Economic Sustainability
#17Key Findings
New Zealand falls into the sample’s middle ranks (rank 17) in the category of economic sustainability.
The country lacks a comprehensive national circular-economy strategy with fully defined goals. Under current investment plans, there is a significant infrastructure gap over the next 30 years, exacerbated by climate change. The government has set emissions-reduction and renewable-energy targets, but lacks a detailed roadmap for a fully decarbonized energy system.
Despite education and training programs, the labor market features shortages of skilled workers in key sectors. There are legal protections against workplace discrimination, but significant pay gaps persist for Māori and Pasifika workers. The government in 2023 has sought to roll back some previously passed workers’ rights provisions.
The tax system relies heavily on a regressive goods and services tax and personal income tax. The government has sought to diminish tax disincentives to work and investment. Environmental taxes aim to internalize negative externalities. Budgets use tools such as medium- and long-term projections and performance-based budgeting to promote sustainability.
The country lacks a comprehensive national circular-economy strategy with fully defined goals. Under current investment plans, there is a significant infrastructure gap over the next 30 years, exacerbated by climate change. The government has set emissions-reduction and renewable-energy targets, but lacks a detailed roadmap for a fully decarbonized energy system.
Despite education and training programs, the labor market features shortages of skilled workers in key sectors. There are legal protections against workplace discrimination, but significant pay gaps persist for Māori and Pasifika workers. The government in 2023 has sought to roll back some previously passed workers’ rights provisions.
The tax system relies heavily on a regressive goods and services tax and personal income tax. The government has sought to diminish tax disincentives to work and investment. Environmental taxes aim to internalize negative externalities. Budgets use tools such as medium- and long-term projections and performance-based budgeting to promote sustainability.
Graph View
Graph View
How committed is the government to driving the transition toward a circular economy?
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9
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The government is clearly committed to transitioning to a circular economy.
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7
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7
6
The government is largely committed to transitioning to a circular economy.
5
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3
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3
The government is somewhat committed to transitioning to a circular economy.
2
1
1
The government is not at all committed to transitioning to a circular economy.
While New Zealand is actively exploring and developing strategies to transition toward a more circular economy, there is no single, comprehensive national strategy or roadmap with fully defined and binding goals for this transition.
Several notable initiatives aim to foster a more circular economy. For instance, in early 2023, the Labour-Green coalition announced a new recycling project that will prevent approximately 45,000 tons of carbon emissions by 2035. As Environment Minister David Parker said, the new recycling strategy “commits us to becoming a low-emissions, low-waste circular economy by 2050” (RNZ 2023). Simultaneously, the government took steps to integrate circular economy principles into public procurement – for example, by developing sustainable procurement guidelines encouraging public agencies to consider environmental and social impacts when purchasing goods and services (New Zealand Government Procurement n.d.).
While these efforts indicate a growing interest in and commitment to transitioning to a circular economy, the absence of a singular, fully articulated strategy is problematic. For example, the Labour-Green coalition committed to building new waste-to-energy plants, which have been criticized by environmental researchers for not creating incentives to reduce waste (Srinivasa 2023). Similarly, a 2022 report by the Sustainable Businesses Network argues that encouraging the growth of circular business models requires more fundamental reforms, as “current regulation, taxation and accounting practices don’t provide the necessary carrots and sticks to support a circular economy” (RNZ 2022).
Citations:
New Zealand Government Procurement. n.d. “Reducing Emissions and Waste.” https://www.procurement.govt.nz/broader-outcomes/reducing-emissions-and-waste/
RNZ. 2022. “Economic system incentivises waste, slows circular economy transition – report.” 22 August. https://www.rnz.co.nz/news/business/473244/economic-system-incentivises-waste-slows-circular-economy-transition-report
RNZ. 2023. “New nationwide recycling and food scraps strategy unveiled.” 29 March. https://www.rnz.co.nz/news/national/486958/new-nationwide-recycling-and-food-scraps-strategy-unveiled
Srinivasa, Y. 2023. “Waste-to-energy plants are ‘yesterday’s technology’, researchers say on Waimate proposal.” Stuff, April 26. https://www.stuff.co.nz/environment/131786690/wastetoenergy-plants-are-yesterdays-technology-researchers-say-on-waimate-proposal
Several notable initiatives aim to foster a more circular economy. For instance, in early 2023, the Labour-Green coalition announced a new recycling project that will prevent approximately 45,000 tons of carbon emissions by 2035. As Environment Minister David Parker said, the new recycling strategy “commits us to becoming a low-emissions, low-waste circular economy by 2050” (RNZ 2023). Simultaneously, the government took steps to integrate circular economy principles into public procurement – for example, by developing sustainable procurement guidelines encouraging public agencies to consider environmental and social impacts when purchasing goods and services (New Zealand Government Procurement n.d.).
While these efforts indicate a growing interest in and commitment to transitioning to a circular economy, the absence of a singular, fully articulated strategy is problematic. For example, the Labour-Green coalition committed to building new waste-to-energy plants, which have been criticized by environmental researchers for not creating incentives to reduce waste (Srinivasa 2023). Similarly, a 2022 report by the Sustainable Businesses Network argues that encouraging the growth of circular business models requires more fundamental reforms, as “current regulation, taxation and accounting practices don’t provide the necessary carrots and sticks to support a circular economy” (RNZ 2022).
Citations:
New Zealand Government Procurement. n.d. “Reducing Emissions and Waste.” https://www.procurement.govt.nz/broader-outcomes/reducing-emissions-and-waste/
RNZ. 2022. “Economic system incentivises waste, slows circular economy transition – report.” 22 August. https://www.rnz.co.nz/news/business/473244/economic-system-incentivises-waste-slows-circular-economy-transition-report
RNZ. 2023. “New nationwide recycling and food scraps strategy unveiled.” 29 March. https://www.rnz.co.nz/news/national/486958/new-nationwide-recycling-and-food-scraps-strategy-unveiled
Srinivasa, Y. 2023. “Waste-to-energy plants are ‘yesterday’s technology’, researchers say on Waimate proposal.” Stuff, April 26. https://www.stuff.co.nz/environment/131786690/wastetoenergy-plants-are-yesterdays-technology-researchers-say-on-waimate-proposal
Graph View
How committed is the government to updating and protecting critical infrastructure?
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9
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The government is clearly committed to updating basic technical infrastructure.
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The government is largely committed to updating basic technical infrastructure.
5
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3
4
3
The government is somewhat committed to updating basic technical infrastructure.
2
1
1
The government is not at all committed to updating basic technical infrastructure.
New Zealand faces significant challenges related to infrastructure deficits in various sectors. The Treasury’s 2022 Investment Statement estimates the combined infrastructure gap at $210 billion over the next 30 years under current investment plans. Te Waihanga / New Zealand Infrastructure Commission, established in 2019, estimates that addressing current and future infrastructure requirements would require nearly doubling current spending – from 5.5% of gross domestic product (GDP) to 9.6% over a 30-year period – which would be the equivalent of $31 billion annually to close the gap (RNZ 2022).
Concerns persist that climate change will exacerbate the infrastructure deficit, posing additional challenges to maintaining and upgrading infrastructure. For example, the Treasury calculated that Cyclone Gabrielle and the Auckland Anniversary weekend floods – which struck in early 2023 – caused damages ranging between $9 billion and $14.6 billion (Coughlan 2023). In addition, aging water infrastructure across New Zealand’s three waters (i.e., waste, storm and drinking) also requires significant funding and rebuilding. The Labour government launched the Three Waters policy, but it proved highly controversial and became a contentious issue in the lead-up to the 2023 election. At the end of 2023, the new National government announced the repeal of the legislation (Beehive 2023).
There is also apprehension about New Zealand’s susceptibility to cyberattacks. In May 2023, the Five Eyes intelligence network issued an alert warning that a group sponsored by the Chinese state had been targeting U.S. critical infrastructure and could direct their efforts to other Western democracies, including New Zealand (RNZ 2023).
In mid-2023, the New Zealand government published a discussion document, acknowledging that the country “is exposed to a wide range of hazards that … can trigger infrastructure failures” as well as recognizing “a range of other threats, such as cyber attacks, espionage and terrorism, which can bring the delivery of crucial services to a halt” (New Zealand Government 2023).
In its 2023 budget, the Labour-Green coalition committed $71 billion for new and existing infrastructure programs, an additional $1 billion for a flood and cyclone recovery package, and $6 billion for a National Resilience Plan. However, critics pointed out that the budget “doesn’t make any bold leaps toward infrastructure resiliency” and mainly focuses on “repairing our existing infrastructure” (Shaw et al. 2023).
The government led by Chris Hipkins also introduced the Emergency Management Bill. The bill establishes an amended legal framework that will replace the Civil Defense Emergency Management Act 2002. While the government argued that the bill aims to modernize resilience, critics point out that the new legal framework focuses more on managing the aftermath of disasters and improving civil defense operations rather than on disaster-proofing critical infrastructure (Pennington 2023).
During the 2023 election campaign, the National Party pledged to establish a new National Infrastructure Agency. This agency, tasked with finding private investors and managing the contracting for major infrastructure projects, would also introduce a “value capture” tax on properties benefiting from the completion of significant infrastructure projects (McConnell 2023).
