New Zealand may technically be creating jobs, but it isn't creating enough of them — and younger New Zealanders are bearing much of the cost. Behind the 5.6% unemployment rate lies a deeper problem of weak growth per person, falling purchasing power and an economy that continues to struggle to offer many New Zealanders the wages and opportunities available across the Tasman.
eLocal Report: Based on analysis by Kiwibank economists Jarrod Kerr, Alexandra Turcu and Elliott Lowe in Markets, Mystics & Mayhem — Young labour force(d) to the back of the queue
There is something deeply concerning beneath New Zealand's latest employment numbers.
The unemployment rate reached 5.6% in the June quarter, higher than markets had expected. Kiwibank's economists had anticipated unemployment eventually reaching that level, but not this soon, and warn there remains a risk it climbs further as more recent economic shocks work their way through the labour market.
The headline number, however, tells only part of the story.
New Zealand's underutilisation rate has climbed to 13.8% — its highest level in 12 years. That measure captures not only people officially unemployed, but those who have jobs and cannot obtain as many hours as they would like.
Total hours worked also declined by 0.3% over the quarter on a seasonally adjusted basis.
For comparison, Kiwibank points out that underutilisation peaked at 14.8% following the Global Financial Crisis.
New Zealand is now just one percentage point below that level.
Nearly One in Six Young Workers Unemployed
The most disturbing number appears when the labour market is broken down by age.
Unemployment among New Zealanders aged 15 to 24 is 17.2%.
That compares with 5.2% among those aged 25 to 34 and just 3.5% for those aged 35 to 44. Among the oldest age bracket discussed by Kiwibank, unemployment falls to only 1.9%.
The March quarter was worse again for younger workers, recording the highest youth unemployment rate since late 2012, during the aftermath of the Global Financial Crisis.
Young workers have always experienced higher unemployment than older, more experienced workers.
But 17.2% is not an ordinary number.
It means almost one in six young New Zealanders participating in the labour force cannot find work.
And for a generation trying to establish careers, leave home, save for a house and begin independent lives, the consequences extend far beyond an unemployment statistic.
Young People Become the Economy's Shock Absorbers
Kiwibank's economists describe younger workers as particularly exposed when an economy hits trouble.
The industries where young people commonly obtain their first jobs — hospitality, retail and other businesses dependent upon discretionary spending — are often among the first affected when households tighten their belts.
People continue paying for electricity and groceries.
They can stop buying coffees, eating out or making discretionary purchases.
When that happens, the café worker, shop assistant or inexperienced employee can quickly find themselves without sufficient hours — or without a job at all.
There is another problem.
Young New Zealanders aren't necessarily competing only against other young workers for those positions.
Kiwibank notes that in a weak labour market, experienced workers may apply for jobs below the level they would ordinarily consider and may accept lower wages because times are difficult.
An employer faced with a 20-year-old seeking their first substantial job and another applicant with five or ten years' experience has an understandable commercial decision to make.
The result is an experience trap.
You need experience to get the job.
But you need the job to gain experience.
There Are Jobs — Just Not Enough of Them
There is an important qualification in the latest figures.
New Zealand is creating employment.
Kiwibank says filled jobs have increased and labour-force participation rose from 70.4% to 70.7%.
Normally that would be encouraging. More people wanting to participate in the workforce should be a sign of confidence.
The problem is that employment isn't expanding quickly enough to accommodate them.
As Kiwibank explained:
"The economy is adding more jobs. The problem is that it's just not adding enough jobs."
The working-age population is also increasing, including through positive net international migration, further enlarging the pool of people looking for employment.
This is where the debate needs to move beyond simply counting jobs.
New Zealand doesn't just need more jobs.
It needs more productive, well-paid jobs capable of supporting New Zealand's cost of living.
Workers Are Going Backwards
Even having a job doesn't necessarily mean a household is getting ahead.
Kiwibank's figures show overall wage growth of approximately 2%, while consumer prices increased 4.1% over the corresponding period.
The result is a decline in purchasing power.
Kiwibank economist Elliott Lowe summed up the consequences simply: households are going backwards.
