Examining New Zealand’s increased rate of income growth between the late 1990s and 2019

This paper provides a macroeconomic level cross-country analysis of New Zealand’s material economic performance over recent decades. New Zealand’s growth on traditional productivity metrics, such as real GDP per hour worked, has been lacklustre. However, its growth on more comprehensive measures, such as real net national income per capita, has been stronger since the 1990s. Consistent with this, New Zealand’s real net national income per capita and real wages have somewhat caught up with higher-income countries, and emigration has reduced. The sources of New Zealand’s real net national income per capita growth from the late 1990s to 2019 were different to those of most OECD countries. In most countries the bulk of the growth in real net national income per capita was due to growth in real GDP per hour worked (ie, production volumes per hour worked). In New Zealand, around 60% of cumulative growth was accounted for by a combination of a rising employment rate, a rising terms of trade, a reduced net international income deficit, and an unchanged depreciation burden (while most other OECD countries experienced increases). New Zealand has had broad-based growth in employment compared to other OECD countries. Much of the rise in New Zealand’s terms of trade is attributable to rising export prices, although it has also been supported by a changing import mix.