Citations:
Beehive. 2023. “Government to repeal Three Waters Legislation.” https://www.beehive.govt.nz/release/government-repeal-three-waters-legislation
Coughlan, T. 2023. “‘Hard calls’ on cyclone recovery to come – Finance Minister Grant Robertson.” New Zealand Herald. https://www.nzherald.co.nz/nz/politics/finance-minister-grant-robertson-to-preach-resilience-in-pre-budget-speech/WEUPSZXFAJGAZECFQXPBZJHIUY
McConnell, G. 2023. “National campaigns for new infrastructure agency, and value capture taxes.” Stuff, June 7. https://www.stuff.co.nz/national/politics/300899281/national-campaigns-for-new-infrastructure-agency-and-value-capture-taxes
New Zealand Government. 2023. “Strengthening the Resilience of Aotearoa New Zealand’s Critical Infrastructure System.” https://consultation.dpmc.govt.nz/national-security-group/critical-infrastucture-phase-1-public-consultation/user_uploads/dpmc–summary-dd–strengthening-the-resilience-of-ci.pdf
Pennington, P. 2023. “Emergency Management Bill flawed, government told by officials.” 16 June. https://www.rnz.co.nz/news/political/492100/emergency-management-bill-flawed-government-told-by-officials
RNZ. 2022. “Infrastructure Commission Releases First Long-Term Strategy.” 2 May. https://www.rnz.co.nz/news/political/466284/infrastructure-commission-releases-first-long-term-strategy
RNZ. 2023. “NZ Warned After Chinese Hackers Target Critical US Infrastructure – Intelligence Agencies.” 25 May. https://www.rnz.co.nz/news/world/490642/nz-warned-after-chinese-hackers-target-critical-us-infrastructure-intelligence-agencies
Shaw, R., et al. 2023. “For a no-frills New Zealand budget it was ‘surprisingly frilly’: 5 experts on Labour’s big pre-election calls.” The Conversation, 18 May. https://theconversation.com/for-a-no-frills-new-zealand-budget-it-was-surprisingly-frilly-5-experts-on-labours-big-pre-election-calls-205925
Concerns persist that climate change will exacerbate the infrastructure deficit, posing additional challenges to maintaining and upgrading infrastructure. For example, the Treasury calculated that Cyclone Gabrielle and the Auckland Anniversary weekend floods – which struck in early 2023 – caused damages ranging between $9 billion and $14.6 billion (Coughlan 2023). In addition, aging water infrastructure across New Zealand’s three waters (i.e., waste, storm and drinking) also requires significant funding and rebuilding. The Labour government launched the Three Waters policy, but it proved highly controversial and became a contentious issue in the lead-up to the 2023 election. At the end of 2023, the new National government announced the repeal of the legislation (Beehive 2023).
There is also apprehension about New Zealand’s susceptibility to cyberattacks. In May 2023, the Five Eyes intelligence network issued an alert warning that a group sponsored by the Chinese state had been targeting U.S. critical infrastructure and could direct their efforts to other Western democracies, including New Zealand (RNZ 2023).
In mid-2023, the New Zealand government published a discussion document, acknowledging that the country “is exposed to a wide range of hazards that … can trigger infrastructure failures” as well as recognizing “a range of other threats, such as cyber attacks, espionage and terrorism, which can bring the delivery of crucial services to a halt” (New Zealand Government 2023).
In its 2023 budget, the Labour-Green coalition committed $71 billion for new and existing infrastructure programs, an additional $1 billion for a flood and cyclone recovery package, and $6 billion for a National Resilience Plan. However, critics pointed out that the budget “doesn’t make any bold leaps toward infrastructure resiliency” and mainly focuses on “repairing our existing infrastructure” (Shaw et al. 2023).
The government led by Chris Hipkins also introduced the Emergency Management Bill. The bill establishes an amended legal framework that will replace the Civil Defense Emergency Management Act 2002. While the government argued that the bill aims to modernize resilience, critics point out that the new legal framework focuses more on managing the aftermath of disasters and improving civil defense operations rather than on disaster-proofing critical infrastructure (Pennington 2023).
During the 2023 election campaign, the National Party pledged to establish a new National Infrastructure Agency. This agency, tasked with finding private investors and managing the contracting for major infrastructure projects, would also introduce a “value capture” tax on properties benefiting from the completion of significant infrastructure projects (McConnell 2023).
Citations:
Beehive. 2023. “Government to repeal Three Waters Legislation.” https://www.beehive.govt.nz/release/government-repeal-three-waters-legislation
Coughlan, T. 2023. “‘Hard calls’ on cyclone recovery to come – Finance Minister Grant Robertson.” New Zealand Herald. https://www.nzherald.co.nz/nz/politics/finance-minister-grant-robertson-to-preach-resilience-in-pre-budget-speech/WEUPSZXFAJGAZECFQXPBZJHIUY
McConnell, G. 2023. “National campaigns for new infrastructure agency, and value capture taxes.” Stuff, June 7. https://www.stuff.co.nz/national/politics/300899281/national-campaigns-for-new-infrastructure-agency-and-value-capture-taxes
New Zealand Government. 2023. “Strengthening the Resilience of Aotearoa New Zealand’s Critical Infrastructure System.” https://consultation.dpmc.govt.nz/national-security-group/critical-infrastucture-phase-1-public-consultation/user_uploads/dpmc–summary-dd–strengthening-the-resilience-of-ci.pdf
Pennington, P. 2023. “Emergency Management Bill flawed, government told by officials.” 16 June. https://www.rnz.co.nz/news/political/492100/emergency-management-bill-flawed-government-told-by-officials
RNZ. 2022. “Infrastructure Commission Releases First Long-Term Strategy.” 2 May. https://www.rnz.co.nz/news/political/466284/infrastructure-commission-releases-first-long-term-strategy
RNZ. 2023. “NZ Warned After Chinese Hackers Target Critical US Infrastructure – Intelligence Agencies.” 25 May. https://www.rnz.co.nz/news/world/490642/nz-warned-after-chinese-hackers-target-critical-us-infrastructure-intelligence-agencies
Shaw, R., et al. 2023. “For a no-frills New Zealand budget it was ‘surprisingly frilly’: 5 experts on Labour’s big pre-election calls.” The Conversation, 18 May. https://theconversation.com/for-a-no-frills-new-zealand-budget-it-was-surprisingly-frilly-5-experts-on-labours-big-pre-election-calls-205925
Graph View
How committed is the government to fully decarbonizing the energy system by 2050?
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9
9
The government is clearly committed to transitioning to a decarbonized energy system.
8
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7
6
The government is largely committed to transitioning to a decarbonized energy system.
5
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3
4
3
The government is somewhat committed to transitioning to a decarbonized energy system.
2
1
1
The government is not at all committed to transitioning to a decarbonized energy system.
While New Zealand does not have a comprehensive roadmap detailing every step toward a fully decarbonized energy system by 2050, successive governments have outlined several strategies and actions contributing to this transition.
The Zero Carbon Act 2019 sets a legally binding commitment to reduce New Zealand’s greenhouse gas emissions to net zero by 2050. The act establishes long-term emissions reduction targets and requires regular emissions budgets to achieve these goals. The government’s Energy Strategy 2050 aims to reach net zero for long-lived gases by 2050, and sets the objective of generating 100% renewable electricity by 2030 (Ministry of Business, Innovation & Employment 2023). New Zealand has an Emissions Trading Scheme designed to put a price on carbon emissions, incentivizing emission reductions and providing economic signals for transitioning to low-carbon alternatives (Ministry for the Environment n.d.). The government also supports investments in clean energy technology research, development and deployment, including renewable energy projects and innovations in energy storage – for example, through the Government Investment in Decarbonizing Industry (GIDI) fund (RNZ 2023) or through the $2 billion climate infrastructure fund with U.S. investment fund BlackRock, which was announced in August 2023 (New Zealand Government 2023).
A report published by the International Energy Agency (IEA) in 2023 commends New Zealand for setting ambitious decarbonization targets and highlights that – due to its vast renewable energy resources – the country is in a good position to cut emissions across the economy. However, the report also notes that New Zealand has more work to do in setting clear pathways to meet its objectives (IEA 2023).
Moreover, the 2023 elections and the change in government from Labour to National have thrown the decarbonization targets into doubt. While new Prime Minister Christopher Luxon in principle supports the decarbonization of the economy and has announced several policy measures to achieve this objective – for example, shortening consent timeframes for renewable energy projects – the National-ACT-NZ First coalition agreement also contains several measures that would undermine decarbonization efforts, such as scrapping the Clean Car Discount and reversing the ban on at-sea oil and gas exploration (Wannan 2023).
