THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

New Zealand

Ranked 1st of 149

At a glance

Ranks

1 st on the Legatum
Prosperity Index™

1st
2nd
2nd
15th
12th
19th
3rd
1st
13th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, New Zealand performs best on Economic Quality and Social Capital and scores lowest on the Safety & Security sub-index.

Visit our Rankings table to see how New Zealand compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

New Zealand has had the biggest prosperity surplus in the world every year for the past decade. This surplus has grown slightly since 2007, indicating that New Zealand is delivering ever higher levels of prosperity with its growing wealth.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

New Zealand has had the largest prosperity surplus of any country in the world over the past decade. That it can generate the world’s highest level of prosperity with only average wealth for a developed country, is an achievement based on strong structural foundations and ongoing improvements in key areas of prosperity.

New Zealand’s prosperity surplus far outstrips that of the OECD and the EU
Structurally, New Zealand’s free and open markets, free people, and strong society play a significant role in is ability to turn wealth into prosperity

Structurally, New Zealand’s free and open markets, free people, and strong society play a significant role in is ability to turn wealth into prosperity. Alongside other similar countries at the top of the delivery rankings: the UK, Australia, and Canada, it is this pattern of prosperity delivery that is consistently seen. New Zealand has the strongest society in the world, with 99% of New Zealanders saying they can rely on family and friends in times of need. This social strength has been proved globally to not only have a significant impact on wellbeing, but on economic growth also. New Zealand’s mighty Social Capital performance is certainly at the heart of its success.

So too has trade been critical. A small nation of just 4.7 million, exporting has long been necessary to secure rising wealth and economic growth in the country. New Zealand is one of the least distorted markets in the world, with unrivalled free market access. A recent signatory to the Trans-Pacific Trade Partnership, which includes access to over 40% of global GDP, New Zealand already has free trade agreements in place with ASEAN, was the first developed nation to secure an FTA with China, and was a signatory to the P4 (Brunei, Chile, Singapore, and New Zealand) the first FTA linking the Pacific, Asia, and the Americas. New Zealand is proof that a small nation whose exports are still dominated by the primary sector, can trade its way to prosperity.

These strong foundations are enough to secure New Zealand a place in the global top ten, but it has risen to the top through concerted policy efforts to improve key areas of prosperity where New Zealand was less competitive. The Business Environment sub-index has risen from 11th to 2nd over the past decade. This is the result of infrastructure improvement – namely greater broadband penetration – but crucially also structural changes. Labour market flexibility has risen noticeably, as has access to affordable financial services or credit for businesses. New Zealand now scores the maximum possible on ease of getting credit. Other areas crucial to New Zealand industry, particularly its highly innovative sectors such as bio-tech, like IP protection, has been improved. The result of this reform is that New Zealand has one of the best environments for business in the world, second only to the United States.

Yet progress has not been merely economic. Health is another key area of New Zealand’s prosperity that has seen marked improvement. Ranked 20th in 2007, the country now ranks 12th in the Health sub-index. This improvement is particularly notable in comparison to UK performance. The two countries’ health systems are the most comparable in the world, and both set out on very similar reforms to the service commissioning process. New Zealand’s ‘Alliance’ model, brought together not just GPs (as in the UK model of reform), but professionals from across the local healthcare sector, encompassing multiple different service providers, from the ambulance service, to local clinics, to major hospitals. Its progress in the Health sub-index has far outstripped that of the UK. In 2007, New Zealand ranked 20th in this sub-index and the UK 22nd. In 2016, the UK still ranks similarly at 20th, but New Zealand has climbed to 12th.

Behind New Zealand’s improvement is a rising 85% satisfaction with the health system, high life expectancy that has risen by nearly two years over the past decade, and falling mortality. Conversely, satisfaction with the UK health system has fallen from 84% to 77% since 2007, life expectancy is lower and has not risen as rapidly, and mortality remains higher. The UK has not performed as well as New Zealand in improving health outcomes, despite having very similar health systems.

However, there are areas where New Zealand has not performed so well. The country has slipped seven ranks in the Education sub-index since 2007, the result of New Zealand’s education declining in real terms. This has come from falling human capital (captured by measures like years of education per worker). This trend is concerning as it has the potential to undermine New Zealand’s economic success and its role as a world-class place for business. If the country cannot sustain the skills base to match, then prosperity is at risk.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.

Special Analysis

Special Analysis

OVERALL

New Zealand has sustained good prosperity growth over the past decade, ensuring that it has always ranked in the top five and ranking first for six of the past ten years. It has seen notable improvements in Business Environment and Health, while performance has slipped in Health and Natural Environment.

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Areas of Success
Areas of Success

New Zealand has made significant progress in improving its business environment, rising nine places over the past decade to rank 2nd only to the United States. This has been the result of improving labour market flexibility, infrastructure, and financial access. So too has improvement come in Health, where the country has seen an eight rank improvement since 2007 to now rank 12th. Increased life expectancy, rising immunisation rates, reduced mortality, and a growing satisfaction with the healthcare system is behind this rise. These improvements sit alongside New Zealand’s world-class performance on Economic Quality (1st), Governance (2nd), Personal Freedom (3rd), and Social Capital (1st).

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Areas of Little Change
Areas of Little Change

New Zealand has seen little change in the fundamental foundations of its prosperity which have remained strong. Personal Freedom, Social Capital, and Governance have been steadily rising over the past decade, ensuring that New Zealand keeps it place in the global top five in all these sub-indices.

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Areas of Improvement
Areas of Improvement

New Zealand has seen a real and relative decline in its Education sub-index, falling from 8th to 15th over the past ten years. This is the result of declining human capital relative to the working age population and less vocational training. Increasing levels of overfishing have also meant that the country has declined from 2nd to 13th in the Natural Environment sub-index.