Among prosperous nations, New Zealand is relatively a low-income country. That hurts.
  
In 2024, net national income per capita was 30% higher in Australia, according to the Paris-based OECD. It was only 19% higher on average over the four years to 2019. 

That 2024 gap represents a missing NZ$20,000 per person a year. That is $100 billion a year spread over 5 million people. 

The gap means New Zealanders can afford less of everything than can Australians. It means less housing, food, footwear, health care, home heating, less safe workplaces, worse transport, and makes a cleaner environment less affordable. 

No wonder, many New Zealanders now live in Australia. 

The New Zealand Institute of Economic Research's latest report correctly identifies the main proximate factor: too little productive capital per worker. Firms have not invested enough in the machinery, technology, and infrastructure that make labour more productive. The education system has also performed poorly.
 
Low average labour productivity means low average wage rates, relative to the cost of living.
 
What causes low investment per worker?
  
The NZIER’s report usefully rehearses the contributing factors. Indeed, the likely reasons have been rehearsed for decades by officials, think tanks, the Treasury, the IMF and the OECD.
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There is much that government could do to reduce red tape, improve the quality of spending and reduce tax burdens.
 
Indeed, a government task force in 2009 had over 60 recommendations to help close the income gap with Australia by 2025. Few have been actioned. The Initiative’s 2026 publication, Prescription for Prosperity 2026, made 170 policy recommendations.
 
Unfortunately, the NZIER’s report does not dig into the barriers to more effective government action.
  
The malaise surely comes down to voter preferences and political incentives. An entrenched status quo has many defenders.
  
As one overseas politician notably observed: “We know what needs to be done, we just do not know how to get re-elected after we have done it”.
  
The critical constraint is the balance of voter opinion between the insatiable “what’s in it for me” demand for redistribution and the "what is best for New Zealanders overall" mindset.
  
The balance is important because aspirational and productive young New Zealanders need good reasons to stay in New Zealand when Australia is so attractive.
  
These are high stakes for the public debate.
 
Good policy recommendations for lifting productivity abound. The issue is to explain them to the public. That is a matter of political leadership.