The income gap bewteen NZ and Aussie will widen further unless frowth promoting policies as initiated by the New Zealand government. Don Brash – Taskforce chairman – indicated that teh NZ economy needs to grow 2% faster than Australia in order to close the 35% income gap over the next 15 years. The report states that smaller government was essential, allowing for lower tax rates. The state should get out of commercial activity with the full or part sale of government businesses, to let the private sector generate higher levels of growth.
However it is going to be a tough ask to close the gap as the Australian economy has been thriving in the current economic climate with the RBA trying to suppress accelerating wage inflation. Below is a graph showing GDP per capita in AUS$ in 2008 – New Zealand is even below Tasmania.