Winston Peters says New Zealand remains a desirable country, but is no longer as attractive as it once was. Behind that observation lies a deeper economic problem: a country that has struggled for decades to increase the value it produces for every hour worked
Report by eLocal
New Zealand First leader Winston Peters has acknowledged something increasingly difficult to ignore: New Zealand is not the country of economic opportunity it once appeared to be.
Speaking to RNZ political editor Jo Moir during the 2026 election campaign, Peters said the country remained an attractive place to live, work and raise a family, but was "not as attractive as it used to be".
His comments were part of a wider discussion about the election, government formation and the affordability of political promises.
But the most important issue may not be which parties eventually form the next government.
It is whether New Zealand has retained the productive economic capacity needed to sustain the living standards, public services and opportunities its citizens expect.
The evidence suggests this problem has been developing for decades.
The Numbers Behind the Decline
New Zealand's productivity performance has been weak for a prolonged period.
In its 2025 Long-term Fiscal Statement, He Tirohanga Mokopuna, the Treasury reported that annual labour productivity growth had averaged just 0.7 percent over the preceding two decades.
That compares with an average of approximately 1 percent over the preceding 30 years.
The difference may appear small, but productivity growth compounds over time. A sustained slowdown gradually reduces the economy's capacity to generate higher incomes and support additional public spending.
Productivity is not simply about asking people to work harder.
It measures how effectively labour, capital, technology and organisation combine to produce goods and services.
A country can increase its total economic output by employing more people or expanding its population without achieving a comparable improvement in output per worker.
That distinction is critical.
Growth in headline GDP does not necessarily mean that the average household is becoming substantially more prosperous.
The Treasury has acknowledged that stronger population growth, labour participation and favourable export prices have helped support national income despite disappointing productivity performance.
Those factors can provide genuine economic benefits. They cannot, by themselves, substitute indefinitely for improvements in productive efficiency.
A Country Short of Productive Capital
The OECD's 2026 assessment of New Zealand identifies a persistent problem with investment and capital intensity.
In straightforward terms, New Zealand workers often have less productive capital available to support their work than workers in more productive advanced economies.
That capital includes machinery, equipment, technology, infrastructure and the systems that allow businesses to operate efficiently.
Treasury research published in 2025 similarly identifies relatively low capital intensity and the high cost of capital as contributors to weak productivity.
This matters because productivity is not an abstract economic statistic.
A manufacturer with modern equipment can produce more with the same workforce. A construction company with better technology can complete projects more efficiently. A farmer with improved infrastructure can increase output while managing costs.
When businesses cannot justify or finance those investments, the economy becomes more dependent on additional labour, longer hours and higher prices to generate growth.
The result is an economy that may remain busy without becoming proportionately wealthier.
What Happened to New Zealand's Productive Economy?
The decline cannot be explained by a single government or one policy decision.
Treasury research examining changes in industry structure identifies a prolonged productivity slowdown and evidence that New Zealand has not experienced the same beneficial movement of labour towards more productive industries seen across the OECD on average.
The research also records the movement of employment away from agriculture and manufacturing towards service industries, a pattern shared by other developed economies.
That does not mean services are inherently unproductive. Technology, engineering, professional services and other knowledge-intensive industries can generate substantial economic value.
The more important question is whether New Zealand has developed enough high-value activities to replace, complement and expand its traditional productive strengths.
If capital and skilled labour move into activities generating relatively little additional output, economic growth becomes harder to sustain.
Equally, if profitable businesses cannot access competitive finance, reliable energy or the infrastructure needed to expand, productive opportunities can be lost.
The evidence points towards a structural problem involving investment, competition, innovation and the allocation of resources.
Describing that process as the hollowing out of New Zealand's productive economy is a reasonable analytical interpretation, provided it is not mistaken for proof that every industry has contracted or that one deliberate policy caused the entire decline.
Energy, Infrastructure and the Cost of Producing Wealth
The OECD's 2026 Economic Survey identifies affordable and reliable electricity and gas supplies as important to New Zealand's productivity performance.
Energy is an input into almost every productive activity.
When energy becomes expensive or unreliable, manufacturers, food processors, transport operators and other businesses face higher costs and greater uncertainty.
Those pressures influence investment decisions.
A business considering whether to expand production must assess not only labour costs but also electricity, transport, regulatory requirements, financing and access to markets.
If those costs make investment uneconomic, expansion may be postponed, scaled back or undertaken elsewhere.
The same logic applies to infrastructure.
