Australia / From the Founder
Cousins Across the Tasman

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by Phil Ruthven, IBISWorld Founder
Nov 05 2019

When Australia was federated in 1901, the Constitution invited all the states and New Zealand to join. Western Australia hung out until the last minute before agreeing. New Zealand said thanks, but no thanks. Nevertheless, the invitation remains in the Constitution. Neither country is in a hurry to federate, although both collaborate on systems and a lot of protocols, and we may have one currency in the foreseeable future.

But long may the sporting challenges in football and cricket continue!

So, what are the vital statistics of New Zealand? It is a nation with just under 4% of Australia’s land mass (around the size of Victoria), under one-fifth (18%) of Australia’s 25.3 million population (around Queensland’s population), and just under one-eighth (12%) of Australia’s GDP (around the size of Western Australia). The data below goes further.

New Zealand National Snapshot

But apart from size differences across the Tasman, what else is different? Well, happiness, as indicated by sentiment, is one difference. The Kiwis have been much happier over recent decades than Aussies, as seen in the two charts below. Perhaps this difference is because they have had far more capable political leaders and reforms than Australia.

New Zealand consumer sentiment index

Australia Consumer Sentiment index

Indeed, in a recent survey, when Australians were asked where they would like to live if not in Australia, the responses were New Zealand at 28%, Canada at 15%, the United Kingdom at 8%, the United States at 6% and either France, Italy or Japan at 3% each. So, any one-time exodus of Kiwis to Australia has been replaced by a new found mutual, if not reverse, admiration.

Does this confidence spill into the business world? No, it doesn’t. Australia’s businesses seem to have more consistent confidence than those in New Zealand, as we see below.

New Zealand business sentiment index

Australia business sentiment index

Volatility in New Zealand is less a function of its political or business leadership, than the result of being a small economy that is subject to all the international vagaries of demand and prices associated with agricultural and tourism exports. Earthquakes don’t help either, but Australia has droughts, floods and cyclones. Deuce on that issue.

And economic growth. Again, Australia is a bit ahead. It has had fewer recessions over the past six decades, at seven in New Zealand and two in Australia. It has had average GDP growth of around 0.5% higher than New Zealand.

Australia economic growth

This leaves the make-up of each nation’s industries in the economy. The two charts below show the mix of industry divisions in 2019.

New Zealand Industry Division

Australia Industry Division

Interestingly, Australia has a greater reliance on resource industries at 10.3% of GDP, compared with 6.6% in New Zealand. Australia’s secondary sector, including manufacturing, utilities and construction, accounts for 15.4% of GDP, compared with 18.5% in New Zealand. Australia’s tertiary sector accounts for 12.5% of GDP, compared with 17.0% in New Zealand. Australia is therefore further advanced in the post-Industrial Age than New Zealand. However, both economies are dominated by the quaternary and quinary service industries, so both are very modern economies. Almost kissing cousins across the Tasman, one could say.         

And where are the growth prospects for New Zealand? The evolution of Australia’s industry divisions over the past centuries gives us a macro-guide, as seen below.

While the timescales are somewhat different, New Zealand’s economic mix has followed much the same course.

Australia's industry division changing importance

And it is always helpful to know that each new age’s industries are created by outsourcing. We would not have an agricultural sector if households stayed self-sufficient (and inefficient). Nor would we have had an industrial age if households preserved their own food, made their clothes and furniture, and stayed self-sufficient and inefficient.

In this new age following the mid-1960s, we have been outsourcing services, as seen below. These have been or are the faster growing opportunities to the middle of this century.

outsourcing creates new industries

For a printable PDF of this release, click here.