Citations:
IEA. 2023. “New Zealand Can Use Its Clean Electricity Strengths to Decarbonise Its Energy System, Says New IEA Report.” https://www.iea.org/news/new-zealand-can-use-its-clean-electricity-strengths-to-decarbonise-its-energy-system-says-new-iea-report
Ministry for the Environment. n.d. “New Zealand Emissions Trading Scheme.” https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/
Ministry of Business, Innovation & Employment. 2023. “New Zealand Energy Strategy.” https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/energy-strategies-for-new-zealand/new-zealand-energy-strategy/
New Zealand Government. 2023. “First of its kind climate fund to back 100% renewable electricity.” https://www.beehive.govt.nz/release/first-its-kind-climate-fund-back-100-renewable-electricity
RNZ. 2023. “Government commits extra $16.2 million to Government Investment in Decarbonising Industry.” 20 April. https://www.rnz.co.nz/news/political/488370/government-commits-extra-16-point-2-million-to-government-investment-in-decarbonising-industry
Wannan, O. 2023. “The Unexpected Climate Plans of the New Government.” Stuff, November 28. https://www.stuff.co.nz/environment/climate-news/133356580/the-unexpected-climate-plans-of-the-new-government
The Zero Carbon Act 2019 sets a legally binding commitment to reduce New Zealand’s greenhouse gas emissions to net zero by 2050. The act establishes long-term emissions reduction targets and requires regular emissions budgets to achieve these goals. The government’s Energy Strategy 2050 aims to reach net zero for long-lived gases by 2050, and sets the objective of generating 100% renewable electricity by 2030 (Ministry of Business, Innovation & Employment 2023). New Zealand has an Emissions Trading Scheme designed to put a price on carbon emissions, incentivizing emission reductions and providing economic signals for transitioning to low-carbon alternatives (Ministry for the Environment n.d.). The government also supports investments in clean energy technology research, development and deployment, including renewable energy projects and innovations in energy storage – for example, through the Government Investment in Decarbonizing Industry (GIDI) fund (RNZ 2023) or through the $2 billion climate infrastructure fund with U.S. investment fund BlackRock, which was announced in August 2023 (New Zealand Government 2023).
A report published by the International Energy Agency (IEA) in 2023 commends New Zealand for setting ambitious decarbonization targets and highlights that – due to its vast renewable energy resources – the country is in a good position to cut emissions across the economy. However, the report also notes that New Zealand has more work to do in setting clear pathways to meet its objectives (IEA 2023).
Moreover, the 2023 elections and the change in government from Labour to National have thrown the decarbonization targets into doubt. While new Prime Minister Christopher Luxon in principle supports the decarbonization of the economy and has announced several policy measures to achieve this objective – for example, shortening consent timeframes for renewable energy projects – the National-ACT-NZ First coalition agreement also contains several measures that would undermine decarbonization efforts, such as scrapping the Clean Car Discount and reversing the ban on at-sea oil and gas exploration (Wannan 2023).
Citations:
IEA. 2023. “New Zealand Can Use Its Clean Electricity Strengths to Decarbonise Its Energy System, Says New IEA Report.” https://www.iea.org/news/new-zealand-can-use-its-clean-electricity-strengths-to-decarbonise-its-energy-system-says-new-iea-report
Ministry for the Environment. n.d. “New Zealand Emissions Trading Scheme.” https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/
Ministry of Business, Innovation & Employment. 2023. “New Zealand Energy Strategy.” https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/energy-strategies-for-new-zealand/new-zealand-energy-strategy/
New Zealand Government. 2023. “First of its kind climate fund to back 100% renewable electricity.” https://www.beehive.govt.nz/release/first-its-kind-climate-fund-back-100-renewable-electricity
RNZ. 2023. “Government commits extra $16.2 million to Government Investment in Decarbonising Industry.” 20 April. https://www.rnz.co.nz/news/political/488370/government-commits-extra-16-point-2-million-to-government-investment-in-decarbonising-industry
Wannan, O. 2023. “The Unexpected Climate Plans of the New Government.” Stuff, November 28. https://www.stuff.co.nz/environment/climate-news/133356580/the-unexpected-climate-plans-of-the-new-government
Graph View
To what extent do existing labor market institutions support or hinder the transition to an adaptive labor market?
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Labor market institutions are fully aligned with the goal of an adaptable labor market.
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Labor market institutions are largely aligned with the goal of an adaptable labor market.
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3
Labor market institutions are only somewhat aligned with the goal of an adaptable labor market.
2
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1
Labor market institutions are not at all aligned with the goal of an adaptable labor market.
Labor market institutions generally support, rather than hinder, the transition to an adaptive labor market.
Most fundamentally, New Zealand’s employment laws include provisions that allow flexibility in work arrangements, such as part-time work, temporary contracts and flexible hours. New Zealand also offers social safety nets and unemployment support systems to assist individuals during job transitions.
New Zealand does not have a nationwide short-time work scheme like those seen in other OECD countries. However, during economic downturns or crises, governments have implemented various temporary measures to support employment and businesses, such as wage subsidy schemes or tax relief schemes.
Government agencies collect labor market data to assess trends, skills gaps and employment needs, aiding in informed policy decisions and targeted interventions. The government has also initiated programs to upskill and reskill the workforce to meet the evolving demands of industries. For example, the Labour-Green budget in 2023 committed $27 million to growing New Zealand’s digital workforce and increasing women’s participation in the technology sector.
Challenges persist in fully transitioning to an adaptive labor market. Despite efforts in education and training, many sectors of the New Zealand economy and public services suffer from a shortage of skilled workers. Examples include freight and logistics (New Zealand Herald 2023), manufacturing and engineering (Tilo 2022), and healthcare (Hewett 2023).
It is likely that the mismatch between available skills and industry needs will persist under the recently elected National-led government. While the coalition under Luxon has announced a new visa policy to attract skilled tech workers, it has been criticized for its plans to scrap workforce development councils and de-establish Te Pūkenga, New Zealand’s largest vocational education provider (Gerritsen 2023).
Citations:
Gerritsen, J. 2023. “Industry leaders worried at National Party plan to scrap Workforce Development Councils.” RNZ, 8 September. https://www.rnz.co.nz/news/national/497541/industry-leaders-worried-at-national-party-plan-to-scrap-workforce-development-councils
Hewett, W. 2023. “Govt Unveils New Sustained Improvement Plan to Tackle Issues within NZ’s Health Workforce.” Newshub, July 4. https://www.newshub.co.nz/home/politics/2023/07/govt-unveils-new-sustained-improvement-plan-to-tackle-issues-within-nz-s-health-workforce.html
New Zealand Herald. 2023. “Skilled labour shortage: Freight, logistics sector needs 18,000 workers for jobs.” 25 May. https://www.nzherald.co.nz/kahu/18000-skilled-workers-urgently-needed-for-logistics-sector-new-study/BQFZIVX6RZB6XELIWNBBJ2263I/
Tilo, D. 2022. “Report Warns of 40K Staff Shortage in These Sectors.” Human Resources Director, November 12. https://www.hcamag.com/nz/specialisation/recruitment/report-warns-of-40k-staff-shortage-in-these-sectors/427274
Most fundamentally, New Zealand’s employment laws include provisions that allow flexibility in work arrangements, such as part-time work, temporary contracts and flexible hours. New Zealand also offers social safety nets and unemployment support systems to assist individuals during job transitions.
New Zealand does not have a nationwide short-time work scheme like those seen in other OECD countries. However, during economic downturns or crises, governments have implemented various temporary measures to support employment and businesses, such as wage subsidy schemes or tax relief schemes.
Government agencies collect labor market data to assess trends, skills gaps and employment needs, aiding in informed policy decisions and targeted interventions. The government has also initiated programs to upskill and reskill the workforce to meet the evolving demands of industries. For example, the Labour-Green budget in 2023 committed $27 million to growing New Zealand’s digital workforce and increasing women’s participation in the technology sector.
Challenges persist in fully transitioning to an adaptive labor market. Despite efforts in education and training, many sectors of the New Zealand economy and public services suffer from a shortage of skilled workers. Examples include freight and logistics (New Zealand Herald 2023), manufacturing and engineering (Tilo 2022), and healthcare (Hewett 2023).
It is likely that the mismatch between available skills and industry needs will persist under the recently elected National-led government. While the coalition under Luxon has announced a new visa policy to attract skilled tech workers, it has been criticized for its plans to scrap workforce development councils and de-establish Te Pūkenga, New Zealand’s largest vocational education provider (Gerritsen 2023).
Citations:
Gerritsen, J. 2023. “Industry leaders worried at National Party plan to scrap Workforce Development Councils.” RNZ, 8 September. https://www.rnz.co.nz/news/national/497541/industry-leaders-worried-at-national-party-plan-to-scrap-workforce-development-councils
Hewett, W. 2023. “Govt Unveils New Sustained Improvement Plan to Tackle Issues within NZ’s Health Workforce.” Newshub, July 4. https://www.newshub.co.nz/home/politics/2023/07/govt-unveils-new-sustained-improvement-plan-to-tackle-issues-within-nz-s-health-workforce.html
New Zealand Herald. 2023. “Skilled labour shortage: Freight, logistics sector needs 18,000 workers for jobs.” 25 May. https://www.nzherald.co.nz/kahu/18000-skilled-workers-urgently-needed-for-logistics-sector-new-study/BQFZIVX6RZB6XELIWNBBJ2263I/
Tilo, D. 2022. “Report Warns of 40K Staff Shortage in These Sectors.” Human Resources Director, November 12. https://www.hcamag.com/nz/specialisation/recruitment/report-warns-of-40k-staff-shortage-in-these-sectors/427274
To what extent do existing labor market institutions support or hinder the transition to an inclusive labor market?
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9
9
Labor market institutions are fully aligned with the goal of an inclusive labor market.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of an inclusive labor market.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of an inclusive labor market.
2
1
1
Labor market institutions are not at all aligned with the goal of an inclusive labor market.
