Are high wages putting New Zealand businesses off Australia?

Australia’s high wage rate is discouraging New Zealand companies from investing in Australia, according to New Zealand’s Finance Minister, Bill English.

English said successful New Zealand businesses would like to expand their operations here, but they would not find it economically viable, Fairfax reports.

“Some Australian firms are paying wage rates that mean New Zealand firms cannot get a return on investing here,” he said.

Fairfax reports statistics showing on a dollar-for-dollar scale, full-time employees in Australia earn an average of $369 per week more than employees in New Zealand.

OzForex chief currency and payment strategist, Asia-Pacific, Jim Vrondas told SmartCompany this morning he had not heard any direct complaints from New Zealand businesses about wages putting them off doing business in Australia.

Vrondas says with the Australian dollar at a lower rate and more comparable to New Zealand, it is possible that they may view now as a good time to set up production here.

“They have a 20% reduction in set-up costs over the last year,” he says. “However, most plan their expansion to new countries as much as five years ahead.”

Pitcher Partners executive director Adrian Fitzpatrick agrees with Vrondas that he has not heard direct complaints from New Zealand businesses about Australian wage rates.

Fitzpatrick says wages are just one of many issues New Zealand businesses consider when setting up in Australia, with access to markets, skill bases and potential profit gains all involved.

“I don’t think that the dollar will make a big difference to their plans (to operate here),” he says.

“We have had this situation between Australia and New Zealand for so long that we have learned to live with it.”

The statement from English follows a recent MYOB Trans-Tasman Business Monitor report, which showed New Zealand SMEs are set to outpace their Australian counterparts by a “considerable margin” in 2014.

The comparative report found while Australian SMEs are more optimistic about growth for the current financial year compared to last year, their opportunities for growth are around six months to a year behind those of New Zealand business owners.

MYOB chief executive Tim Reed said the results fall into the context of both countries having the prospect of improved economic conditions this year.

Crossmark chairman Kevin Moore, who went on a trade trip to New Zealand late in 2013, said New Zealand SMEs were feeling buoyant compared to their Australian counterparts due to a far lower tax rate and no capital gains tax.


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