11/30/20091

$64,000 question

Context

• Confidence and Supply agreement•“Our vision is to close the gap with Australiaby 2025” –Hon John Key, Prime MinisterRole:

•make recommendations•report annually on progress

11/30/20092

Comparing our economic performance

7 0 0 3 0 0 0 0

The gap is wide and not closingNZ vs. Australia

110120130140150110120130140150NZUSOECDAustralia

7 7 6 9 0 5 3 5 0 0 5 1 9 0 0 5 1 2 0 0 5 0 7 0 0 4 6 2 0 0 4 3 0 0 0 3 8 4 0 0

80901008090100

1970197319761979198219851988199119941997200020032006

W e s t e r n A u s t r a l i a N o r t h e r n T e r r i t o r y A C T A U S T R A L I A N e w S o u t h W a l e s V i c t o r i a Q u e e n s l a n d S o u t h A u s t r a l i a T a s m a n i a N E W Z E A L A N D

Source: Australian Bureau of Statistics and Statistics New Zealand

How big is the gap?

Others have caught up

GDP per capita, constant prices, PPP

We need to get started

GDP per capita, US$, PPP, constant prices, 2008

Australian GDP/capitaNew Zealand Baseline GDP/capitaNew Zealand 'Catch-Up’ GDP/capita

ForecastActual$15,000$20,000$25,000$30,000$35,000$40,000$45,000199020092025050001000015000200002500030000

19801984198819921996200020042008

KoreaNew ZealandSlovenia

Source: OECD and Statistics NZ

The $64,000 question:

For an average family of four, thegap is around $64,000 per year.Catching up means per-capita growth of 1.8% p.a. morethan Australia. If we don’t start now, it will get much harder.

11/30/20093

Why does it matter?

Migration and income appear related

Whangarei

-20-10010203040-1000001000020000300004000019471953195919651971197719831989199520012007%NumberNet outflow to Australia

GisborneInvercargillTimaruNelsonMasterton

•People migrate for many reasons –not just higher wages•As the gap has widened, so has net migration of NZ citizens•Current outflow is comparable to Ireland during 1950s-1980s

% gap between NZ and Australia GDP per capita (right axis)

Causes

•

Mths: