Bolger says NZ could become a 'shell country'

Former prime minister Jim Bolger has entered the debate over the brain drain to Australia, warning New Zealand risks becoming a "shell country" if it continues.

Mr Bolger was speaking at National's 70th anniversary dinner last night, just hours after a new report showed New Zealand slipping behind other countries in its international competitiveness and amid concerns about the impact of Australian tax cuts on Transtasman migration.

National MPs have warned that Australia is becoming an increasingly attractive destination for skilled New Zealanders.

Mr Bolger, the last National prime minister to lead the party to an election victory, said the "hard question" was whether New Zealand should join Australia in a "conscious decision" or be absorbed by osmosis.

He suggested there should be a strategy on how the two countries worked together, although he did not go into details on that, and said so many "good people" were moving to Australia that New Zealand could be reduced to a shell.

National MP Lockwood Smith and Immigration Minister David Cunliffe continued to argue today over the exodus.

Dr Smith, National's immigration spokesman, said New Zealand recorded a net loss of nearly 400 people a week to Australia during the last 12 months.

"Part of the reason for Australia lowering its tax rates is to attract skilled people, and New Zealand is their number one source," he said on National Radio.

Mr Cunliffe said there had been a net overall gain in immigration every year Labour had been in office, and the highest outflows to Australia were in 1998 and 1999, when National was in power.

"The total tax wedge in Australia is higher than in New Zealand when you add up income tax, stamp duty, medicare costs...it is still less in New Zealand and people need to get their facts right," he said.

- NZPA