get waffle.

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3

At least the landlord class are happy now that the average NZ home is worth nearly $1,000,000.

Although they seem to be rather grumpy of late as well.

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But Kiwis aren't convict spawn

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Kiwis can also easily jump on websites and see how much cheaper the equivalent lifestyle is in Australia, which tends to come with better wages to boot. Off the top of my head, a TV can be thousands of dollars cheaper, while a brand-name electric car can be $20K less.

This isn't something you're relying on anecdotes from travelling relatives about anymore, the information is a few clicks away. 

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8

Fun fact many kiwis literally cannot move overseas, no matter how skilled they are nor how much they desperately want to. Some people are trapped here and the same way we discriminate against them here in this country means other countries will deny them visas due to their birth. It is just a bad lot that people like you want to shove your relative freedom and entitlement up their noses. Well you can search for a few other things, but I would be happy if you look at visa conditions and exceptions just once for Australia. Even those needing to become medical refugees in Aus due to NZ denying them lifesaving medical care (resulting in death of their children in their teens and twenties) have enormous trouble actually trying to move there even for a short space of time to receive treatment.

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Minor crime in NZ imo  is growing at an alarming rate. On top of that gangs pulling people out of cars and dealing to them.

That along with rents,house prices,food prices all rising why would a kiwi be miserable.

 

 

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THERE IS NO DEPRESSION IN NEW ZEALAND!

https://www.youtube.com/watch?v=2HVogejKx_c

'Everyone's talking about World War 3'

 

 

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I don't claim to know much but over the last 50 years, as an adult I have lived in Australia for 25 years and New Zealand for 25 years. I travel to Australia often. I am off to see family in Sydney tomorrow.

Yes, you can earn a bit more in Australia but there are a lot of hidden costs in Australia e.g. Stamp Duty. $55000.00 on a $1,000.000.00 property.(VIC) or $600 on a $20000 vehicle etc.

Australia is over governed, often too hot, too dogmatic and under threat with climate change.

Over rated. I prefer to allegedly be under happy in New Zealand. I haven't mentioned the politics.

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I have also lived some time in Aus. Despite what you rightly mention, it stacks up quite a lot better financially, in general terms.

One thing that I think NZ is superior to Aus in is education. When we lived there our son went to the supposedly best public high school, but I would say it wasn't a patch on the better public high schools here in Auckland. It felt to me like you really needed to go private for schooling in Aus, and I don't think you need to here.

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