eLocal Report
A recent episode of the Notes From The Executive podcast brought together four experienced voices from economics, business and social science to examine a question increasingly being asked across New Zealand:
Is New Zealand going broke?
The discussion featured economic commentator Bernard Hickey, economist Shamubeel Eaqub, a demographer and social scientist focused on migration and population trends, and a business strategist and economic advisor focused on helping businesses navigate uncertain economic conditions.
While none of the participants argued that New Zealand is facing collapse, all agreed the country faces significant structural challenges that can no longer be ignored.
The discussion ranged from housing, productivity and migration through to energy security, business investment and the future opportunities available to younger generations.
Bernard Hickey: How New Zealand Became a Housing Economy
Bernard Hickey argued that New Zealand's economic model has increasingly become centred on residential property.
"Our collective choice as an economy, a society, to become a housing market with bits tacked on."
According to Hickey, New Zealand gradually shifted away from productive investment and towards property speculation as the preferred pathway to wealth creation.
For decades the model appeared successful. Property values climbed steadily, homeowners accumulated wealth and residential real estate became the investment of choice for many New Zealanders.
However, Hickey believes the limits of that model are now becoming evident.
"We've really bet everything on this housing market."
He noted that many investors who purchased property during the boom years are still waiting for a return to the rapid capital gains experienced before 2022.
Instead, house prices have largely stagnated while rental yields remain under pressure.
Hickey also contrasted New Zealand with countries such as Australia, Denmark, Finland and Singapore, arguing that many competing economies provide stronger incentives for long-term investment in businesses, infrastructure and productive assets.
Shamubeel Eaqub: Productivity Is the Real Challenge
Economist Shamubeel Eaqub challenged some of the assumptions surrounding New Zealand's housing debate while agreeing that productivity remains a central issue.
"We've always had a real economy beyond housing. I think that's always been a bit of a myth."
Eaqub pointed out that approximately half of New Zealand's wealth is tied up in property, which limits investment in other areas of the economy.
"You cannot expect to create good jobs and a prosperous society if you don't create good businesses that create those opportunities."
He argued that while housing remains important, long-term prosperity comes from productive businesses, innovation, exports and technology.
One concern raised was New Zealand's tendency to use immigration to address labour shortages rather than investing sufficiently in productivity improvements.
"We often go for a short-term sugar fix such as immigration to fix a gap rather than thinking could we actually do this onshore using new technologies in a much more effective way."
Eaqub also warned that rising energy costs and global uncertainty will continue to place pressure on both consumers and businesses.
The Demographer: The Great Escape
One of the most striking parts of the discussion centred on New Zealand's ongoing loss of skilled people overseas.
The demographic perspective highlighted what was described as New Zealand's growing "escape valve" — the steady outflow of young people, graduates and skilled workers.
"I call it the great escape valve. And at the moment, it's an escape valve that looks like an A320 a day."
The discussion noted that New Zealand now has one of the largest overseas diasporas in the OECD relative to population size.
More concerning was the suggestion that many of those leaving are among the country's best educated citizens.
"More than 30 percent of the graduates who were born in New Zealand leave New Zealand permanently."
The demographer argued that the issue is not simply population numbers but the loss of talent, skills and future leadership.
The discussion highlighted spikes in departures among school leavers and university graduates, as well as increasing numbers of young families seeking opportunities offshore.
The Business Perspective: Survival Through Innovation
The fourth contributor brought the discussion back to the practical realities facing business owners.
While acknowledging the challenges, the business perspective was notably optimistic.
The advice focused less on predicting the future and more on preparing for multiple possible outcomes.
"One of the best things to do at the moment is think through different scenarios."
Business owners were encouraged to develop contingency plans, protect margins and focus on areas they can control rather than becoming consumed by economic uncertainty.
The contributor also argued that downturns often present opportunities.
"Don't spoil a good crisis."
Rather than retreating, businesses were encouraged to continue marketing, innovating and competing for market share.
"Any growth you have in this market is because you've taken somebody else's market share."
Perhaps most significantly, the discussion suggested that the people best positioned to improve New Zealand's future may not be politicians.
"The people who can fix this aren't in government."
Areas of Agreement
Despite approaching the issue from different perspectives, all four contributors appeared to agree on several important points:
- Productivity growth matters.
- Innovation remains essential.
- New Zealand retains considerable strengths.
- Businesses play a critical role in creating opportunity.
- The country must find ways to retain and attract talented people.
- Long-term prosperity requires investment in productive activity.
Importantly, none of the participants suggested New Zealand is doomed.
As Shamubeel Eaqub noted:
"It doesn't mean everything is going to hell in a hand basket. It's not."
The debate is increasingly shifting from identifying problems to debating solutions.
eLocal Analysis
One issue largely absent from mainstream economic discussion is the role of money creation itself.
eLocal notes that New Zealand's housing-focused economy did not emerge in isolation.
Following the abandonment of the gold standard and the transition to modern fiat monetary systems, commercial banks gained increasing capacity to expand credit through fractional-reserve banking and mortgage lending.
Over subsequent decades, much of this newly created broad money flowed into residential property rather than productive enterprise.
Mortgage lending became one of the primary mechanisms through which money was created within the economy, helping drive rising land and housing values while attracting capital away from productive investment.
From this perspective, New Zealand's housing obsession may not simply be a cultural preference but a structural outcome of the financial system itself.
While the four contributors offered different explanations and solutions, there was broad agreement that future prosperity will depend on directing more capital, innovation and talent into productive activity rather than relying solely on rising property values.
The Question That Remains
As the discussion drew to a close, Bernard Hickey posed what may be the most important question facing New Zealand's future:
"Where do you think your kids are going to grow up?"
For many New Zealand families, the answer to that question may ultimately determine whether the country's next chapter becomes one of renewal or continued decline.
Source
Notes From The Executive Podcast – "Why New Zealand Is Going Broke: 3 Top Economists Explain Why (Plus a Social Scientist)"