New Zealand’s labor market institutions strive to facilitate the transition to an inclusive labor market.
There are legal frameworks in place to prevent workplace discrimination based on factors such as gender, ethnicity, age and disability. The government also invests in training and education programs focused on upskilling and reskilling to enhance employability. More specifically, targeted programs support groups facing employment barriers, such as Māori, Pasifika, people with disabilities and youth.
Despite these efforts, certain challenges persist in achieving full labor market inclusivity. Areas needing further attention include income inequality, disparities in access to quality education and higher unemployment rates among specific demographics. In particular, the labor market is not entirely inclusive for Māori and Pasifika. One indicator is that – compared to the average hourly pay rate of Pākehā (European NZer) men – Māori men earn 16.7% less, Pasifika men 22.9% less, Māori women 23.0% less and Pasifika women 24.0% less (RNZ 2022). One important reason for these pay gaps is that Māori and Pasifika workers are at least 10% less likely than other ethnicities to complete training or find work following the completion of their training (New Zealand Herald 2022).
Citations:
New Zealand Herald. 2022. “Thousands of Māori and Pacific Workers Needed to Fill Skills Gap – Report.” November 10. https://www.nzherald.co.nz/kahu/thousands-of-maori-and-pacific-workers-needed-to-fill-skills-gap-report/IDAJDSHTPREOVFJWQZGR4VKOCI
RNZ. 2022. “Pay gap: report reveals gender, ethnic disparities.” 6 October. https://www.rnz.co.nz/news/business/476170/pay-gap-report-reveals-gender-ethnic-disparties
There are legal frameworks in place to prevent workplace discrimination based on factors such as gender, ethnicity, age and disability. The government also invests in training and education programs focused on upskilling and reskilling to enhance employability. More specifically, targeted programs support groups facing employment barriers, such as Māori, Pasifika, people with disabilities and youth.
Despite these efforts, certain challenges persist in achieving full labor market inclusivity. Areas needing further attention include income inequality, disparities in access to quality education and higher unemployment rates among specific demographics. In particular, the labor market is not entirely inclusive for Māori and Pasifika. One indicator is that – compared to the average hourly pay rate of Pākehā (European NZer) men – Māori men earn 16.7% less, Pasifika men 22.9% less, Māori women 23.0% less and Pasifika women 24.0% less (RNZ 2022). One important reason for these pay gaps is that Māori and Pasifika workers are at least 10% less likely than other ethnicities to complete training or find work following the completion of their training (New Zealand Herald 2022).
Citations:
New Zealand Herald. 2022. “Thousands of Māori and Pacific Workers Needed to Fill Skills Gap – Report.” November 10. https://www.nzherald.co.nz/kahu/thousands-of-maori-and-pacific-workers-needed-to-fill-skills-gap-report/IDAJDSHTPREOVFJWQZGR4VKOCI
RNZ. 2022. “Pay gap: report reveals gender, ethnic disparities.” 6 October. https://www.rnz.co.nz/news/business/476170/pay-gap-report-reveals-gender-ethnic-disparties
To what extent do existing labor market institutions support or hinder the mitigation of labor market risks?
10
9
9
Labor market institutions are fully aligned with the goal of protecting individuals against labor market risks.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of protecting individuals against labor market risks.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of protecting individuals against labor market risks.
2
1
1
Labor market institutions are not at all aligned with the goal of protecting individuals against labor market risks.
New Zealand’s labor market institutions play an important role in mitigating labor market risks.
Employment laws and regulations protect workers’ rights, such as minimum wage laws and health and safety regulations, and establish provisions for fair dismissals. Government agencies gather data that help policymakers anticipate labor market risks and take proactive measures.
New Zealand has social safety nets, including unemployment benefits and welfare support, that serve as a buffer during periods of unemployment or economic instability. Efforts have been made to broaden the coverage of such protection benefits to previously excluded worker categories, such as migrant workers (Harris 2020). The Labour-Green coalition had plans to introduce an income insurance scheme modeled on similar programs in Europe, but the plans were shelved in early 2023. Prime Minister Hipkins said there would need to be “significant improvement” in economic conditions before the scheme could be implemented (Taunton 2023).
While the government has made efforts to mitigate labor market risks, there are areas that require more policy work. In particular, more must be done to adapt regulations and support schemes to accommodate the growing prevalence of nonstandard forms of work, such as among gig economy workers (Pullar-Strecker 2023). There are also concerns that the newly elected National government will roll back the protection of workers’ rights. For example, ACT – one of the three coalition parties – has signaled that it wants to change the Employment Relations Act to prevent courts from ruling that a person employed as a contractor could claim the rights of an employee (Stock 2023). Already in December 2023, the new government repealed the Fair Pay Act – legislation passed by Labour in 2022 that would have allowed sector-wide collective employment negotiations (McConnell 2023).
Citations:
Harris, C. 2020. “Migrant workers to receive emergency benefits.” Stuff, 20 November. https://www.stuff.co.nz/business/123455880/migrant-workers-to-receive-emergency-benefits
McConnell, G. 2023. “Every bill the Government has passed under urgency.” Stuff, December 22. https://www.stuff.co.nz/national/politics/133493748/every-bill-the-government-has-passed-under-urgency
Pullar-Strecker, T. 2023. “Uber Granted Right to Appeal Drivers’ Employment Status.” Stuff, June 8. https://www.stuff.co.nz/business/132269681/uber-granted-right-to-appeal-drivers-employment-status
Stock, R. 2023. “ACT’s contractor plan finds favour with BusinessNZ, but unions say it will worsen inequality.” Stuff, June 22. https://www.stuff.co.nz/business/132389990/acts-contractor-plan-finds-favour-with-businessnz-but-unions-say-it-will-worsen-inequality
Taunton, E. 2023. “Delay to income insurance scheme a blow for workers, union says.” Stuff, February 8. https://www.stuff.co.nz/business/131177245/delay-to-income-insurance-scheme-a-blow-for-workers-union-says
Employment laws and regulations protect workers’ rights, such as minimum wage laws and health and safety regulations, and establish provisions for fair dismissals. Government agencies gather data that help policymakers anticipate labor market risks and take proactive measures.
New Zealand has social safety nets, including unemployment benefits and welfare support, that serve as a buffer during periods of unemployment or economic instability. Efforts have been made to broaden the coverage of such protection benefits to previously excluded worker categories, such as migrant workers (Harris 2020). The Labour-Green coalition had plans to introduce an income insurance scheme modeled on similar programs in Europe, but the plans were shelved in early 2023. Prime Minister Hipkins said there would need to be “significant improvement” in economic conditions before the scheme could be implemented (Taunton 2023).
While the government has made efforts to mitigate labor market risks, there are areas that require more policy work. In particular, more must be done to adapt regulations and support schemes to accommodate the growing prevalence of nonstandard forms of work, such as among gig economy workers (Pullar-Strecker 2023). There are also concerns that the newly elected National government will roll back the protection of workers’ rights. For example, ACT – one of the three coalition parties – has signaled that it wants to change the Employment Relations Act to prevent courts from ruling that a person employed as a contractor could claim the rights of an employee (Stock 2023). Already in December 2023, the new government repealed the Fair Pay Act – legislation passed by Labour in 2022 that would have allowed sector-wide collective employment negotiations (McConnell 2023).
Citations:
Harris, C. 2020. “Migrant workers to receive emergency benefits.” Stuff, 20 November. https://www.stuff.co.nz/business/123455880/migrant-workers-to-receive-emergency-benefits
McConnell, G. 2023. “Every bill the Government has passed under urgency.” Stuff, December 22. https://www.stuff.co.nz/national/politics/133493748/every-bill-the-government-has-passed-under-urgency
Pullar-Strecker, T. 2023. “Uber Granted Right to Appeal Drivers’ Employment Status.” Stuff, June 8. https://www.stuff.co.nz/business/132269681/uber-granted-right-to-appeal-drivers-employment-status
Stock, R. 2023. “ACT’s contractor plan finds favour with BusinessNZ, but unions say it will worsen inequality.” Stuff, June 22. https://www.stuff.co.nz/business/132389990/acts-contractor-plan-finds-favour-with-businessnz-but-unions-say-it-will-worsen-inequality
Taunton, E. 2023. “Delay to income insurance scheme a blow for workers, union says.” Stuff, February 8. https://www.stuff.co.nz/business/131177245/delay-to-income-insurance-scheme-a-blow-for-workers-union-says
Graph View
To what extent do existing tax institutions and procedures support or hinder adequate tax revenue flows?
10
9
9
The tax system is fully aligned with the goals of ensuring adequate tax revenues.
8
7
6
7
6
The tax system is largely aligned with the goals of ensuring adequate tax revenues.
5
4
3
4
3
The tax system is only somewhat aligned with the goals of ensuring adequate tax revenues.
2
1
1
The tax system is not at all aligned with the goals of ensuring adequate tax revenues.
New Zealand’s government has been actively addressing potential disincentives within the tax system that might discourage individuals from seeking employment and companies from making investments. The most important measures intended to mitigate these disincentives include lower marginal tax rates for low- to middle-income earners as a means of incentivizing work; tax credits and deductions for businesses to encourage employment, investment, and innovation; and simplified tax rules to reduce compliance burdens.
