Capitalism 'a success', but things must change - economist

An economics expert says capitalism has not been "a blatant failure" as new Prime Minister Jacinda Ardern suggests - but agrees changes must be made to narrow the wealth gap.

University of Auckland economics professor Timothy Hazeldine says capitalism's longevity in New Zealand and throughout the western world means it's a success.

But he told The AM Show on Tuesday plenty has gone wrong within our own system, and says Labour has a challenge to fix housing and welfare issues.

"I think [Labour is] pretty happy with the system in general, but they think there's a few tweaks needed, and the power balance has maybe switched a bit too far to the capital side, and away from the labour side," Prof Hazeldine said.

He says New Zealand's current economic climate is not too dissimilar to dictatorships in central Africa, countries host Duncan Garner described as having "1 percent with the gold watch and a university degree out of Harvard, and the others living in the dump".

He says the top 1 percent of our population has nearly doubled their share of national income to about 10 percent, leaving "a small number of people who find it very easy to get rich, and a large number of people who find it very hard to get by".

The middle class is under threat of becoming like the working poor, Prof Hazeldine added, but "high-achieving Trump voter types" are more angry at people living on benefits than the wealthy who find income easy to come by.

"[That type of person is] angry at the people around him who aren't working as hard as he is, that didn't struggle as much as he and his family struggled, and still seem to be getting what they need for nothing," Prof Hazeldine explained.

"[People like that] look across the fence at the guy who doesn't go to work at all, the beneficiary - that's what really pisses them off.

"They're angry about that because it's grown - we've now got hundreds of thousands of people in New Zealand who live off various benefits, including superannuation."

Prof Hazeldine says there is some merit to that, as the welfare state was designed to be "a trampoline" people use to "bounce back up and into society".

He added Labour has "a big challenge" on their hands if they're truly trying to change that, but said one way to remedy it would be to introduce a universal basic income and do away with benefits.