Wednesday, 25 January 2012


Heritage ranked New Zealand below Australia on economic freedom; I was a bit surprised. Now they have a nice graph letting us see why.

The subcomponents don't seem far out except in two cases.

Heritage ranks Australia slightly ahead of New Zealand in labour market freedom. I'm pretty sure that doesn't accurately reflect things. New Zealand likely had the world's most free labour market subsequent to the Employment Contracts Act; we slid back a bit with the Employment Relations Act but things here remain remarkably clean. Contrast with the Australia's Fair Pay Commission.

Here's Heritage:
The labor freedom component is a quantitative measure that looks into various aspects of the legal and regulatory framework of a country’s labor market. It provides cross-country data on regulations concerning minimum wages; laws inhibiting layoffs; severance requirements; and measurable regulatory burdens on hiring, hours, and so on.
I'm not sure that many NZ union leaders would reckon that New Zealand offers unions a more hospitable environment than Oz; Australian minimum wages are higher and more complicated; the general labour market approach seems far more prescriptive.

Heritage also puts Australia a bit ahead of New Zealand on trade freedom. Australia last year suffered a banana crisis when its banana-growing regions suffered crop failure and Australian "we'll pretend it's phytosanitary but it's really protectionism [see also apples]" regs bit hard; banana prices hit $13/kg.

NZ takes a deserved hit for having allowed the size of government to ratchet upwards substantially under Helen Clark, but we ought to have been credited for our rather better performance on these two measures.


  1. Agreed. I had assumed it was solely on the basis of size of government - but if it was driven by labour market regulation and trade freedom it makes little sense.

    Potentially they viewed Fonterra in an unfavourable light, and decided that this was akin to greater trade protectionism then the blatant trade protectionism that occurs all through Australia.

    Also, parts of Australia do things like directly regulation the maximum calorie size of meals - how can we say that such a country is relatively more economically free then New Zealand??

    1. It's the combination: our better labour and trade freedom ought to have washed out our larger size of government.

      And the "nanny state" stuff has never sat well in measures of economic freedom - I don't think it's counted at all in either measure. It's more an issue of personal freedoms (though I can't help but see the two as inexorably linked).

  2. the claim that the labour market in NZ is better is laughable. It is quite restricted in NZ too. Trade freedom is so-so also.

    1. It would be awfully hard to conclude that the NZ labour market is more regulated than the Australian one. It's not as clean as it was under ECA, but it's worse elsewhere.