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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