New Zealand's great unlearning: how a country rich in energy became poorer in work
New Zealand did not have a James Watt moment. It had something stranger: a small, blessed country with hydro lakes, gas fields, coal, geothermal heat, fertile soil, ports, food exports and practical people — and then, slowly, a habit of making useful work harder.
We talk about productivity as if it is a spreadsheet problem. Skills. Management. Capital deepening. Innovation policy. R&D grants. All true, but incomplete. Productivity is also physical. It is the amount of useful work a society can command per person: heat, motion, pressure, refrigeration, transport, processing, fertiliser, irrigation, data centres, cold stores, trucks, ships, milk dryers, sawmills, greenhouses and factories. Energy is not just another input. It is the input that makes all the others more powerful.
That is why New Zealand's productivity malaise should be understood as an energy story as much as an economic one. Treasury itself says productivity is the biggest long-run determinant of wages and living standards. Stats NZ shows labour productivity growth has been weak: over the year to March 2025 it rose only 0.8%, and the prior year included one of the sharpest falls since the global financial crisis. Treasury analysis also shows the long-run trend has slowed: average labour-productivity growth was about 1% over 30 years but only 0.7% over the 20 years to 2022/23.
That is the polite statistical version. The lived version is that New Zealanders work hard, pay more, wait longer, build less, export logs instead of higher-value goods, and watch young people leave for Australia. We have added population, compliance, consultants and debt faster than we have added productive capability.
Energy tells the same story. In 2024, New Zealand's total energy consumption fell 2.1% to 524.8 petajoules, driven by lower industrial demand. Natural gas consumption fell to its lowest level since 2011. On a population of about 5.31 million at the end of 2024, that is roughly 99 gigajoules of final energy per person — not catastrophic, but not the profile of a country gearing up for an industrial expansion.
The reassuring headline is that renewables are rising. In 2024, 45.5% of primary energy supply came from renewable sources, a record, and 85.5% of electricity generation was renewable. That is good. But it hides the harder question: are we adding enough total useful energy, at reliable prices, to lift output per person? A country does not become rich by boasting about the percentage of its energy that is renewable while consuming less energy in the sectors that make tradable goods.
New Zealand has pursued a strange form of decarbonisation: not always replacing fossil energy with abundant cheap clean energy, but often suppressing or exporting the activity that used energy. That may improve a domestic emissions ledger. It does not necessarily improve the atmosphere, national resilience, or household living standards.
The clearest symbol is Marsden Point. New Zealand closed its only oil refinery in 2022. MBIE now states the position plainly: since Marsden Point closed, all domestic petroleum needs are served by imports of refined products such as petrol, diesel and jet fuel.
This was not just a sentimental loss of an old industrial asset. It was the closure of a strategic conversion machine: crude oil in, finished fuels out. Before closure, Marsden Point sat at the centre of New Zealand's fuel system, supplying most of the country's petrol, diesel and aviation fuel demand and all fuel oil for shipping, while contributing nearly 7% of Northland GDP.
Yes, the refinery faced difficult economics. Yes, shareholders voted for the import-terminal conversion. Yes, refining margins were weak. But the wider lesson remains: New Zealand allowed one of its few large-scale pieces of energy-industrial infrastructure to become an import terminal. We did not eliminate the need for fuel. We eliminated the domestic act of refining it.
That matters because energy security is not the same as having contracts. A refinery is optionality. It gives a country more ways to respond when shipping lanes, wars, sanctions, currency, freight, insurance or regional refinery capacity shift. An import terminal is efficient in normal times. It is less sovereign in abnormal times.
Agriculture is the second great contradiction. New Zealand is one of the most efficient food producers in the world, yet agriculture has spent years under threat of emissions pricing, freshwater regulation, land-use change and uncertainty. The damage from that uncertainty is not imaginary — farming is a long-cycle business, and if farmers believe the long-term answer is to tax biological production and encourage permanent carbon forestry over food production, they will invest differently.
The productive economy does not run on vibes. It runs on heat, pressure, torque, electrons, logistics and confidence. New Zealand should be asking a more brutal question: what would it take to double useful energy per worker without doubling emissions? Not how to ration. Not how to close. Not how to import. How to produce more useful work per person with cleaner, cheaper, more reliable energy.
The old New Zealand bargain was simple: a small country could be rich if it turned natural abundance into high-value exports. Grass into protein. Rain into hydro. Heat into geothermal power. Gas into industrial energy. The new bargain has been worse: consume what others make, regulate what we still make, count imports as virtue, and call lower industrial energy use a transition.
Watt's lesson was that civilisation advances when heat is turned into useful work. New Zealand's lesson, if we are not careful, will be the reverse: a country can have almost everything nature offers and still go backwards if it makes useful work too expensive, too uncertain, and too hard.