For the first time in years, Australia’s growth is set to fall behind New Zealand’s. How the heck did that happen, asks Catherine McGregor in today’s excerpt from The Bulletin.
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Could the tables be turning?
New Zealand’s economy is on course to outgrow Australia’s for the first time in years – and by a surprisingly wide margin. As the Herald’s Liam Dann reports (paywalled), the Reserve Bank here projects GDP growth of 2.8% in the year to March 2027 and 3.1% in the year to March 2028. Westpac economists are even more bullish, tipping 3.3% growth in 2026.
On the other side of the Tasman, the Reserve Bank of Australia projects growth of just 1.6% from next year through to 2028 – what the Australian Financial Review called “the lowest medium-term growth outlook ever published in the bank’s forecasting history.”
As The Spinoff’s Joel MacManus writes this morning, the contrast isn’t so much a New Zealand triumph as a tale of two economic cycles. We endured a more painful recession coming out of Covid, but are now bouncing back; Australia had a smoother landing but is now battling inflation. Put simply, “New Zealand’s reserve bank thinks things can’t get any worse, while Australia’s bankers think their growth is starting to top out.”
A structural warning
There is a temptation to read the numbers as cause for celebration but both Dann and economist Cameron Bagrie, writing in BusinessDesk (paywalled), caution against it. New Zealand is growing from a much lower base and remains a long way from closing the wealth gap with Australia.
However both countries share the same problem: lagging productivity. Much has been made of NZ’s poor productivity record, but Australia’s is currently around 2016 levels, Bagrie says. “Australia has been trying to have its cake and eat it too. Strong wage growth and weak productivity is not a sustainable mix.” Dann argues that New Zealand has a rare opportunity to make smart policy choices that could lift its long-term growth potential. “The biggest question is whether we have the political will to take it.”
Green shoots – with one exception
New data from Infometrics shows NZ is on the up. Principal economist Nick Brunsdon writes that economic activity rose 1.6% in the December 2025 quarter, with the South Island leading the way. Canterbury, Southland and Otago are all growing solidly, buoyed by a strong primary sector. The North Island is also seeing a slight recovery, though much less pronounced than the south.
Wellington is the conspicuous exception. As the NZ Herald’s Ethan Manera reports, the number of businesses based in the capital fell 2.3% over the year, employment dropped 2.8% – the worst in the country – and the Jobseeker count reached 7,290, a 10-year high. Brunsdon likens the effect of public service cuts to a large factory closing in a small town, saying the structural adjustment will take time.
Is the grass still greener over there?
For much of the past decade, the answer seemed obvious – Australia paid more, and tens of thousands of us went to collect. But the calculus is shifting, finds Stuff’s Annemarie Quill. Growing numbers of New Zealanders are questioning whether it still makes financial sense, with interviewees warning that Australian rents are “insane”, RTDs are “wildly” more expensive, and speeding fines start at $1,000. One returnee who earned 30% more as a marketing executive in Brisbane still concluded Australia was “more expensive overall”.
He’s not the only one: Stats NZ says 27,000 New Zealanders came home in the year to November 2025, up 17% on the previous year. But relocation specialist Mark Berger cautions against reading this as a reversal of the fundamental trend. “New Zealanders are not leaving because one item costs a few dollars more,” he says. “They are leaving because Australia pays more, protects workers better, and allows people to get ahead faster.”
