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New Zealand rocks but the poor are rolled

  • 17 February 2014

New Zealand's status as a rock star economy with unusually high growth in 2014 is in question from commentators who say the economy has never recovered from major economic policy shifts 30 years ago.

NZ Deputy Prime Minister and Finance Minister, Bill English, showed cool confidence at the bilateral talks with the Australian Government in early February, no doubt boosted by the HSBC chief economist's prediction that NZ is set to outpace most of its market peers in economic growth this year. With the Australian economy in disarray, the Abbott Government is showing keen interest in developments in NZ's projected 3.4 per cent growth.

Financial commentator Rod Oram points to the latest quarterly survey of business opinion, which has confidence on a 20-year high as one indicator that the 'rock star economy' epithet might stick. But while the NZIER survey shows the economy is advancing on a number of fronts, 'they are measuring the breadth of expectation [rather than] the depth — they are not measuring how big the growth is going to be', he said on Radio New Zealand.

Economist Brian Easton says New Zealand's sexy image on the global business stage does not necessarily translate to a better life for those on low incomes, particularly women and children. Easton, who's recently published a user's guide to economic inequality, says inequality is difficult to measure. One indicator might show it going up while another has it coming down or staying the same, 'so it's easy to choose the indicator you want'.

But, he says, all the indicators are that New Zealand suffered a sharp rise in inequality as a result of policy changes to tax rates and benefits 30 years ago and is now in the company of those OECD countries with the biggest gap between rich and poor. 'The simple way to put this is that in the 1980s we were in the bottom half of the OECD as far as inequality was concerned. Those above us had greater inequality. By the mid-1990s we were in the top half — among the most unequal parts of the OECD — and it's still like that.'

Easton points to child poverty as the single greatest indicator of growth in the wrong direction for those at the bottom of the heap.

A major influence on the rich-poor gap is growth in the share of income of the top one per cent of adults whose income share has