How can we expect an Australian standard of living when their productivity is about 40 per cent higher than ours?

And if we can't, must we settle for a future where New Zealand is just a great place to be from?

These are the questions the 2025 taskforce chaired by Don Brash has to wrestle with.

Its first report is due at the end of next month. In the meantime, submissions and background papers it has been considering, now available on a website (www.2025taskforce.govt.nz), make sobering reading.

To close by 2025 the income gap, measured in GDP per capita, which had opened up by 2008, New Zealand would need to grow 1.8 percentage points a year faster than Australia, Treasury economist Michael Reddell points out.

The lucky country has escaped recession during the global crisis. If you take the two countries' Treasury forecasts for 2013 as reliable, by then the gap will have widened to the point that it would require New Zealand to grow 3.2 percentage points a year faster than Australia to catch up by 2025.

If history is any guide we haven't got a dog's show.

Over the past 40 years Australia has remained securely above the OECD average in terms of per capita GDP.

Currently it is about 15 per cent above.

That is where New Zealand was 40 years ago before two big downward lurches in the second half of the 1970s and then in the era of radical economic reform between 1985 and 1992. Since then we have remained pretty much stuck around 15 per cent below OECD average levels.

"This shows that not only did those reforms mean we missed a cycle of economic growth, but we have not had any real dividend from that reform period," says the Council of Trade Unions. "It would be foolish to head down that path again."

Lifting real wages requires investment in skills and education, it says. It also requires more capital per worker. A lot more.

By 2002 the amount of physical capital New Zealand firms had per worker was about half the US level, compared with 80 per cent in Australia.

The CTU attributes this "capital shallowness" to the Employment Contracts Act, depressing real wages and making it easier for firms to grow by piling on more labour than by undertaking productivity-boosting capital expenditure. It was strategy of all hands to the pump, instead of investing in a better pump, as Australia, with its more regulated labour market, did.

Some capital deepening occurred during the most recent boom, but with the economy having shrunk nearly 3 per cent since then businesses have plenty of spare capacity and investment intentions are weak.