Xero is a NZ startup success story but they have moved their main offices to Australia and the US. Tiny population and geographic and time-zone isolation are big obstacles for anyone trying to do things on a global scale.
As someone in Australia our decrepit internet makes it impossible to do anything resembling a startup. I can't imagine New Zealand would be so bad that they need to move here.
While as a fellow Australia I bemoan the woeful state of our internet, I don't think it makes it "impossible" to start a startup, in fact I know many startups in Sydney and elsewhere. It makes it more difficult, yes, and limits your options, but it's not impossible.
I can think of several reasons to move to AU from NZ as a startup; a greater talent pool and larger investment community for starters. It's by no means a slam dunk, but they're valid reasons.
