OECD Recommends Major Reforms to Boost New Zealand Economy

The Organisation for Economic Co-operation and Development (OECD) has delivered a comprehensive set of recommendations to address New Zealand’s economic challenges, warning that without decisive reforms, the country risks falling further behind its OECD peers in terms of growth and living standards. In its latest economic survey, released on May 7, 2026, the OECD highlighted structural issues in energy affordability, retirement savings, and productivity as key areas requiring urgent attention.

The report underscores that New Zealand’s economy, while showing signs of recovery with lower interest rates and resilient exports, faces significant headwinds. Domestic demand remains subdued, and the OECD cautions that global turbulence—particularly the ongoing Middle East conflict—could further delay economic growth and push up inflation. The survey also points to persistent weaknesses, including low productivity, high public debt, and insufficient investment.

Energy and Electricity: A Structural Affordability Crisis

The OECD has identified New Zealand’s electricity market as a critical bottleneck, describing electricity prices as “structurally too high” and warning of a “massive negative energy shock” if no action is taken. The report attributes this crisis to underinvestment in firming capacity and a lack of resilience in the energy sector. High and volatile electricity costs are already discouraging business investment, and the OECD calls for immediate reforms to restore affordability and security of supply. Without intervention, the report suggests, New Zealand risks losing competitiveness and further dampening economic momentum.

“Electricity prices are structurally too high,” the OECD states, adding that the current market structure is failing to incentivize necessary investment in generation and transmission infrastructure. The survey recommends exploring structural changes, such as separating generation and retail operations of dominant energy providers, to foster competition and lower costs for consumers and businesses alike.

Retirement Savings: Linking NZ Super to Life Expectancy

In a move that could reshape New Zealand’s social policy landscape, the OECD has recommended raising the eligibility age for New Zealand Superannuation (NZ Super) and linking it to life expectancy. The report argues that the current fixed eligibility age of 65 is no longer sustainable given increasing life spans and rising public pension costs. The OECD suggests that tying NZ Super eligibility to life expectancy would help ensure the long-term viability of the pension system and reduce pressure on public finances.

The OECD also advocates for increasing contributions to KiwiSaver, the country’s voluntary workplace savings scheme, to bolster retirement savings and reduce reliance on the public pension. The survey notes that while KiwiSaver participation is growing, coverage of occupational pension plans continues to decline, leaving many New Zealanders vulnerable in retirement.

Capital Markets and Productivity: The Path to Sustainable Growth

To support long-term growth, the OECD recommends deepening New Zealand’s capital markets and accelerating the digitization of key sectors, particularly health. The report highlights that while labor participation and employment rates are strong, productivity gains have stalled, leaving New Zealand’s output per capita persistently below that of the most advanced OECD countries. The OECD urges the government to continue fiscal consolidation while maintaining targeted support for job creation and income protection.

the report advises the Reserve Bank of New Zealand (RBNZ) to maintain a stable monetary policy framework to preserve credibility and support inflation expectations. Frequent adjustments to the RBNZ’s remit, the OECD warns, could increase the risk of policy errors and undermine confidence in the central bank’s ability to manage inflation.

What Comes Next?

The OECD’s recommendations come as New Zealand grapples with a complex economic landscape. With unemployment hovering above 5% and net migration subdued, the government faces the challenge of implementing reforms that balance short-term relief with long-term sustainability. The report’s call for action on energy affordability, retirement savings, and productivity signals that New Zealand’s economic future will depend on its ability to address these structural issues decisively and without delay.

As the government considers the OECD’s advice, the coming months will be critical in determining whether New Zealand can break free from its current growth constraints and restore its position as a high-income, competitive economy.