New Zealand’s tax administration, managed by the Inland Revenue Department (IRD), is generally considered to have sufficient administrative capacities to collect government-levied taxes. The IRD has invested in modern digital systems (e.g., O’Neill 2023) – which allow for easier and more efficient tax filing, payments and data management – and employs a risk-based approach to compliance. This approach focuses efforts on areas with higher risks of noncompliance, helping to optimize resources for maximum effectiveness (Inland Revenue 2023: 98).
New Zealand also has enforcement measures to address tax evasion, such as penalties for noncompliance and investigations into suspected cases. The IRD collaborates with other government agencies (e.g., the Serious Fraud Office) and international counterparts to gather information and address cross-border tax evasion. However, critics have pointed out that tax evasion investigations can suffer from a lack of resources (Wells 2023).
Citations:
Inland Revenue. 2023. Inland Revenue Annual Report Te Tari Taake Pūrongo ā-Tau 2022-23. https://www.ird.govt.nz/-/media/project/ir/home/documents/about-us/publications/annual-and-corporate-reports/annual-reports/annual-report-2023.pdf
O’Neill, R. 2023. “Inland Revenue Eyes Local Cloud Hosting for Its Brand New Tax Engine.” Reseller News, May 22. https://www.reseller.co.nz/article/707263/inland-revenue-eyes-local-cloud-hosting-its-brand-new-tax-engine/
Wells, I. 2023. “Newsable: Billions Likely Lost to Tax Evasion, as White Collar Crime Investigators Go Underfunded.” Stuff, May 15. https://www.stuff.co.nz/national/crime/300878382/newsable-billions-likely-lost-to-tax-evasion-as-white-collar-crime-investigators-go-underfunded
New Zealand’s tax administration, managed by the Inland Revenue Department (IRD), is generally considered to have sufficient administrative capacities to collect government-levied taxes. The IRD has invested in modern digital systems (e.g., O’Neill 2023) – which allow for easier and more efficient tax filing, payments and data management – and employs a risk-based approach to compliance. This approach focuses efforts on areas with higher risks of noncompliance, helping to optimize resources for maximum effectiveness (Inland Revenue 2023: 98).
New Zealand also has enforcement measures to address tax evasion, such as penalties for noncompliance and investigations into suspected cases. The IRD collaborates with other government agencies (e.g., the Serious Fraud Office) and international counterparts to gather information and address cross-border tax evasion. However, critics have pointed out that tax evasion investigations can suffer from a lack of resources (Wells 2023).
Citations:
Inland Revenue. 2023. Inland Revenue Annual Report Te Tari Taake Pūrongo ā-Tau 2022-23. https://www.ird.govt.nz/-/media/project/ir/home/documents/about-us/publications/annual-and-corporate-reports/annual-reports/annual-report-2023.pdf
O’Neill, R. 2023. “Inland Revenue Eyes Local Cloud Hosting for Its Brand New Tax Engine.” Reseller News, May 22. https://www.reseller.co.nz/article/707263/inland-revenue-eyes-local-cloud-hosting-its-brand-new-tax-engine/
Wells, I. 2023. “Newsable: Billions Likely Lost to Tax Evasion, as White Collar Crime Investigators Go Underfunded.” Stuff, May 15. https://www.stuff.co.nz/national/crime/300878382/newsable-billions-likely-lost-to-tax-evasion-as-white-collar-crime-investigators-go-underfunded
To what extent do existing tax institutions and procedures consider equity aspects?
10
9
9
The tax system is fully aligned with the goal of ensuring equity.
8
7
6
7
6
The tax system is largely aligned with the goal of ensuring equity.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of ensuring equity.
2
1
1
The tax system is not at all aligned with the goal of ensuring equity.
Existing tax institutions and procedures are designed with considerations for equity, aiming to achieve fairness and balance in the tax system.
In August 2023, Parliament passed the Taxation Principles Reporting Bill, which establishes a statutory framework requiring the Commissioner of Inland Revenue to report annually on New Zealand’s tax settings against a set of core principles, including horizontal and vertical equity. The bill has been criticized for providing only vague definitions of these core tax principles (Barrett 2023).
The concept of “horizontal equity” is defined as meaning “people with similar levels of income should pay similar amounts of tax.” This definition is incompatible with the Income Tax Act because people with similar levels of income often do not pay similar levels of tax due to credits and deductions that help offset tax burdens for specific groups, such as families with children through the Working for Families tax credit package.
New Zealand’s tax system generally aims to achieve vertical equity. However, despite various mechanisms intended to impose a greater tax burden on those with greater financial capacity, the tax system demonstrates weaknesses in accomplishing vertical equity and addressing societal inequality. Notably, compared to the OECD average, New Zealand relies heavily on personal income tax and a goods and services tax (GST) (OECD 2023). While GST is generally considered a regressive tax because it disproportionately affects lower-income individuals, New Zealand’s personal “broad base, low rate” income tax also lacks progressivity. Furthermore, New Zealand does not have a comprehensive wealth tax or a capital gains tax, partly because the Labour government (2017 – 2023) ignored calls, including recommendations from its own Tax Working Group (Walls 2019), to introduce a capital gains tax. In 2020, a law change gave Inland Revenue the power to require the wealthiest families to submit their earnings information. A two-year investigation into high-wealth individuals (311 who generally have a net worth of more than $50 million) concluded in 2023 and revealed that they pay less than half the amount of tax, across all forms of income, than do most other New Zealanders (RNZ 2023).
The Taxation Principles Reporting Bill 2023 does not address this problem, despite stating that “the tax system should be progressive. Tax is progressive if people with higher levels of economic income pay a higher proportion of that income in tax.” Importantly, the bill provides governments with considerable scope to decide how to balance the core tax principles.
Citations:
Barrett, J. 2023. “Making NZ’s Tax System Fairer Is a Good Idea – But This Proposed New Law Isn’t the Answer.” The Conversation, June 1. https://theconversation.com/making-nzs-tax-system-fairer-is-a-good-idea-but-this-proposed-new-law-isnt-the-answer-206745
RNZ [Radio New Zealand]. 2023. “Wealthiest Paying Tax at Much Lower Rate Than Most Other New Zealanders – IRD Report.” https://www.rnz.co.nz/news/national/488705/wealthiest-paying-tax-at-much-lower-rate-than-most-other-new-zealanders-ird-report
OECD. 2023. “Revenue Statistics 2023: New Zealand.” https://www.oecd.org/tax/revenue-statistics-new-zealand.pdf
Walls, J. 2019. “Government kills off capital gains tax, won’t happen on Jacinda Ardern’s watch.” New Zealand Herald, April 17. https://www.nzherald.co.nz/nz/government-kills-off-capital-gains-tax-wont-happen-on-jacinda-arderns-watch/PRAJYZ2BSONYAFTJI4HJ6JUS5A/
In August 2023, Parliament passed the Taxation Principles Reporting Bill, which establishes a statutory framework requiring the Commissioner of Inland Revenue to report annually on New Zealand’s tax settings against a set of core principles, including horizontal and vertical equity. The bill has been criticized for providing only vague definitions of these core tax principles (Barrett 2023).
The concept of “horizontal equity” is defined as meaning “people with similar levels of income should pay similar amounts of tax.” This definition is incompatible with the Income Tax Act because people with similar levels of income often do not pay similar levels of tax due to credits and deductions that help offset tax burdens for specific groups, such as families with children through the Working for Families tax credit package.
New Zealand’s tax system generally aims to achieve vertical equity. However, despite various mechanisms intended to impose a greater tax burden on those with greater financial capacity, the tax system demonstrates weaknesses in accomplishing vertical equity and addressing societal inequality. Notably, compared to the OECD average, New Zealand relies heavily on personal income tax and a goods and services tax (GST) (OECD 2023). While GST is generally considered a regressive tax because it disproportionately affects lower-income individuals, New Zealand’s personal “broad base, low rate” income tax also lacks progressivity. Furthermore, New Zealand does not have a comprehensive wealth tax or a capital gains tax, partly because the Labour government (2017 – 2023) ignored calls, including recommendations from its own Tax Working Group (Walls 2019), to introduce a capital gains tax. In 2020, a law change gave Inland Revenue the power to require the wealthiest families to submit their earnings information. A two-year investigation into high-wealth individuals (311 who generally have a net worth of more than $50 million) concluded in 2023 and revealed that they pay less than half the amount of tax, across all forms of income, than do most other New Zealanders (RNZ 2023).
The Taxation Principles Reporting Bill 2023 does not address this problem, despite stating that “the tax system should be progressive. Tax is progressive if people with higher levels of economic income pay a higher proportion of that income in tax.” Importantly, the bill provides governments with considerable scope to decide how to balance the core tax principles.
Citations:
Barrett, J. 2023. “Making NZ’s Tax System Fairer Is a Good Idea – But This Proposed New Law Isn’t the Answer.” The Conversation, June 1. https://theconversation.com/making-nzs-tax-system-fairer-is-a-good-idea-but-this-proposed-new-law-isnt-the-answer-206745
RNZ [Radio New Zealand]. 2023. “Wealthiest Paying Tax at Much Lower Rate Than Most Other New Zealanders – IRD Report.” https://www.rnz.co.nz/news/national/488705/wealthiest-paying-tax-at-much-lower-rate-than-most-other-new-zealanders-ird-report
OECD. 2023. “Revenue Statistics 2023: New Zealand.” https://www.oecd.org/tax/revenue-statistics-new-zealand.pdf
Walls, J. 2019. “Government kills off capital gains tax, won’t happen on Jacinda Ardern’s watch.” New Zealand Herald, April 17. https://www.nzherald.co.nz/nz/government-kills-off-capital-gains-tax-wont-happen-on-jacinda-arderns-watch/PRAJYZ2BSONYAFTJI4HJ6JUS5A/
To what extent do existing tax institutions and procedures minimize compliance and collection costs?
