Analysis by Keith Rankin.
Keith Rankin, trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.
The following two tables show New Zealand and the 24 other economies in the world most easily and fruitfully compared to New Zealand. The countries are sorted with the worst-performing economies (in terms of economic growth per capita) listed at the top. Thus, taking four-year compounded growth for 2020, 2021, 2022 and 2023, Germany was the worst performer (ranked 25 out of 25); its economy, adjusted for population growth, shrank over four years by 1.2 percent.
The ‘top’ three countries in the table all had such negative growth.
Table 1: Rankings for 25 Advanced Economies 2019-23
2019-23*
growth pc
inflation
interest
population
rank
rank
rank
rank
Germany
25
6
9
18
Finland
24
19
9
20
Austria
23
1
9
9
United Kingdom
22
2
4
12
Canada
21
14
3
3
Spain
20
15
9
10
France
19
16
9
19
Japan
18
24
25
24
Norway
17
10
7
6
Sweden
16
9
21
15
New Zealand
15
4
1
5
Switzerland
14
25
24
7
Australia
13
11
8
4
Belgium
12
8
9
13
Portugal
11
17
9
16
Netherlands
10
3
9
8
Italy
9
12
9
23
Israel
8
22
6
1
United States
7
5
2
11
Slovenia
6
7
9
17
Denmark
5
18
23
14
Korea
4
21
5
21
Greece
3
20
9
25
Taiwan
2
23
22
22
Ireland
1
13
9
2
*
end of year data for inflation and interest
source: IMF World Economic Outlook Database, April 2025
On growth, New Zealand was in the middle of the pack, with 3.9 percent compounded growth per capita; that averages out to just below one percent per annum.
On inflation and interest rates, a high ranking is generally regarded as a poor performance; although a low inflation rate may be outside the policy target zone, just as a high inflation rate may be. New Zealand had the fourth-highest CPI inflation over that four-year period, comparing consumer prices in December 2023 with December 2019. In December 2023, consumer prices were 20.6% higher than in December 2019. The country with highest compounded inflation was Austria with 22.4%, and the lowest Switzerland with 5.5%.
New Zealand had the highest compounded interest rates for that period; it had top-ranking for high-interest. If $1,000 was ‘invested’ at the Official Cash Rate each December from December 2020, and reinvested each December for four years in total, the accumulated amount would have been $1,111. Next highest were the United States and Canada. This ranking gives a sense of the monetary policy in the four years after the 2020 covid wave; New Zealand had the tightest monetary policy for the period as a whole, meaning the strongest ‘anti-inflationary policy’. If you see Table 2 below, you will see that New Zealand had the lowest economic growth in 2024, a direct consequence of that tighter monetary policy stance.
On interest rates, we note that the countries in the Euro currency zone all experience the same monetary policy setting. It means that those Euro countries which are more aggressively anti-inflation tend to resort most to fiscal consolidation, a euphemism for government retrenchment and austerity. There is no simple measure for tight fiscal policy; the Budget deficit/surplus is often used incorrectly because government retrenchment significantly undermines government revenue.
On inflation, we note that some of those northern European countries which we normally expect to have low inflation actually had the highest inflation: Austria, Netherlands, Germany. One country similar to New Zealand on inflation and interest, and with zero growth per capita, was the United Kingdom. Australia was better than New Zealand on all three measures: growth, inflation, and interest. And much the same as New Zealand on population growth.
Table 2: Rankings for 25 Advanced Economies 2023-24
2023-24*
growth pc
inflation
interest
population
rank
rank
rank
rank
New Zealand
25
13
6
2
Austria
24
15
8
15
Canada
23
17
7
1
Finland
22
22
8
12
Ireland
21
24
8
3
Germany
20
9
8
20
Israel
19
3
2
5
Switzerland
18
25
24
4
United Kingdom
17
10
1
6
Netherlands
16
2
8
11
Belgium
15
1
8
14
Australia
14
11
5
13
Japan
13
6
25
25
Sweden
12
20
22
17
Italy
11
23
8
22
France
10
21
8
19
Portugal
9
4
8
10
Norway
8
14
2
7
Slovenia
7
19
8
18
United States
6
8
2
9
Korea
5
16
20
21
Spain
4
7
8
8
Greece
3
5
8
24
Denmark
2
18
21
16
Taiwan
1
12
23
23
*
end of year data for inflation and interest
source: IMF World Economic Outlook Database, April 2025
Table 2 shows the same data items for 2024. Of particular interest is the 2024 growth and inflation rates in 2024, compared to the interest rates for the preceding four years. New Zealand, with the toughest monetary policy over a longer period certainly got the recession it asked for; and was the median country for CPI inflation in 2024, virtually bang-on the policy target. (Was the pain worth it?)
It’s important to note that many countries with significantly lower inflation than New Zealand did not have anything like the very high policy interest rates that New Zealand was subjected to; eg Sweden, Italy, France, Denmark, Slovenia. Any beneficial link from high interest rates to low inflation remains moot; and it is clear that high-interest-rate policies do much damage to the wider economy. While Japan had higher inflation in 2024 than New Zealand, we note that Japan’s overall increase in consumer prices in the half-decade was much lower than New Zealand’s. Japan’s inflationary pressures are almost entirely imported, with New Zealand’s domestically generated CPI inflation being significantly greater than Japan’s.
We should note that southern Europe was doing particularly well in 2024. Although Greece’s per capita growth is fuelled in part by substantial population losses. Spain, on the other hand, is getting its population back. Further north, the Austrian economy is looking particularly problematic; it’s no wonder the ‘far-right’ political party did so well there in elections at the end of 2024 (ten percentage points higher than the Hitler-led NSDAP party got in Germany in 1930). And Finland is not looking happy either, despite low inflation.
United States, United Kingdom and Australia continued to have above-median inflation in 2024, despite – or, more likely, because of – their continued perseverance with high-interest monetary policies.
On population growth we see that Canada has been the overall ‘winner’, presumably in the sense that it both attracts and accepts immigrants. Surprisingly, in 2024 Australia slumped in its population growth, whereas New Zealand did not. I suspect that 2025 will show more immigration in Australia than New Zealand.
Finally
All is not well in the New Zealand economy. And it’s also quite unwell in some other countries, especially the North European Euro-zone countries, and the United Kingdom. And the United States, with its tight monetary policies, seems to have only averted the fate of the United Kingdom and New Zealand (and Germany and Austria) by virtue of stimulus to its military-industrial complex. Or, strictly speaking, to its military complex. Civilian industry remains weak in the USA.
*******
Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.