That is an important distinction when politicians talk about wages increasing.
A bigger pay packet doesn't necessarily mean a higher standard of living.
What matters is what those wages actually buy.
If the cost of living increases twice as quickly as wages, workers become poorer in real terms even though the number printed on their payslip has increased.
The Graph That Explains the Bigger Problem
The latest unemployment figures did not appear from nowhere.
Long-term Stats NZ data for real GDP per capita shows how difficult New Zealand has found it to generate sustained economic growth for the individual New Zealander.
Quarter after quarter, through successive Labour-led and National-led governments, real GDP per person has repeatedly hovered around very low growth rates, punctuated by periods of per-capita recession.
The extraordinary COVID-era collapse and rebound dominate the graph visually, but remove those exceptional movements and the longer-term problem becomes clearer.
New Zealand has struggled to generate sustained increases in economic output per person.
Real GDP per capita quarterly percentage change, 1992–2025. The long-term series shows repeated periods of per-capita contraction and generally modest quarterly growth across successive Labour-led and National-led governments. Source: Stats NZ.
This distinction matters enormously.
An economy can become larger simply because its population becomes larger.
More people mean more consumption, more houses, more government expenditure, more services and potentially more total GDP.
But that doesn't necessarily make the individual New Zealander better off.
GDP per capita asks the harder question:
Is the economy growing faster than the population it has to support?
And productivity takes us deeper again:
Are New Zealand workers producing greater economic value for every hour they work?
New Zealand's Productivity Problem
This is arguably the structural economic issue sitting underneath the employment and wage figures.
Sustainable improvements in living standards cannot ultimately come simply from increasing government spending, expanding population, raising nominal wages or redistributing existing income.
Over the long term, higher real wages depend heavily upon productivity.
A highly productive business can pay high wages and remain internationally competitive because each worker generates substantial economic value.
A low-productivity business faces a much harder equation.
And that helps explain an apparent contradiction increasingly visible in New Zealand.
Employers say they cannot afford substantially higher wages.
Workers say they cannot afford to live on the wages employers offer.
Both can be telling the truth.
If businesses themselves are operating on narrow margins and producing relatively little value per hour worked, there is a limit to what they can sustainably pay.
That isn't principally a wage problem.
It is a productivity problem.
And it is not new.
Successive governments of both major political colours have presided over periods of disappointing productivity and per-capita economic performance.
The question is why New Zealand has been unable to break out of it.
Why Are New Zealanders Looking to Australia?
That brings Australia into the equation.
For a young New Zealander deciding where to establish a career, the comparison is intensely practical.
What job can I get?
What will it pay?
What will housing cost?
What will be left after tax and living expenses?
Where are the opportunities for advancement?
And where am I most likely to be better off in ten years?
Australia has long exercised a powerful economic pull over New Zealand workers because New Zealand citizens can live and work there with relatively few barriers.
Not everyone leaving New Zealand does so because of employment or wages, and migration decisions are complex.
But when young New Zealanders face a 17.2% unemployment rate at home while Australia offers a much larger labour market and frequently higher wages, the attraction isn't difficult to understand.
And there is a potentially damaging feedback loop.
When productive, educated, skilled and ambitious New Zealanders leave, the country loses some of the very human capital it needs to build higher-productivity industries.
We don't simply lose population.
We risk losing future entrepreneurs, tradespeople, engineers, technicians, health professionals, managers and taxpayers.
Immigration Doesn't Automatically Solve Productivity
Immigration can bring enormous benefits to New Zealand.
Migrants can bring skills, investment, entrepreneurship and connections to international markets.
But increasing the number of workers does not automatically increase productivity per worker.
Kiwibank itself highlights the tension.
New Zealand's working-age population is increasing, partly because net international migration remains positive, while employment isn't expanding sufficiently quickly to absorb everyone wanting work.
If population rises faster than the economy creates productive employment, competition for available jobs can increase.
That raises a fundamental policy question.
Should New Zealand judge economic success by how large the economy becomes — or by whether the people already living here become more prosperous?
