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Why has Australia Done Better than New Zealand? Good Luck or Good Management?

Author

Listed:
  • Graeme Davis

    (Treasury, Government of Australia)

  • Robert Ewing

    (Treasury, Government of Australia)

Abstract

The relative performance of the Australian and New Zealand economies has been the subject of many questions. Why, if New Zealand reformed so much, has the Australian economy performed so much better? Why are average incomes in Australia so much higher than in New Zealand? This paper explores some of the potential explanations for the different levels of labour productivity in the two countries and attempts to quantify the effects on productivity of a range of possible causal factors. Potential causal factors examined include the level of education, Research and Development intensities, regulatory policy differences, the interaction of productivity with participation, and the potential impact of geography, location, and population. It is the last of these possible explanations, the impact of geography, location and population that would seem to have the most potential to explain the differences in labour productivity levels that are currently observed. By comparing productivity levels in New Zealand with those of the Australian States we can estimate the potential magnitude of such effects. We find that the difference in productivity levels between Australia and New Zealand is not outside reasonable expectations once these factors are taken into account.

Suggested Citation

  • Graeme Davis & Robert Ewing, 2005. "Why has Australia Done Better than New Zealand? Good Luck or Good Management?," Treasury Working Papers 2005-01, The Treasury, Australian Government, revised Jan 2005.
    • Handle: RePEc:tsy:wpaper:wpaper_tsy_wp_2005_1
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    File URL: http://archive.treasury.gov.au/documents/949/PDF/Treasury%20Working%20Paper%202005-01.pdf
    File Function: First version, 2005
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    References listed on IDEAS

    as
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    5. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210, National Bureau of Economic Research, Inc.
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    7. Andrew Coleman, 2001. "Three Perspectives on an Australasian Monetary Union," RBA Annual Conference Volume (Discontinued), in: David Gruen & John Simon (ed.),Future Directions for Monetary Policies in East Asia, Reserve Bank of Australia.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ben Dolman & Dean Parham & Simon Zheng, 2007. "Can Australia Match US Productivity Performance?," Staff Working Papers 0703, Productivity Commission, Government of Australia.
    2. Graeme Davis & Jyoti Rahman, 2006. "Perspectives on Australia's productivity prospects," Treasury Working Papers 2006-04, The Treasury, Australian Government, revised Sep 2006.
    3. Andrew Coleman & Hugh McDonald, 2010. "“No Country for Old Men”: a Note on the trans-Tasman Income Divide," Working Papers 10_08, Motu Economic and Public Policy Research.
    4. Philip McCann, 2009. "Economic geography, globalisation and New Zealand's productivity paradox," New Zealand Economic Papers, Taylor & Francis Journals, vol. 43(3), pages 279-314.

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    More about this item

    Keywords

    Australia; New Zealand; Productivity; Economic Reform; Geography; Remoteness;
    All these keywords.

    JEL classification:

    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • N37 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Africa; Oceania
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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