10
9
9
The tax system is fully aligned with the goal of minimizing compliance and collection costs.
8
7
6
7
6
The tax system is largely aligned with the goal of minimizing compliance and collection costs.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of minimizing compliance and collection costs.
2
1
1
The tax system is not at all aligned with the goal of minimizing compliance and collection costs.
New Zealand has designed its tax institutions and procedures with an emphasis on simplicity and efficiency, aiming to minimize compliance and collection costs for both taxpayers and the government. Taxpayers whose tax is deducted from their wage, salary, benefit or scheduler payment automatically are not required to file an annual return, and any refund is automatically returned (IRD 2023a). Additionally, there are very few exemptions on New Zealand’s Goods and Services Tax (IRD 2023b). Both of these mechanisms reduce the state’s administrative burden.
Independent reviews often laud New Zealand for its transparent and easy-to-understand tax system. For example, the International Tax Competitiveness Index – published by the conservative Tax Foundation think tank – ranks New Zealand third in terms of “tax competitiveness,” ahead of international financial centers such as Switzerland and Luxembourg (Tax Foundation 2023). In PwC’s 2020 Paying Taxes Index, which measures how easy it is for companies to discharge their tax obligations in a given jurisdiction, New Zealand was placed ninth out of 189 territories, ahead of all other OECD member countries except Denmark and Ireland (PwC 2020). New Zealand was also ranked ninth on the “paying taxes” measure in the World Bank’s Business Index (World Bank 2020).
Citations:
IRD. 2023a. “Getting a Tax Refund.” https://www.govt.nz/browse/tax-benefits-and-finance/tax/getting-a-tax-refund
IRD. 2023b. “Charging GST.” https://www.ird.govt.nz/gst/charging-gst/exempt-supplies
PwC. 2020. “Paying Taxes 2020.” https://www.pwc.com/gx/en/services/tax/publications/paying-taxes2020.html
Tax Foundation. 2023. “International Tax Competitiveness Index.” https://taxfoundation.org/wp-content/uploads/2023/10/TF-ITCI23-Book_16-10_FV.pdf
World Bank. 2020. “Doing Business 2020: New Zealand.” https://www.doingbusiness.org/content/dam/doingBusiness/country/n/new-zealand/NZL.pdf
Independent reviews often laud New Zealand for its transparent and easy-to-understand tax system. For example, the International Tax Competitiveness Index – published by the conservative Tax Foundation think tank – ranks New Zealand third in terms of “tax competitiveness,” ahead of international financial centers such as Switzerland and Luxembourg (Tax Foundation 2023). In PwC’s 2020 Paying Taxes Index, which measures how easy it is for companies to discharge their tax obligations in a given jurisdiction, New Zealand was placed ninth out of 189 territories, ahead of all other OECD member countries except Denmark and Ireland (PwC 2020). New Zealand was also ranked ninth on the “paying taxes” measure in the World Bank’s Business Index (World Bank 2020).
Citations:
IRD. 2023a. “Getting a Tax Refund.” https://www.govt.nz/browse/tax-benefits-and-finance/tax/getting-a-tax-refund
IRD. 2023b. “Charging GST.” https://www.ird.govt.nz/gst/charging-gst/exempt-supplies
PwC. 2020. “Paying Taxes 2020.” https://www.pwc.com/gx/en/services/tax/publications/paying-taxes2020.html
Tax Foundation. 2023. “International Tax Competitiveness Index.” https://taxfoundation.org/wp-content/uploads/2023/10/TF-ITCI23-Book_16-10_FV.pdf
World Bank. 2020. “Doing Business 2020: New Zealand.” https://www.doingbusiness.org/content/dam/doingBusiness/country/n/new-zealand/NZL.pdf
To what extent do existing tax institutions and procedures internalize negative and positive externalities?
10
9
9
The tax system is fully aligned with the goal of internalizing externalities.
8
7
6
7
6
The tax system is largely aligned with the goal of internalizing externalities.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of internalizing externalities.
2
1
1
The tax system is not at all aligned with the goal of internalizing externalities.
Existing tax institutions and procedures aim to internalize both negative and positive externalities – at least to some extent.
Environmental taxes, such as levies for agricultural emissions, as well as tobacco and alcohol taxes, aim to internalize negative externalities by discouraging excessive consumption. Conversely, other tax policies provide subsidies or tax credits to incentivize behaviors that generate positive externalities. An example of this is the Clean Car Discount for low-emissions vehicles.
Tax policies aimed at internalizing negative and positive externalities were a key focus of the 2023 election campaign. The new National-ACT-NZ First coalition announced it will scrap the “future generations” smoking ban, instead directing revenue from tobacco taxes to fund the coalition’s tax cuts (Corlett 2023). Additionally, the coalition axed Auckland’s Regional Fuel Tax, which was introduced for 10 years to pay for the city’s new rail infrastructure projects, and removed the Clean Car Discount. They argued that the latter scheme – which taxes high-emission vehicles to subsidize low-emission vehicles – was fiscally unfair (Trevett 2023).
Citations:
Corlett, E. 2023. “New Zealand scraps world-first smoking ‘generation ban’ to fund tax cuts.” The Guardian, November 27. https://theguardian.com/world/2023/nov/27/new-zealand-scraps-world-first-smoking-generation-ban-to-fund-tax-cuts#:~:text=The%20laws%20were%20due%20to,outlets%20and%20the%20generation%20ban%E2%80%9D
Trevett, C. 2023. “Election 2023: National Vows to Scrap Discounts on EVs and ‘Ute Tax’ in 100 Days if Elected.” New Zealand Herald, September 30. https://www.nzherald.co.nz/nz/politics/election-2023-national-leader-christopher-luxon-sets-out-new-policy-as-concerns-about-campaign-safety-rise/INHI4QQZYFAV5MV7OZBNLQHPIM
Environmental taxes, such as levies for agricultural emissions, as well as tobacco and alcohol taxes, aim to internalize negative externalities by discouraging excessive consumption. Conversely, other tax policies provide subsidies or tax credits to incentivize behaviors that generate positive externalities. An example of this is the Clean Car Discount for low-emissions vehicles.
Tax policies aimed at internalizing negative and positive externalities were a key focus of the 2023 election campaign. The new National-ACT-NZ First coalition announced it will scrap the “future generations” smoking ban, instead directing revenue from tobacco taxes to fund the coalition’s tax cuts (Corlett 2023). Additionally, the coalition axed Auckland’s Regional Fuel Tax, which was introduced for 10 years to pay for the city’s new rail infrastructure projects, and removed the Clean Car Discount. They argued that the latter scheme – which taxes high-emission vehicles to subsidize low-emission vehicles – was fiscally unfair (Trevett 2023).
Citations:
Corlett, E. 2023. “New Zealand scraps world-first smoking ‘generation ban’ to fund tax cuts.” The Guardian, November 27. https://theguardian.com/world/2023/nov/27/new-zealand-scraps-world-first-smoking-generation-ban-to-fund-tax-cuts#:~:text=The%20laws%20were%20due%20to,outlets%20and%20the%20generation%20ban%E2%80%9D
Trevett, C. 2023. “Election 2023: National Vows to Scrap Discounts on EVs and ‘Ute Tax’ in 100 Days if Elected.” New Zealand Herald, September 30. https://www.nzherald.co.nz/nz/politics/election-2023-national-leader-christopher-luxon-sets-out-new-policy-as-concerns-about-campaign-safety-rise/INHI4QQZYFAV5MV7OZBNLQHPIM
Graph View
To what extent do existing budgetary institutions and procedures support or hinder sustainable budgeting?
10
9
9
Budgetary institutions and policies are fully aligned with the goals of sustainable budgeting.
8
7
6
7
6
Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting.
5
4
3
4
3
Budgetary institutions and policies are only somewhat aligned with the goals of sustainable budgeting.
2
1
1
Budgetary institutions and policies are not at all aligned with the goals of sustainable budgeting.
New Zealand’s budgetary institutions and procedures are generally designed to support aspects of sustainable budgeting.
To begin with, fiscal frameworks are in place to promote sustainability by projecting financial performance in the medium term (the Fiscal Strategy Model) and the long term (the Long-Term Fiscal Model) (Treasury 2023). Moreover, budgetary practices incorporate elements of performance-based budgeting, focusing on achieving outcomes and results rather than solely input-based allocations (OECD 2017). This approach aims to improve the efficiency and effectiveness of government spending. The budgetary processes are also relatively transparent, providing information on revenue sources, spending priorities and fiscal forecasts (International Budget Partnership 2021). This transparency contributes to greater accountability and public understanding of government finances. Finally, alongside its “well-being” budget approach – focusing both on current and intergenerational living standards – the Labour government introduced gender budgeting in 2023, whereby government agencies applied a gender analysis to their budget bids submitted to the Treasury. This meant New Zealand joined more than 20 other OECD countries that have built a focus on women and girls into the budget process (Curtin et al. 2023).
