Catching Australia, Part I

New Zealand's Slope is Steep and Slippery

Catching up with Australia (in terms of relative GDP and overall material prosperity) has long been a dream of successive governments in New Zealand.  It has come up again in the current election.  The field of debate roughly falls out into four camps.

The first camp's (centre right) dream has to do with out competing Australia and producing our way to relative prosperity.  The second camp (centre left) views it as a matter of legislating parity in things like wages, income levels, and living standards.  The view is that if you first create by fiat legislation, economic reality will kick in to match it.  Put wages up by law and suddenly everyone becomes more productive.  (Yes, it is as stupid as it sounds, but there you go).
  The third camp (the greens) believe the debate is fundamentally wrong-headed.  Economic growth is damaging to the environment.  They yearn for a poorer time (although they never frame their position in such terms).  The final camp (the apolitical) believe the goal is a rhetorical utopian dream that only the foolish would contemplate. 

The debate is not unimportant.  Australian companies (being bigger and wealthier) successively buy an increasing amount of the productive capacity in the country.  Over time, this means that the value of the goods and services produced trundles off to Australia.  We are gradually becoming a nation of renters and wage earners, rather than owners and investors of capital.  Secondly, more and more New Zealanders migrate to Australia.  Labour is fungible, as they say.  As more and more (usually the more ambitious and productive types) head off to Oz, we are left with those who have neither the will nor ambition to move becoming a greater proportion of the population.  These good folk tend to demand that their living standard be maintained by taxing others, while they live out lifestyle-unemployment or lifestyle-perpetual sickness. 

The cultural and spiritual values of hard work, thrift, self-denial, saving for the future, neighbourliness, and family solidarity (which are the necessary components of sustained economic progress) attenuated long ago.  They are found only in pockets, in sub-cultural groups now. 

But what about Australia?  Will its upward economic rise continue unabated and forever?  Maybe NZ will never catch Australia in terms of living standards.  But what if it was not so much a matter of NZ catching up with Australia but rather Australia slowing down?  That would flip the debate around.  It's not impossible, nor even unlikely.  It turns out Australia's continuing prosperity growth is fragile.  At least that's what some Australians think.

We will review the argument in the next post.