No Stupid Questions with Susan Edmunds How Does Australia Pay High Wages but Still Keep Prices Low?
Nov 25, 2025
In this discussion, Mary-Jo Vergara, an Economist at Kiwibank, shares insights into how Australia manages to offer higher wages alongside lower living costs. She attributes this to the nation's larger scale, higher productivity, and competitive market conditions. Mary-Jo also highlights the challenges New Zealand faces in boosting productivity, emphasizing the need for more capital investment. The episode touches on various financial queries, including KiwiSaver options for different religious beliefs and the implications of international transaction fees.
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Scale And Productivity Explain Price Gaps
- Australia pays higher wages partly because its larger economy spreads costs over more customers and output per worker is higher.
- New Zealand's smaller scale and lower productivity mean wage rises more easily translate into higher prices.
Shift Toward Capital Investment
- Improve productivity by shifting growth toward capital investment rather than relying mainly on labour.
- Increasing capital investment helps absorb higher wages without pushing up prices.
Use Sharia‑Compliant KiwiSaver Funds
- Muslim savers can use Sharia-compliant KiwiSaver options like Always Ethical (formerly Amarna Ethical).
- These funds avoid companies that earn interest and adhere to Islamic investment principles.