'Wake-up call' in low OECD ranking

New Zealand's ranking as a low-middle-income country should deliver a wake-up call, business opinion leaders say.

New figures from the Organisation for Economic Co-operation and Development show no change in New Zealand's standing at number 22 since the last comparison of 42 nations in 1999.

The chief executive of the New Zealand Institute, David Skilling, said the figures were a reminder that economic growth was one of the country's biggest challenges.

"If we want our young people to stay here, capital to come here and firms to locate in New Zealand, we need to move out of the low-middle income [bracket] into the high-middle income."

Skilling said the country's strong economic growth in recent years had done little to improve its position.

New Zealand was behind Spain and Israel, and ahead of Cyprus, Greece, Portugal, Slovenia, Korea, Malta, Czech Republic and Hungary.

Australia was a long way ahead, alongside Britain, Sweden, France and Japan in the high-middle-income group.

With an average annual income of $29,000 for the year to last June, New Zealand was well behind Luxembourg, which topped the list with an annual average income of $66,618.

Skilling said although the recent economic performance was encouraging, it needed to be sustained at the same rate, if not higher, to see any significant convergence with countries in the high-middle bracket.

"Otherwise people, firms and capital are going to go to Australia searching for returns and opportunities. Even though New Zealand has lifestyle, lifestyle is not enough to stem that entirely."

Skilling was wary of expecting New Zealand's ranking to change when the OECD figures are updated in three years.

"It's a pretty significant gap between New Zealand and Australia in terms of per capita income so making a significant dent in that in a period of two to three years probably isn't going to happen.

"It's something that needs to be sustained over the next 10 to 15 years."

Business New Zealand chief executive Phil O'Reilly said the figures were a bouquet and a brick-bat for the Government.

He saw improving workforce productivity as being a key to improving New Zealand's ranking and was pleased the Government was looking at initiatives for this.
But more work was needed to improve flexibility in labour markets.