For the first time in years, Australia\u2019s growth is set to fall behind New Zealand\u2019s. How the heck did that happen, asks Catherine McGregor in today\u2019s excerpt from The Bulletin.<\/p>\n
To receive The Bulletin in full each weekday,\u00a0sign up here<\/a>.<\/p>\n Could the tables be turning?<\/p>\n New Zealand\u2019s economy is on course to outgrow Australia\u2019s for the first time in years \u2013 and by a surprisingly wide margin. As\u00a0the Herald\u2019s Liam Dann reports<\/a>\u00a0(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.<\/p>\n On the other side of the Tasman, the Reserve Bank of Australia projects growth of just 1.6% from next year through to 2028 \u2013 what the Australian Financial Review called \u201cthe lowest medium-term growth outlook ever published in the bank\u2019s forecasting history.\u201d<\/p>\n As The Spinoff\u2019s Joel MacManus writes this morning<\/a>, the contrast isn\u2019t 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, \u201cNew Zealand\u2019s reserve bank thinks things can\u2019t get any worse, while Australia\u2019s bankers think their growth is starting to top out.\u201d<\/p>\n A structural warning<\/p>\n There is a temptation to read the numbers as cause for celebration but both Dann and economist Cameron Bagrie,\u00a0writing in BusinessDesk<\/a>\u00a0(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.<\/p>\n However both countries share the same problem: lagging productivity. Much has been made of NZ\u2019s poor productivity record, but Australia\u2019s is currently around 2016 levels, Bagrie says. \u201cAustralia has been trying to have its cake and eat it too. Strong wage growth and weak productivity is not a sustainable mix.\u201d Dann argues that New Zealand has a rare opportunity to make smart policy choices that could lift its long-term growth potential. \u201cThe biggest question is whether we have the political will to take it.\u201d<\/p>\n Green shoots \u2013 with one exception<\/p>\n New data from Infometrics shows NZ is on the up. Principal economist\u00a0Nick Brunsdon writes<\/a>\u00a0that 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.<\/p>\n Wellington is the conspicuous exception. As the\u00a0NZ Herald\u2019s Ethan Manera reports<\/a>, the number of businesses based in the capital fell 2.3% over the year, employment dropped 2.8% \u2013 the worst in the country \u2013 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.<\/p>\n Is the grass still greener over there?<\/p>\n