Congested roads, delayed construction, inadequate water systems and expensive development processes can reduce the return on productive investment.
This is why infrastructure policy should be assessed by what it enables the economy to produce, rather than merely by the amount of money announced.
A billion dollars spent is not automatically a billion dollars of productive capacity created.
The economic return depends on what is built, what it costs, how effectively it operates and who ultimately benefits.
Housing Wealth Is Not the Same as Productive Wealth
New Zealand's longstanding reliance on property as a major store of household wealth raises another question about how capital is allocated.
Housing provides essential shelter and residential construction is itself a productive industry.
However, rising prices for existing properties do not necessarily represent an equivalent increase in the country's productive output.
When capital and borrowing capacity become heavily concentrated in bidding up existing assets, businesses seeking funds for equipment, technology or expansion may face a less favourable investment environment.
The relationship is complex. Property investment does not automatically displace business investment, and housing shortages can themselves constrain economic growth.
Nevertheless, the allocation of savings and credit between existing assets and new productive capacity deserves scrutiny.
A stronger economy requires investment that expands what New Zealand can make, grow, develop and sell, rather than relying principally on increases in asset values.
Political Promises and the Revenue Problem
Peters also questioned the credibility of competing parties' fiscal promises.
According to RNZ, he argued that economic growth was insufficient to support the spending commitments being made during the campaign.
His criticism is a political claim, not an independent assessment of every party's fiscal plan.
But the underlying economic constraint is real.
Governments fund services through taxation, borrowing and other revenue sources. Their long-term capacity to do so depends heavily on the size and productivity of the economy.
Treasury's 2025 fiscal statement warns that population ageing, healthcare costs and existing structural deficits will place increasing pressure on public finances.
Weak productivity growth makes those challenges harder.
A government can change tax rates, redistribute expenditure or borrow to fund particular priorities.
Those choices can have important consequences, and some public spending, especially effective education, healthcare and infrastructure investment, can itself improve future productivity.
But no fiscal strategy can permanently avoid the underlying requirement for a productive economy capable of supporting its commitments.
This is where election debates should become more demanding.
Political parties should explain not only what they intend to spend, but how their policies will increase productive investment, competition, innovation, household purchasing power and the economy's capacity to sustain future obligations.
Will New Zealanders Actually Become Better Off?
Will this in fact make New Zealand stronger? That is the question that should be applied to every major economic proposal presented during the election campaign.
A policy that increases measured GDP but leaves output per person stagnant requires closer examination.
A policy that raises government revenue while weakening productive investment may impose longer-term costs.
Equally, a policy that reduces public expenditure but undermines essential infrastructure, education or healthcare can damage future productivity.
The test is not whether a policy is described as pro-business, fiscally responsible or socially progressive.
It is whether the evidence indicates that it will strengthen New Zealand's ability to create value, support higher real incomes, improve resilience and expand opportunity.
That requires examining who pays, who benefits, which incentives change and whether the promised gains are likely to materialise.
A Problem Bigger Than One Election
New Zealand's weak productivity performance has developed across successive governments and changing economic conditions.
International economic pressures, geographical isolation, market size and global technological trends all play a role.
The OECD and Treasury nevertheless identify domestic constraints that policy can influence, including investment, competition, infrastructure, capital markets and innovation.
There is no credible basis for attributing the entire slowdown to a single political party, nor for assuming that one reform will reverse it.
The challenge is cumulative.
If New Zealand continues to underinvest in productive capacity, its ability to fund public services, retain skilled workers and provide attractive economic opportunities will remain constrained.
Peters' observation that New Zealand is less attractive than it once was therefore deserves examination beyond the election campaign.
The central question is not simply how New Zealand can attract more people or generate higher headline growth.
It is how the country can become sufficiently productive to offer its existing citizens stronger wages, affordable essentials, viable businesses and a realistic opportunity to build prosperity.
That is the economic test against which the promises of every party should be measured.
Sources
- Jo Moir, RNZ, "'Not as attractive as it used to be' - Winston Peters on living in NZ today", 12 October 2026
- New Zealand Treasury, He Tirohanga Mokopuna: Long-term Fiscal Statement 2025
- OECD, Economic Surveys: New Zealand 2026
- OECD, Foundations for Growth and Competitiveness: New Zealand 2026
- New Zealand Treasury, Understanding the Effect of Changing Industry Structure on New Zealand's Labour Productivity Slowdown, 2025
- New Zealand Treasury, Why Not Both? The Effects of Innovation and Capital on Productivity in New Zealand, 2025