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Ageing and the labour market[93]

In the past century, New Zealand's population has increased from around one million people to around 4.7 million. Population growth increased due to a combination of; increasing life expectancy, declining age specific mortality rates, net inflows of migration, and births per female being generally above the natural replacement rate. The population is projected to increase to around 5.3 million by 2025 and to reach around 6.3 million by 2060.

Historically high levels of immigration have contributed significantly to strong population growth in recent years. From mid-2013 (around the release of the last Statement) to mid-2016, New Zealand's population is estimated to have increased by over 250,000 people. Net migration has accounted for around 165,000 over this period. Given that long-term birth rates are projected to be below replacement rates, net migration is projected to remain a major source of long-term population growth.

Ageing will also continue to play a large role in New Zealand's demographic composition. Those born today are expected to live around 20 years longer than their ancestors born a century ago, with males and females born in 2016 expected to live to around 80 and 84 years respectively. Rising life expectancy is generally positive for living standards but does have a wide range of implications.

The historical uniqueness of New Zealand's current demographic composition is the ageing of the baby boomers (people born between 1946 and 1965). The baby boomers represent a large cohort of the population, born at a time when births per female were historically high (around 3.5). Over the next 15 years this population cohort will continue to move past 65 years of age (see Figure 3.3).

Figure 3.3 – New Zealand population age structure: 1972 – 2060
Figure 3.3 – New Zealand population age structure: 1972 – 2060   .
Source:  Statistics New Zealand.

The last 25 years has seen a significant increase in the labour force participation of older workers. This shift has been particularly prominent for those aged over 60. The labour force participation rate over the past 25 years has risen from around 26 percent to around 73 percent for those aged between 60 and 64, and from around six percent to around 22 percent for those aged over 65 (see Figure 3.4).[94] This has been assisted by a number of factors including; healthy ageing, flexible labour market settings, and New Zealand Superannuation settings (e.g. increases in the age of eligibility, absence of a means test). New Zealand now has one of the highest participation rates for over 65s among OECD countries.[95], [96]

To assist the economy through this transition, labour market settings should ensure older workers are not discouraged from working. As healthy ageing is projected to increase, it is anticipated the participation of older workers will also continue to rise. Participation rates for those over 65 are projected to increase from around 22 percent to almost 26 percent by 2060.[97] Given the proportion of New Zealanders aged above 65 is projected to increase from around 15 percent to around 27 percent over this period,[98] labour market, tax and retirement age settings, and supportive employers will play important roles in future economic growth. The fiscal impacts of ageing are further explored in Section Six.

Figure 3.4– Labour force participation rates of selected age groups
Figure 3.4– Labour force participation rates of selected age groups .
Source:  Statistics New Zealand.


  • [93] Population statistics in this section are from Statistics New Zealand.
  • [94] Statistics New Zealand.
  • [95]
  • [96]
  • [97] The Treasury's Long-Term Fiscal Model.
  • [98] The Treasury's Long-Term Fiscal Model.
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