Among prosperous nations, New Zealand is relatively a low-income country. That hurts.

In 2024, net national income per capita was 30% higher in Australia, according to the Paris-based OECD. It was only 19% higher on average over the four years to 2019.

That 2024 gap represents a missing NZ$20,000 per person a year. That is $100 billion a year spread over 5 million people.

The gap means New Zealanders can afford less of everything than can Australians. It means less housing, food, footwear, health care, home heating, less safe workplaces, worse transport, and makes a cleaner environment less affordable.

No wonder many New Zealanders now live in Australia.

The New Zealand Institute of Economic Research's latest report correctly identifies the main proximate factor: too little productive capital per worker. Firms have not invested enough in the machinery, technology, and infrastructure that make labour more productive. The education system has also performed poorly.

Low average labour productivity means low average wage rates, relative to the cost of living.

What causes low investment per worker?

The NZIER’s report usefully rehearses the contributing factors. Indeed, the likely reasons have been rehearsed for decades by officials, think tanks, the Treasury, the IMF and the OECD.
There is much that government could do to reduce red tape, improve the quality of spending and reduce tax burdens.

Indeed, a government task force in 2009 had over 60 recommendations to help close the income gap with Australia by 2025. Few have been actioned. The Initiative’s 2026 publication, Prescription for Prosperity 2026, made 170 policy recommendations.

Unfortunately, the NZIER’s report does not dig into the barriers to more effective government action.

The malaise surely comes down to voter preferences and political incentives. An entrenched status quo has many defenders.

As one overseas politician notably observed: “We know what needs to be done, we just do not know how to get re-elected after we have done it”.

The critical constraint is the balance of voter opinion between the insatiable “what’s in it for me” demand for redistribution and the "what is best for New Zealanders overall" mindset.

The balance is important because aspirational and productive young New Zealanders need good reasons to stay in New Zealand when Australia is so attractive.

These are high stakes for the public debate.

Good policy recommendations for lifting productivity abound. The issue is to explain them to the public. That is a matter of political leadership.

The United States celebrated its 250^th birthday this weekend. Like all those who are told that their glory years are behind them, my country showcased its youth and inexperience with much rejoicing.

The festivities were organised by Freedom 250, a Republican-dominated group that President Trump chairs. To acquire the necessary and proper funds, the group ran donate-for-access advertisements and diverted congressional appropriations from the bipartisan America250 group.

With that money, Freedom 250 set up a Great American State Fair. Most of the musical acts backed out after learning of Trump’s switcheroo, except the late, great Vanilla Ice. The ‘ICE, ICE Baby’ jokes wrote themselves.

Some states opted not to send any fair exhibits at all – Connecticut had some flyers and two chairs. The Ferris Wheel broke down, and the crowds were as scattered as the British armies at Yorktown.
Elsewhere, a particularly ebullient skydiver draped in American flags fell face first into a tent. He got up with a cut lip as his only injury, simultaneously personifying 250 years of American resilience and Monty Python’s Black Knight – ‘tis but a scratch!

On the bright side of civic life, a 30-minute fireworks display lit up the National Mall. The Washington Monument projected powerful displays of red, white and blue.

These showings of prosperous exuberance evoke strong feelings of both pride and embarrassment: Pride in being part of the wealthiest, freest and, dare I say, greatest liberal republic in history, and embarrassment at the collective expression of that heritage.

The American founders would quickly recognise that a free self-governing people must possess individual and civic virtues. Ben Franklin, when asked what system of government was decided upon at the Constitutional Convention, best captured this philosophy with his infamous response, “A Republic, if you can keep it.”

But as Franklin’s private life in 1780s Paris demonstrated, salacious pomp and decadence go hand-in-hand with philosophical contemplation and worldly entrepreneurship as hallmarks of American virtue.
 
Perhaps this dichotomy best encapsulates what it means to be an American. One day, we are inventing cures for polio and celebrating liberty as humanity’s fundamental need. On another day, we are drowning in Diet Coke and forcing FIFA to overturn a red card – Dr Washington and Mr Trump, if you will.

Such split personalities make one wonder: Apart from the world’s best universities, air conditioning, craft beer, rock and roll, the end of communism, artificial intelligence and revolutionary medical innovation, what have the Americans ever done for us?

 “Brought peace?”

Oh, peace? Shut up!