As a spate of headlines suggest Australia’s economy is stalling, economist Shamubeel Eaqub crunches the data.
Watch/listen to Shamubeel Eaqub talking this through on the Spinoff podcast At Large with Toby Manhire.
The pull of the West Island is strong. I lived in Melbourne for a bit, but was enticed back with a great job. I have friends and family there. Why do so many go? Broadly speaking, higher incomes and, until recently, cheaper housing. But that’s not universal.
One in nine of us lives there
About 638,000 New Zealand-born people were living in Australia in mid-2025, one in nine people born here. The flow has picked up again: departures are running near 48,000 a year, and net of arrivals we are losing about 29,000 a year.
We lose fewer people when the economy here is strong; family, friends and community keep many of us here. When the economy is weak, the draw of relocation wins out. And when their economy slows, as it sometimes does, some come back, including Kiwis who cannot access their welfare system.
They have been pulling away for 40 years
It was not always like this. From the 1870s to the late 1960s we were as rich as Australia, and often richer. The gap opened in the 1970s and 1980s, when Britain joined Europe, our export prices collapsed, and we restructured the economy much more brutally.
Since the early 1990s we have sat at about three-quarters of Australian income per person. Our income per person today is about where Australia’s was in the early 2000s, and the gap is not closing.
It comes down to productivity
Productivity is how much we collectively earn, in wages and profits, for each hour we put in. Australians produce about US$76 of value an hour. We produce about US$53. It’s a bit circular, but fundamentally we are poorer because we aren’t as good at business.
It is tempting to explain it away with industry mix: they have iron ore, we have cows. But we are less productive in almost every industry. Industry mix explains about 15% of the productivity gap, the rest is us doing the same jobs, less well, with less capital and technology.
Some of Australia’s great run is luck. For over 20 years their mining commodities – such as iron ore, coal, oil and gas – have been in hot demand globally and prices have been spectacular. But the productivity gap was there before the mining boom. We also benefited from a commodity price increase (think dairy and meat more recently), just not to the same extent.
Our lower income isn’t due to a less engaged workforce. We have about the same share of people in work and we work roughly two weeks more per year. But that hard work doesn’t pay as much, nor does it make as much profit.
We earn less and spend more on housing, but …
The average wage in New Zealand is around a third lower than in Australia. And that doesn’t go as far, because housing takes a big chunk out of it. Around 10% more of the household budget here goes to housing compared to Australia. Everything else is pretty close.
There has been some improvement on housing. Our house prices peaked at 12.5 times GDP per capita in 2021 and have come back to about nine times. Australia’s have climbed to nearly nine times, the highest ever.
There is a similar pattern with rents. This has been a policy win in New Zealand, which has contributed to rents and house prices becoming less exorbitantly expensive. Australia’s housing crisis is worsening – rents and prices are still rising fast relative to income.
Envy their savings
Australia’s compulsory superannuation is 12% of wages (all employer contributions). It has been building since 1992 and now adds up to about 135% of their GDP. KiwiSaver, combined with the older schemes, is 37%.
Their scheme is bigger and older. The typical Australian in their early 60s has around $216,000 in super (in NZD) vs about $55,000 here. Their equivalent of NZ Super is means tested, ours is universal. But that large pool of savings means they are rich. We are heading in the right direction, but we started so much later.
Is the grass greener?
Australian consumer confidence right now is much worse than ours. Their unemployment rate is rising, though still below ours. Until citizenship, which takes four years, Kiwis’ access to their welfare system is limited. This perhaps explains a slight cooling in departures to Australia.
For a young family, childcare is a big Australian advantage, at 16% of the average wage, against our 27%. But our tax and welfare system is far kinder to families on one income (think Working For Families, etc), and the supports add up.
For a young graduate the pull is real too: higher pay, higher super, and a deeper labour market, which means more choice and more career progression opportunities. But income tax is lower here, student loan interest begins when you leave New Zealand, and rents in the big Aussie cities are getting pretty steep.
Longstanding pull
I won’t say leaving is wrong or staying is loyal. People respond to incentives, and for the last 40 years the data shows a pretty strong pull. The gap is old, it is about productivity, and it compounds through wages, lower cost of housing (until recently) and super over a working life.
Is there any hope? Our recent housing wins show we can fix things and it bears fruit. But there is more work to do. The pull of Australia may have dimmed temporarily, but the gaps are real, large and persistent.
Shamubeel Eaqub is chief economist for Simplicity.
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