Economist John Quiggin claims that low NZ performance relative to Australia is because of its central bank being fighting inflation to the point of causing unnecessary recessions.
Edit: Please note that the gravity model of trade is an approximate empirical observation of trade, not economic growth. Australia is just as isolated as is NZ and yet fares better.
Source: 4th paragraph here: http://johnquiggin.com/2011/05/19/9813/
Edit: Please note that the gravity model of trade is an approximate empirical observation of trade, not economic growth. Australia is just as isolated as is NZ and yet fares better.