Here's one very simple reason why the idea of packing up and moving across the Tasman has become so attractive to so many New Zealanders.
In 2006, New Zealand's GDP was the equivalent of US$24,944 ($34,610) for each man, woman and child in the country. In Australia, it was US$32,202. When it comes to GDP, size does matter and not only is Australia's GDP per capita bigger than ours, it is also growing faster.
With its higher GDP, Australia can afford to pay people more. For New Zealand's best and brightest, especially the young, this is a magnet. For our economy it is an unsustainable drain.
How do we lift our per capita GDP to keep our brightest in well paid, challenging work here at home?
The starting point is building up investment in industry by helping businesses find those with money - not easy, but there has been some good news on this score. The 2007 Forbes Capital Hospitality Report ranks New Zealand fifth as an investment destination compared with Australia's 11th, and the 2006 World Bank Ease of Doing Business Ranking places New Zealand second, to Australia's eighth. But those rankings alone aren't enough.
New Zealand is still geographically isolated and small, which means we have to work hard to get noticed by international investors. The best way is to ensure our regulatory, tax and legal framework is world-class and attractive, which is where the recently introduced Limited Partnerships Bill comes in.
The bill is the product of five years consultation between the government, the New Zealand Private Equity & Venture Capital Association and industry.
Worldwide, limited partnerships are the most common vehicle for international investment, particularly for private equity and venture capital funds. By using different structures, New Zealand was potentially putting off prospective investors.
Certainly it was the view of NZVCA that as long as New Zealand maintained its own system, investors would have to work hard to understand all its quirks. But by adopting an internationally recognised model, investors and managers can focus on the investments and not the framework that underpins them. Investors will feel more comfortable investing in vehicles they are familiar with and understand. Since we want their investment, it's in our interests to keep it simple and in sync with the countries with which we compete.
The regime proposed in the bill will be familiar to international investors. Limited partners contribute capital and generally stay clear of the management of the business, and the general partner runs the partnership, makes investment decisions and has unlimited liability for the partnership's debts. Losses and profits flow straight through to the partners, often bringing tax benefits to investors if the partnership makes losses early in the investment cycle - as often happens in biotech and other R&D-heavy industries.
The version of limited partnership being proposed is a hybrid of a partnership and a company. Those working on the bill have looked at models in the US, Britain, the Channel Islands and Australia, picked out the best elements of each, and avoided some of the pitfalls.
Limited partnerships generally ensure that so long as investors do not participate in management, their liability is limited to their investment - just as a shareholder's liability is limited to the amount they pay for their shares.
The New Zealand regime will allow unlimited partner numbers and duration, in contrast with the existing special partnership regime, and will also allow unlimited investment, unlike Australia which effectively caps a limited partnership's assets.
Most importantly for many New Zealand businesses, limited partnerships will be transparent vehicles for tax purposes so that losses and gains are attributed to investors directly.
Limited partnerships can be used for any type of business, except banking and insurance, although they will be most useful for venture capital, private equity and general investment vehicles.
Without a doubt this vehicle will be much easier to establish and administer than complex existing fund structures and will give fund managers the right to keep the identity and contributions of their investors confidential.
As with any new legislation, the bill now heads to a select committee. It isn't perfect as it stands. In particular, some more thought needs to be given to the following issues:
* The extent of the "safe harbours" or activities a limited partner can be involved in without contravening the "no management" rule. These are to be contained in regulations which need to be developed well in advance of the enactment of the legislation.
* The trigger point for when someone becomes a limited partner and can avail themselves of the protection of limited partner status. The draft bill places the obligation on the general partner to get it right.
* The extent of the power in an insolvency to claw back distributions made to limited partners. The current test applies if the limited partner knew that the limited partnership would not satisfy the solvency test after the distribution and applies for three years.
* Written partnership agreements are compulsory for limited partnerships but there is no test of their quality.
* Continued confidentiality of names and investments of limited partners, including where that information is contained in annual returns.
* The pass-though of all losses to investors - at the moment this would be limited to the capital contributed by the relevant investor.
Those issues aside, the regime should introduce an internationally competitive framework for investments.
For those looking for funds, this has to be good news.
* Nick Wells is a partner and Phillippa Wilkie a senior solicitor at Chapman Tripp.