The Reserve Bank thinks the New Zealand economy will grow faster than Australia’s over the next two years. But don’t start celebrating too soon.

Australia’s economy has pulled so far ahead of New Zealand’s that the relationship now seems less like a sibling rivalry and more like we’re a scrawny, awkward younger brother who lives in the shadow of the golden child, like a minor Barrett or Hemsworth.

It’s unfortunate, really. New Zealand still has very high standards of living, household wealth, happiness, and safety. Almost every metric that shows that we’re a pretty well-off country by global standards. 

We just look bad by comparison because our neighbour, Australia, is arguably the most economically successful country of the 21st century. It has the 18th highest GDP per capita and, importantly, the 2nd highest median household wealth in the world, driven by strong government savings schemes and high-performing real estate markets. 

Australia has so thoroughly overtaken New Zealand economically that politicians don’t even bother to maintain the pretenses of rivalry in any area other than sports. Lately, they prefer to point out that we are getting wealthmogged by our economymaxxing neighbours. Deputy prime minister David Seymour has repeatedly reminded the public, “We are not a rich country”. While in opposition, Christopher Luxon described New Zealand’s business environment as “negative, wet, whiny, inward-looking” (which also describes my attitude on day two of a tramp). 

Drawing negative comparisons to Australia is convenient because it allows politicians of all stripes to claim that Australia’s success is due to whatever their preferred policy solution is, whether it’s high superannuation matching, fair pay agreements, a capital gains tax, a lower income tax, better urban public transport, or because they dig lots of special rocks out of the ground to sell for money. 

While politicians argued, a generation of young New Zealanders voted with their feet, moving to Australia to dig up special rocks or put scaffolding around buildings. But that could all be about to change. At least a little bit. Despite what you may have been told, Australia is not perfect. For example, it is quite hot and the people have annoying voices. More importantly, the two country’s central banks are predicting vastly different economic outcomes in the medium-term future. 

The Reserve Bank of Australia projects economic growth of 1.8% in 2025, falling to 1.6% in 2026. Meanwhile, the Reserve Bank of New Zealand predicts 0.5% growth this year, jumping to 2.8% the following year. And it’s not just the central bankers. Private banks are even more bullish. Westpac predicts growth as high as 3.3% for New Zealand in 2026. 

So what’s happened? Has New Zealand suddenly found an economic superpower to unleash next year that will leapfrog above Australia? Not exactly. These projections are a victory for New Zealand in the most hollow, technical way possible. 

New Zealand and Australia are at opposite ends of the economic cycle. During the Covid era, New Zealand increased the money supply more and had to manufacture a more severe recession to get inflation under control. Australia did the same things but not as dramatically, which meant they had a smoother landing, which put Australia in a position to get the economy chug-a-lugging again sooner. It’s enjoyed consistently positive GDP growth since Covid, between 0.8% and 2.5% per annum. While New Zealand has been in the negatives since December 2024. 

Basically, New Zealand’s reserve bank thinks things can’t get any worse, while Australia’s bankers think their growth is starting to top out. The RBA’s February 2026 Statement on Monetary Policy projects that Australia’s employment rate will stay mostly flat for the next three years because of “a period of GDP growing below its potential rate”. 

Of course, growth rates are relative. New Zealand is building from a lower base and is still a long way away from being richer than Australia. But the projected growth could be enough to stem, or even reverse, the tide of New Zealanders jumping the ditch for work. 

https://youtube.com/watch?v=85kXPikWkd8

Because New Zealand and Australia have such close visa arrangements, cultural similarities, and relatively cheap flights, it’s easy for young people to jump between the countries seeking the best work opportunities. Trends in the job market can change quickly. One moment, hospo businesses owners are complaining about how nobody wants to work any more and tech companies are paying software engineers enough to make your eyes water. The next moment, 2,500 people are applying for a single service centre job. 

New Zealand may not match Australia for average income any time soon, but a stronger local job market could go a long way in improving the relative competitiveness of pay in new jobs. For most emigrants, leaving New Zealand is a sacrifice. But when the income difference is $30,000, the tradeoff is worth it. If it’s only $10,000 the picture starts to look different. Many people would choose to stay at home near their family even if it meant earning slightly less. 

At least, that’s what bankers and economists hope will happen. Because when New Zealanders choose to stay in New Zealand, it’s generally a sign the country is doing something right.