A man uses his mobile phone outside an Australia and New Zealand bank branch in central Sydney August 16, 2013.
A man uses his mobile phone outside an Australia and New Zealand bank branch in central Sydney August 16, 2013. REUTERS/Daniel Munoz

The widening gap between New Zealand's rich and poor has taken one-third off the country's economic growth. A new international research has found that rising inequality is damaging to the economic performance of developed countries.

According to the Organisation for Economic Cooperation and Development (OECD), the countries with the biggest differences in income are New Zealand, Finland, Israel, Sweden and the United States. As a result of the income gap, New Zealand has missed out on 10 percentage points of economic growth, Stuff.co reported.

The OECD research suggested that policymakers should be more concerned about the bottom 40 percent of the population and use taxes plus benefits to help redistribute the population's income. New Zealand's economic growth should have been almost 44 percent between 1990 and 2010, but the widening income gap reflected a growth of only 28 percent. The 15.5 percentage points that New Zealand lost due to rising inequality was the highest among developed nations.

The report said Mexico lost 11 points and UK nearly 9 points. Finland, Norway, U.S., Italy and Sweden lost between 6 and 7 percentage points from their respective economic growth rates. OECD Secretary-General Angel Gurria said there was "compelling evidence" that it is critical for governments to address rising inequality in incomes to promote and sustain growth.

Gurria believes that nations providing equal opportunity to its people at an earlier age will have better chances of growth and prosperity. Inequality was also noted as the cause of poor educational outcomes for children whose parents have low-level education. The OECD report indicated that inequality had no effect among parents of children with high levels of education. The international research organisation has found it would take more than anti-poverty programmes to solve the problem.

The OECD recommended increasing access to public services like quality education and healthcare are important for social investment to help bridge the income gap and create equal opportunities in the long run.

According to Radio NZ, Council of Trade Unions economist Bill Rosenberg said that the government should be aware that the bottom half of New Zealand's population is affected by rising inequality. He believes New Zealand may have lost more percentage points from economic growth compared to OECD estimates.

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