18 Feb 2012

Wealth gap with Australia may not be so big - Bollard

6:06 am on 18 February 2012

Reserve Bank Governor Alan Bollard says New Zealand may not be as badly off compared to Australia after all.

He says New Zealand's income relative to its trans-Tasman cousin may be understated by as much as 10%.

Dr Bollard says the use of different methods to calculate Gross Domestic Product explains some of the gap between the two countries.

Australian government statisticians include some production that their New Zealand counterparts do not.

That includes what Dr Bollard describes as "household backyard production" and some financial services income.

He says including previously uncounted production could boost New Zealand's measured GDP by 10%.

Dr Bollard says if that income were counted, it could change New Zealanders' perception of the wealth gap with Australia, convincing more to stay here.

He says international lenders might reassess the country's ability to service its debts and lend on more favourable terms.