11 Sep 2008

Big task to close trans-Tasman wage gap - NZIER

4:18 pm on 11 September 2008

The New Zealand Institute of Economic Research says it would take 140 years to close the trans-Tasman income gap, if the economies of New Zealand and Australia continue to grow at the same rate they did from 2000 to 2007.

The institute has completed a seven-year survey of average growth rates from 2000 to 2007, which also shows New Zealand's productivity is a third lower than Australia's.

Australia's poorest state, Tasmania, now has a 13% income advantage over New Zealand, while incomes in Western Australia are 79% higher than in New Zealand.

The report says to close the gap in five years, New Zealand's output would need to increase by 7.6% each year.

The highest average annual growth rate that has been experienced in New Zealand over a five-year period was 4.6% in the early 1960s.

The report suggests that catching up with Australia is very unlikely without drastic changes in New Zealand's policy directions.

However, NZIER chief executive Brent Layton says catching up in a short time is not impossible.

He says Singapore and Ireland, which are of similar size to New Zealand, though perhaps better located, have made great strides.

Economic Development Minister Pete Hodgson says closing the income gap in five years is unlikely.