Headline GDP can increase because population increases.
GDP per person is harder.
Productivity is harder still.
But those are ultimately the measures that matter to household living standards.
Two New Zealands
The national unemployment figure also conceals an extraordinary geographic divide.
Kiwibank reports unemployment of approximately 6% across the North Island, compared with only 3.7% in the South Island.
Canterbury and Otago are performing particularly strongly at around 3.6%.
Northland, by comparison, has unemployment of 8.8%.
Kiwibank's economists remarked that the difference makes the country look almost like "two different countries".
They also point to different underlying economic structures.
The South Island has substantial exposure to agriculture and tourism, while the North Island carries a greater concentration of services.
Whatever the cause, an unemployment rate of 3.6% in one part of New Zealand and 8.8% in another should command the attention of policymakers.
National averages can conceal regional economic distress.
Where Is the Government's Productivity Plan?
This is where the numbers inevitably become political.
The National-led Government inherited substantial economic problems.
Weak productivity, inflationary pressures, infrastructure constraints, poor investment performance and New Zealand's longstanding economic relationship with Australia did not suddenly appear following the 2023 election.
Nor can any government immediately turn around a labour market.
Kiwibank stresses that employment is a lagging indicator, with today's numbers substantially reflecting economic conditions six to nine months earlier.
But that explanation has limits.
After nearly three years in office, the Government increasingly owns the direction of economic policy.
The question therefore is no longer simply:
What did National inherit?
It is:
What is the plan to change it?
Where is the strategy capable of materially lifting productivity?
Where are the industries that will generate substantially greater economic value per worker?
How does New Zealand attract productive capital rather than simply consumption and property investment?
How do we build businesses capable of paying Australian-level wages?
How do we give a 20-year-old New Zealander a compelling economic reason to remain here?
And what measurable targets should voters use to determine whether any of it is working?
These questions deserve clear answers from the Government.
The Recovery That Keeps Moving Away
Perhaps the most revealing part of Kiwibank's discussion comes when its economists look forward.
They remain optimistic that New Zealand will recover.
But the timing keeps slipping.
The stronger recovery expected during 2026 has been disrupted, and Kiwibank now suggests the labour market may not look properly better until the second half of 2027.
For an economist, that's a forecast.
For a 20-year-old unable to find their first serious job, it's another year of their life.
For a household whose wages are rising at roughly half the rate of prices, it's another year of declining purchasing power.
For a business owner struggling with costs and weak consumer demand, it's another year of uncertainty.
And for a New Zealander already comparing their future with Australia, it may be another reason to leave.
The National Interest Test
eLocal's National Interest Test asks one basic question:
Does this make New Zealand stronger?
An economy with 5.6% unemployment, 13.8% labour underutilisation, 17.2% youth unemployment and wages rising substantially more slowly than prices cannot reasonably be regarded as delivering the prosperity New Zealanders should expect.
But the deeper issue is not today's unemployment number.
It is whether New Zealand is creating the economic conditions necessary to prevent the same problems recurring.
New Zealand needs economic growth.
More importantly, it needs productive growth — growth that raises output per person, creates businesses capable of paying higher real wages, improves household prosperity and gives younger New Zealanders a reason to build their futures here.
That challenge belongs neither exclusively to Labour nor National.
The long-term GDP-per-capita record crosses governments of both colours.
But the Government of the day has responsibility for what happens next.
The unemployment rate will eventually fall.
Economic cycles always turn.
The much harder question is whether New Zealand will have addressed the structural weaknesses underneath it when that happens.
Because if productivity remains weak, economic growth per person remains anaemic and Australian wages and opportunities continue to pull New Zealanders across the Tasman, the departure gate will keep offering young Kiwis an economic policy of its own.
A one-way ticket.
Source
Kiwibank — Markets, Mystics & Mayhem: Young labour force(d) to the back of the queue, hosted by Jarrod Kerr, Alexandra Turcu and Elliott Lowe, published 11 August 2026.
Stats NZ — labour market and real GDP per capita data.
Independent reporting. Original context. Credited sources.