Reliance on GDP hiding true state of affairs, writes John Gascoigne.

There is general agreement New Zealand is heading in the right direction. This consensus, despite all the criticism, explains the enduring popularity of the present Government. But statistics reveal a very different picture. They show a nation in long-term economic decline and societal disintegration.

This contradiction between perception and reality underscores the need for a comprehensive, impartial measure of national economic and social performance. Presently, no such measure exists. The reason for this should be obvious. Our political masters have a very powerful, vested interest in withholding such information from the public.

A pre-condition for economic and social progress is a readily available set of accurate, reliable indicators which, like dials on a car dashboard, not only tell us how we are presently performing but, more importantly, indicate if we are tracking towards that more egalitarian, higher-income nation that can deliver what New Zealanders want and value. Full employment, for example, with good, secure jobs paying decent wages.

Presently, however, economic obfuscation and confusion abound.


New Zealanders are told they have a "rock-star economy" and are doing well. But they also experience low wages, almost 6 per cent unemployment, job insecurity, housing unaffordability, crippling student and national debt, homelessness, a metastasising underclass, grotesque inequality, desolate communities and so on. But we are doing well, apparently. So what gives?

The statistic of choice invariably cited by politicians to gloss over abysmal economic performance is the economic growth rate or increase in Gross Domestic Product (GDP). The GDP or national income is the total market value of all final goods and services we produce in a year.

By itself, the GDP measure is almost totally meaningless. For example, the Government claims our 2.3 per cent economic growth rate puts New Zealand in the top half of all OECD nations. But that half-truth conceals the fact that all the economies of the small nations in the developed world are far larger than ours.

Compare Norway and New Zealand. Norway's GDP exceeds $600 billion as against our $230 billion GDP. While both economies are growing at roughly the same rate, Norway's GDP (and per capita income) is three times New Zealand's.

The total size of a nation's economy is not an index of prosperity. For example, Norway and Argentina have almost the same GDP of around $600 billion, shared by 4.8 and 40 million people respectively. Norway's per capita GDP is one of the world's highest while Argentina's is one third that of ours.

About 15 years ago I put forward an initiative called the Economic Transparency Act. This innovation would require the publication in readily accessible form of all relevant economic and social performance indicators. It would also include similar data from other small nations in the developed world. The focus would be on the GDP or national income, its distribution, real per capita income and the median wage. The idea, however, was firmly rejected.

In America, an entirely new measure of overall economic performance has been developed. It is called the Key National Indicator System (KNIS). This initiative, administered by the National Academy of Sciences, publishes comprehensive, easily accessible data ( with the most critical given priority as with dials on a dashboard.

The Economic Transparency Act, like America's KNIS, would practically eliminate all the obfuscation and confusion that exists in the public mind. The slope of the trend lines would graphically reveal if we are tracking towards greater national wealth and quality of life. In other words, the county's direction would be shown by hard, irrefutable data, not politicians' assurances. That way, we will genuinely know if we are on the right track or locked into economic decline and societal disintegration.

John Gascoigne is a Cambridge-based economic commentator.
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