Labour crunch: NZ is facing a workforce shortfall of 250,000 in next 20 years

The report said New Zealand could aim to stay a small population – similar to the size of Ireland, Denmark and Norway – but would need to lift its standard of living.

New Zealand’s response to the demographic challenge required not just a well-planned immigration strategy, but a gradual and sustainable lift in the retirement age, boosting KiwiSaver contributions, and financial literacy education in schools, the report said.

Health and pension affordability will also be major challenges New Zealand needs to plan for in the future.

“By 2045, 100% of income tax will go on health spending and pensions if nothing changes,” the report said.

The report recommended pushing out the retirement age by 1-2 years, increasing KiwiSaver contributions closer to that of the Australian rate of 12% and not allowing people to dip into their retirement savings – even for a first home.

It also wanted to see ACC claims fully funded and more invested in rehabilitation and getting people back to work.

BusinessNZ advocacy director Catherine Beard, who authored the report, said its findings don’t have to be New Zealand’s fate.

“As a country, we have some amazing ‘X factors’ that could be exploited to catapult our growth,” she said.

This included New Zealand’s resource of renewable clean energy that could enable industries as diverse as green hydrogen production, data centres and digital infrastructure, and steel and aluminium.

“We also have enormous potential to build profitable niche clusters in speciality areas like food science and agritech, aerospace and autonomous systems, semiconductor materials and fusion science, digital exports, critical minerals and marine resources, and medical technology,” Beard said.

“However, achieving such outcomes would require bold, long-term planning, led by bipartisan politicians, informed by public debate, and supported by public buy-in.”

A recent survey of the BusinessNZ members found their number one concern was the reversal of government policies following elections, affecting business certainty.

“We need to have a long-term plan for success because political flip-flops and U-turns mean every time we have a change in government, New Zealand only goes sideways,” Beard said.

Challenges New Zealand needs to plan for:

Ageing populationHealth affordabilityPension affordabilityImmigrationInfrastructure deficitHousing affordabilityEnergy affordabilityProductivity slumpGDP versus Australia declining Educational achievement declineCost and time to get things done in New ZealandSmall population in a large countryLow research and development (R&D) spending versus OECD countriesNew Zealand is ranked as one of the hardest places to invest in the OECDGeopolitical uncertaintyClimate change