Why some countries prosper

Singapore's Marina Bay at night — Points of viewCountries do not get rich by luck. They get rich by making good choices and sticking with them.

I grew up on the Mercedes side of the Berlin Wall. On the other side, people waited 15 years for a Trabant. The two Germanys shared a language, a history and a people. What separated them was policy, and I have been asking why some countries prosper ever since.

Core beliefs

Policy matters more than luck

Australia calls itself the lucky country, but its boom of the 1990s rested on the hard reforms of the 1980s. Once the reforms stopped, so did the gains. Australian labour productivity has grown by less than 0.4 percent a year since 2015, a quarter of its long-run average.

Read: Losing sight of the lucky country – why we need a crisis to reform again (Newsroom, 2026)

Small countries win by being open

Ireland, Switzerland and the Netherlands have little in common except their size and their success. Each has opened itself to trade, investment and talent, and each competes hard for them.

New Zealand ranks 22nd out of 29 rich countries for trade openness and 26th for economic complexity.

Read: Irish Secrets: An Irish lesson in prosperity (report, 2023) and Go Dutch: Learnings from The New Zealand Initiative’s visit to the Netherlands (report, 2025)

Rising house prices are not growth

New Zealand’s recovery after 2014 rode on high export prices, record migration and the Christchurch rebuild. A recovery built on cheap credit and rising house prices has none of those props, and it does not make the country more productive.

Read: NZ’s zombie rock star economy (The Australian, 2025)

Reform is possible, but it needs preparation

John Key’s government reformed quietly and slowly. It prepared the public before each change, so that by the time measures were implemented, they looked like common sense. Reforms built that way create their own constituency.

The harder lesson is that most big reforms come only when a country’s back is to the wall.

Read: Quiet Achievers: The New Zealand Path to Reform (Menzies Research Centre, 2014)

Measure before you despair

Among 29 rich countries, New Zealand ranks first for labour force participation, second for economic freedom and fourth for honesty in government. It ranks 20th for productivity.

Strong institutions and weak productivity is a combination that policy can fix.

Read: New Zealand by Comparison (report, 2026)

How I came to this

I first visited Australia in 1999 and returned in 2001 to write part of my doctorate at the University of Sydney. The economy was growing at around 4 percent a year. Australia was “can do” where Germany was at best “could do”.

In 2014, I wrote Quiet Achievers for the Menzies Research Centre about John Key’s reforms. Mathias Cormann, then Australia’s finance minister, launched it in Canberra. Twelve years later, as head of the OECD, he told an audience that he blamed himself, too, for letting reform lapse.

At The New Zealand Initiative, we take our members to see successful small countries for themselves, from Switzerland to Ireland and the Netherlands. Each trip has shown that prosperity follows from choices other countries can copy.

1999My first visit to Australia, then growing at around 4 percent a year.
2012I leave Sydney for Wellington. My farewell column is titled “Losing sight of the lucky country”.
2014Quiet Achievers examines John Key’s reforms. Mathias Cormann launches it in Canberra.
2017Go Swiss reports on our study tour of Switzerland.
2023Irish Secrets asks how Ireland became one of Europe’s richest countries.
2025Go Dutch reports on our study tour of the Netherlands.
2026New Zealand by Numbers and New Zealand by Comparison measure the country against its peers.

What happened next

The coalition elected in 2023 appointed New Zealand’s first minister for foreign direct investment, set up Invest New Zealand and replaced the Resource Management Act with a new planning law. These are the kinds of reforms that lift productivity over time.

Australia has had no comparable reform era since the GST in 2000, and its productivity growth has slowed to a crawl.

Cormann’s explanation is that reform asks voters to accept visible costs now for benefits that arrive later. That is why reforms so often wait for a crisis, and why I keep making the case before one arrives.