Economy

Inequality, unaffordable housing risks for NZ economy - OECD

A global report has praised New Zealand for its wellbeing approach to policy, but has named inequality, housing unaffordability and migration policy as major risks to our economic success.

The survey by the OECD, the organisation representing the world's developed economies, found New Zealanders' wellbeing was generally high.

The country has stable economic growth, picked to come in at 2.5 percent this year and next, and healthy government finances.

However some groups were faring better than others, and the report recommended the government better target Māori and Pacific people, and solo parents and children to improve their wellbeing.

"The challenge going forward will be to continue improving wellbeing through building a more productive, sustainable and inclusive economy," OECD Deputy Secretary-General Ulrik Vestergaard Knudsen said.

The report also said the government should do more to combat rising house prices and an increase in homelessness by loosening land use rules and increasing the amount of social housing.

It gave a less-than-glowing review of the KiwiBuild policy, saying it would only work to boost affordable housing supply if wider issues like planning, infrastructure and construction sector constraints were sorted out first.

The policy needed to be better targeted, and could instead focus on freeing up land for development and putting risk back on to developers.

The report also suggested the government consider subsidising construction of affordable rental housing, as is done in other OECD countries.

Migration policy was identified as needing work, with more effort required to match the flow of migrants with skills shortages and to get recent migrants into jobs.

The OECD said it approved of Reserve Bank plans to increase the amount of capital banks are required to hold, but told New Zealand it needed a bank deposit guarantee scheme, which the government announced on Monday it would adopt.

Despite the strength of New Zealand's policy settings, productivity and earnings remained relatively low, the report said, and better support for innovation, business and competition could help.