However, it is important to mention factors that may undermine sustainable budgeting.
Budgeting procedures primarily emphasize financial metrics, overlooking nonfinancial indicators related to sustainability. Nonfiscal aspects of sustainability, such as environmental, social and intergenerational factors, have not been fully integrated into budgetary processes. This omission is evident in the criticism that environmental campaigners directed at the 2023 Labour-Green budget (Wannan 2023). Additionally, despite initial efforts to create an independent parliamentary budget office, this initiative has fallen off the agenda of major political parties (Crampton 2023).
Moreover, as in other countries, short-term political and economic pressures can influence budgetary decisions, potentially overshadowing longer-term sustainability considerations. For example, New Zealand’s five-year debt forecast quadrupled when the government increased public spending in the 2020 budget to address the economic slump caused by the COVID-19 pandemic (Giovannetti 2020). Similarly, short-term financial relief measures announced after Cyclone Gabrielle in February 2023 pushed the level of net debt to $1 billion above the forecast (Beckford 2023).
Citations:
Beckford, G. 2023. “Cyclone Gabrielle: Government looking at targeted assistance for immediate, long-term relief.” RNZ, 16 February. https://www.rnz.co.nz/news/political/484332/cyclone-gabrielle-government-looking-at-targeted-assistance-for-immediate-long-term-relief
Crampton, E. 2023. “Why New Zealand needs an independent Parliamentary Budget Office.” New Zealand Herald, October 19. https://www.nzherald.co.nz/business/dr-eric-crampton-for-a-better-fiscal-outlook/ZHIVVYRQRFHU5BGX63QQLYQBQ4/
Curtin, J. et al. 2023. “NZ’s Budget Used a ‘Gender Lens’ for the First Time – The Result Was a Win for Women.” The Conversation, May 19. https://theconversation.com/nzs-budget-used-a-gender-lens-for-the-first-time-the-result-was-a-win-for-women-205116
Giovannetti. 2020. “How New Zealand learned to stop worrying and love government debt.” The Spinoff, June 2. https://thespinoff.co.nz/politics/02-06-2020/how-new-zealand-learned-to-stop-worrying-and-love-government-debt
International Budget Partnership. 2021. “Open Budget Survey 2021: New Zealand.” https://internationalbudget.org/open-budget-survey/country-results/2021/new-zealand
OECD. 2017. Government at a Glance 2017: New Zealand. https://web-archive.oecd.org/2017-09-18/445546-gov-at-a-glance-2017-new-zealand.pdf
Treasury. 2023. “Fiscal strategy model.” https://www.treasury.govt.nz/information-and-services/financial-management-and-advice/fiscal-strategy/fiscal-strategy-model
Wannan. 2023. “Budget’s most expensive green policies may save more cash than carbon.” Stuff, 19 May. https://www.stuff.co.nz/environment/climate-news/132079508/budgets-most-expensive-green-policies-may-save-more-cash-than-carbon
To begin with, fiscal frameworks are in place to promote sustainability by projecting financial performance in the medium term (the Fiscal Strategy Model) and the long term (the Long-Term Fiscal Model) (Treasury 2023). Moreover, budgetary practices incorporate elements of performance-based budgeting, focusing on achieving outcomes and results rather than solely input-based allocations (OECD 2017). This approach aims to improve the efficiency and effectiveness of government spending. The budgetary processes are also relatively transparent, providing information on revenue sources, spending priorities and fiscal forecasts (International Budget Partnership 2021). This transparency contributes to greater accountability and public understanding of government finances. Finally, alongside its “well-being” budget approach – focusing both on current and intergenerational living standards – the Labour government introduced gender budgeting in 2023, whereby government agencies applied a gender analysis to their budget bids submitted to the Treasury. This meant New Zealand joined more than 20 other OECD countries that have built a focus on women and girls into the budget process (Curtin et al. 2023).
However, it is important to mention factors that may undermine sustainable budgeting.
Budgeting procedures primarily emphasize financial metrics, overlooking nonfinancial indicators related to sustainability. Nonfiscal aspects of sustainability, such as environmental, social and intergenerational factors, have not been fully integrated into budgetary processes. This omission is evident in the criticism that environmental campaigners directed at the 2023 Labour-Green budget (Wannan 2023). Additionally, despite initial efforts to create an independent parliamentary budget office, this initiative has fallen off the agenda of major political parties (Crampton 2023).
Moreover, as in other countries, short-term political and economic pressures can influence budgetary decisions, potentially overshadowing longer-term sustainability considerations. For example, New Zealand’s five-year debt forecast quadrupled when the government increased public spending in the 2020 budget to address the economic slump caused by the COVID-19 pandemic (Giovannetti 2020). Similarly, short-term financial relief measures announced after Cyclone Gabrielle in February 2023 pushed the level of net debt to $1 billion above the forecast (Beckford 2023).
Citations:
Beckford, G. 2023. “Cyclone Gabrielle: Government looking at targeted assistance for immediate, long-term relief.” RNZ, 16 February. https://www.rnz.co.nz/news/political/484332/cyclone-gabrielle-government-looking-at-targeted-assistance-for-immediate-long-term-relief
Crampton, E. 2023. “Why New Zealand needs an independent Parliamentary Budget Office.” New Zealand Herald, October 19. https://www.nzherald.co.nz/business/dr-eric-crampton-for-a-better-fiscal-outlook/ZHIVVYRQRFHU5BGX63QQLYQBQ4/
Curtin, J. et al. 2023. “NZ’s Budget Used a ‘Gender Lens’ for the First Time – The Result Was a Win for Women.” The Conversation, May 19. https://theconversation.com/nzs-budget-used-a-gender-lens-for-the-first-time-the-result-was-a-win-for-women-205116
Giovannetti. 2020. “How New Zealand learned to stop worrying and love government debt.” The Spinoff, June 2. https://thespinoff.co.nz/politics/02-06-2020/how-new-zealand-learned-to-stop-worrying-and-love-government-debt
International Budget Partnership. 2021. “Open Budget Survey 2021: New Zealand.” https://internationalbudget.org/open-budget-survey/country-results/2021/new-zealand
OECD. 2017. Government at a Glance 2017: New Zealand. https://web-archive.oecd.org/2017-09-18/445546-gov-at-a-glance-2017-new-zealand.pdf
Treasury. 2023. “Fiscal strategy model.” https://www.treasury.govt.nz/information-and-services/financial-management-and-advice/fiscal-strategy/fiscal-strategy-model
Wannan. 2023. “Budget’s most expensive green policies may save more cash than carbon.” Stuff, 19 May. https://www.stuff.co.nz/environment/climate-news/132079508/budgets-most-expensive-green-policies-may-save-more-cash-than-carbon
Graph View
How committed is the government to utilizing research and innovation as drivers for the transition to a sustainable economy and society?
10
9
9
The government is clearly committed to utilizing research and innovation as drivers for the transition to a sustainable economy and society.
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7
6
7
6
The government is largely committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
5
4
3
4
3
The government is somewhat committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
2
1
1
The government is not at all committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
New Zealand has several research and innovation strategies, the most notable of which is the National Statement of Science Investment (NSSI). This document outlines the country’s approach to investing in research, science and innovation. Additionally, there are sector-specific strategies and initiatives aimed at promoting research and innovation in key areas such as agriculture, health, technology and environmental sustainability.
The Ministry of Business, Innovation and Employment (MBIE) is the lead government agency responsible for implementing research and innovation strategies. A key function of MBIE is to facilitate collaboration and partnerships among government agencies, research institutions, industry and other stakeholders.
The government has demonstrated a commitment to using research and innovation as drivers for the transition to a sustainable economy and society. Two strategies that focus on leveraging research and innovation for sustainable development are particularly noteworthy.
First, the government has allocated funding and support for research and development (R&D) initiatives, aiming to foster innovation in areas such as clean energy (Stuff 2023), sustainable agriculture (Flaws 2020) and conservation (Green 2022). Second, policies have been enacted to promote technological advancements and innovation in key sectors, emphasizing sustainability goals. For example, the Labour-Green government has made efforts to support renewable energy technologies and the development of eco-friendly practices through its 2022 Emissions Reduction Plan (Gibson 2022).
However, it is important to place these strategies in the context of New Zealand’s research and innovation regime, which has long been criticized for its ineffectiveness (OECD 2007). In the latest Bloomberg Innovation Index, which scores countries using seven criteria including R&I spending and the concentration of high-tech public companies, New Zealand ranked only 25th. This ranking followed a four-place drop in 2018, which saw New Zealand slip from 19th to 23rd place and then to 24th place in the subsequent Bloomberg Innovation Index (Jamrisko et al. 2021). Likewise, in the 2023 Global Innovation Index published by the World Intellectual Property Organization, New Zealand ranked only 27th. The report highlights relatively low levels of science and innovation investment as a particular weakness (World Intellectual Property Organization 2023).
Citations:
Flaws, B. 2020. “Government contributes $10m to future farm technology programme.” Stuff, December 21. https://www.stuff.co.nz/business/farming/123707601/government-contributes-10m-to-future-farm-technology-programme
Gibson, E. 2022. “What you need to know about the country’s first-ever emissions plan.” Stuff, 16 May. https://www.stuff.co.nz/environment/climate-news/300588033/what-you-need-to-know-about-the-countrys-firstever-emissions-plan
Green, K. 2020. “Budget 2022: Deer and goats on hit-list as predator eradication focus of conservation funding.” Stuff, 19 May. https://stuff.co.nz/environment/128696928/budget-2022-deer-and-goats-on-hitlist-as-predator-eradication-focus-of-conservation-funding
Jamrisko, Michelle, Wei Lu and Ying Tian. 2021. “South Korea Leads World in Innovation as U.S. Exits Top Ten.” Bloomberg. https://www.bloomberg.com/news/articles/2021-02-03/south-korea-leads-world-in-innovation-u-s-dropsout-of-top-10
OECD. 2007. OECD Reviews of Innovation Policy: New Zealand.
https://www.oecd.org/newzealand/oecdreviewsofinnovationpolicynewzealand.htm
Stuff. 2023. “Energy Research Centre Ara Ake Secures $70 Million in Funding to Support Innovation.” 17 July. https://www.stuff.co.nz/taranaki-daily-news/news/300927445/energy-research-centre-ara-ake-secures-70-million-in-funding-to-support-innovation
World Intellectual Property Organization. 2023. “Global Innovation Index 2023: Innovation in the Face of Uncertainty.” https://www.wipo.int/edocs/pubdocs/en/wipo-pub-2000-2023-en-main-report-global-innovation-index-2023-16th-edition.pdf
The Ministry of Business, Innovation and Employment (MBIE) is the lead government agency responsible for implementing research and innovation strategies. A key function of MBIE is to facilitate collaboration and partnerships among government agencies, research institutions, industry and other stakeholders.
The government has demonstrated a commitment to using research and innovation as drivers for the transition to a sustainable economy and society. Two strategies that focus on leveraging research and innovation for sustainable development are particularly noteworthy.
First, the government has allocated funding and support for research and development (R&D) initiatives, aiming to foster innovation in areas such as clean energy (Stuff 2023), sustainable agriculture (Flaws 2020) and conservation (Green 2022). Second, policies have been enacted to promote technological advancements and innovation in key sectors, emphasizing sustainability goals. For example, the Labour-Green government has made efforts to support renewable energy technologies and the development of eco-friendly practices through its 2022 Emissions Reduction Plan (Gibson 2022).
However, it is important to place these strategies in the context of New Zealand’s research and innovation regime, which has long been criticized for its ineffectiveness (OECD 2007). In the latest Bloomberg Innovation Index, which scores countries using seven criteria including R&I spending and the concentration of high-tech public companies, New Zealand ranked only 25th. This ranking followed a four-place drop in 2018, which saw New Zealand slip from 19th to 23rd place and then to 24th place in the subsequent Bloomberg Innovation Index (Jamrisko et al. 2021). Likewise, in the 2023 Global Innovation Index published by the World Intellectual Property Organization, New Zealand ranked only 27th. The report highlights relatively low levels of science and innovation investment as a particular weakness (World Intellectual Property Organization 2023).
Citations:
Flaws, B. 2020. “Government contributes $10m to future farm technology programme.” Stuff, December 21. https://www.stuff.co.nz/business/farming/123707601/government-contributes-10m-to-future-farm-technology-programme
Gibson, E. 2022. “What you need to know about the country’s first-ever emissions plan.” Stuff, 16 May. https://www.stuff.co.nz/environment/climate-news/300588033/what-you-need-to-know-about-the-countrys-firstever-emissions-plan
Green, K. 2020. “Budget 2022: Deer and goats on hit-list as predator eradication focus of conservation funding.” Stuff, 19 May. https://stuff.co.nz/environment/128696928/budget-2022-deer-and-goats-on-hitlist-as-predator-eradication-focus-of-conservation-funding
Jamrisko, Michelle, Wei Lu and Ying Tian. 2021. “South Korea Leads World in Innovation as U.S. Exits Top Ten.” Bloomberg. https://www.bloomberg.com/news/articles/2021-02-03/south-korea-leads-world-in-innovation-u-s-dropsout-of-top-10
OECD. 2007. OECD Reviews of Innovation Policy: New Zealand.
https://www.oecd.org/newzealand/oecdreviewsofinnovationpolicynewzealand.htm
Stuff. 2023. “Energy Research Centre Ara Ake Secures $70 Million in Funding to Support Innovation.” 17 July. https://www.stuff.co.nz/taranaki-daily-news/news/300927445/energy-research-centre-ara-ake-secures-70-million-in-funding-to-support-innovation
World Intellectual Property Organization. 2023. “Global Innovation Index 2023: Innovation in the Face of Uncertainty.” https://www.wipo.int/edocs/pubdocs/en/wipo-pub-2000-2023-en-main-report-global-innovation-index-2023-16th-edition.pdf
Graph View
How committed and credible is the government in its activities to guide the effective regulation and supervision of the international financial architecture?
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9
9
The government is clearly committed to ensuring the stability of the global financial system.
8
7
6
7
6
The government is largely committed to ensuring the stability of the global financial system.
5
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3
4
3
The government is somewhat committed to ensuring the stability of the global financial system.
2
1
1
The government is not at all committed to ensuring the stability of the global financial system.
Like many other countries, New Zealand contributes to international discussions and initiatives aimed at guiding effective regulation and supervision of the international financial architecture – in particular, through multilateral forums such as the G20, IMF, World Bank and OECD. The country generally adheres to international regulatory standards and best practices, supporting efforts to enhance transparency, stability and accountability within the global financial system.
New Zealand has committed to international agreements to prevent and combat high-risk financial activities. Since 2016, New Zealand has been part of the OECD initiative that allows all participating tax jurisdictions to exchange information on the economic activities of multinational corporations. In 2017, New Zealand also joined the OECD Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit-Shifting.
Successive governments have enacted various reforms to strengthen the international financial architecture. Most notably, New Zealand passed the Anti-Money Laundering and Counter Financing of Terrorism Act (AML/CFT) in 2013. Initially, this law applied only to banks and financial institutions. However, in 2018, the legislation was extended to include accountants, real estate agents, lawyers and conveyancers, aiming to prevent illegal funds from being laundered through property purchases.
In April 2021, the Paris-based Financial Action Task Force (FATF) – a global money laundering and terrorist financing watchdog – released a report on New Zealand, finding that the country had achieved notable results in tackling money laundering but highlighting the continued room for improvement. Key areas in need of further attention include supervision of the private sector, financial institutions, lawyers and accountants to enable detection and prevention of money laundering (Owen 2021).
In September 2021, New Zealand’s Financial Market Authority (FMA) published its AML/CFT Monitoring report. The report showed that between 2018 and 2021, the Authority issued 27 private warnings and three public warnings, and initiated its first-ever court proceedings against a firm. This compares with just one public warning and 17 private actions between 2016 and 2018 (RNZ 2021).
Citations:
Owen. 2021. “Tackling of money laundering ‘adequate’ but more can be done, watchdog finds.” Stuff, 29 April. https://www.stuff.co.nz/national/crime/124984177/tackling-of-money-laundering-adequate-but-more-canbe-done-watchdog-finds
RNZ. 2021. “FMA taking harder line on anti-money laundering rule breaches.” 30 September. https://www.rnz.co.nz/news/business/452624/fma-taking-harder-line-on-anti-money-laundering-rulebreaches
New Zealand has committed to international agreements to prevent and combat high-risk financial activities. Since 2016, New Zealand has been part of the OECD initiative that allows all participating tax jurisdictions to exchange information on the economic activities of multinational corporations. In 2017, New Zealand also joined the OECD Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit-Shifting.
Successive governments have enacted various reforms to strengthen the international financial architecture. Most notably, New Zealand passed the Anti-Money Laundering and Counter Financing of Terrorism Act (AML/CFT) in 2013. Initially, this law applied only to banks and financial institutions. However, in 2018, the legislation was extended to include accountants, real estate agents, lawyers and conveyancers, aiming to prevent illegal funds from being laundered through property purchases.
In April 2021, the Paris-based Financial Action Task Force (FATF) – a global money laundering and terrorist financing watchdog – released a report on New Zealand, finding that the country had achieved notable results in tackling money laundering but highlighting the continued room for improvement. Key areas in need of further attention include supervision of the private sector, financial institutions, lawyers and accountants to enable detection and prevention of money laundering (Owen 2021).
In September 2021, New Zealand’s Financial Market Authority (FMA) published its AML/CFT Monitoring report. The report showed that between 2018 and 2021, the Authority issued 27 private warnings and three public warnings, and initiated its first-ever court proceedings against a firm. This compares with just one public warning and 17 private actions between 2016 and 2018 (RNZ 2021).
Citations:
Owen. 2021. “Tackling of money laundering ‘adequate’ but more can be done, watchdog finds.” Stuff, 29 April. https://www.stuff.co.nz/national/crime/124984177/tackling-of-money-laundering-adequate-but-more-canbe-done-watchdog-finds
RNZ. 2021. “FMA taking harder line on anti-money laundering rule breaches.” 30 September. https://www.rnz.co.nz/news/business/452624/fma-taking-harder-line-on-anti-money-laundering-rulebreaches