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New Zealand - Economy

KEY FACTS 2006

  • GNI: US$112.4bn
  • GNI p c: US$27,250
  • GDP growth: 3.2% p.a. 2002–06
  • Inflation: 2.6% p.a. 2002–06
  • Aid: net donor
  • External debt: US$38.1bn (2004)

Overview: From the 1950s, the country has diversified both its economy and its export markets, reducing its dependence on sheep and butter. Diversification has taken it into new agricultural products (kiwi fruit, apples, timber and wine), and seen significant growth in fishing, tourism, manufacturing and services.

In 1984, after a period when the economy stalled, inflation was high and the currency devalued, the country embarked on a policy of liberalisation, deregulation and privatisation. In 1989, control of inflation was passed to the Reserve Bank: the subsequent austerity measures brought inflation to below 2% by the end of 1991, and tight fiscal policy was maintained. Economic policy has been to protect the core of social spending while reducing government expenditure through privatisations and cost-cutting. New Zealand is a proponent of regional free trade, including the entire Pacific Rim.

The economy grew steadily during the 1990s until 1998. By mid-1998 the impact of the Asian financial crisis had become very serious, causing a sharp fall in trade with Asia and the government announced emergency spending cuts. The 1998 slide into recession was accompanied by a slump in both exports and consumer demand but in 1999, particularly after the Reserve Bank acted in March to curb interest rate volatility, there was a return to confident growth. Growth was steady at around 4% p.a. 2002–04 and slowed to 1.9% in 2005.

The early 2000s saw the start of a strategy to reduce the gap between rich and poor, which had opened up since the introduction of free-market policies in the mid-1980s. Measures included increases in spending on health, education and public housing, focused on the Maori and Pacific Islander communities.

Trade: Exports of goods and services account for around 29% of GDP and manufactured exports for 31% of total merchandise exports (2004). The chief exports are dairy produce, meat, forest products, fish, fruit, vegetables, aluminium and wool. Most exports go to Australia (21%), the USA, Japan, China and the UK; most imports come from Australia (21%), the USA, Japan, China and the UK. Manufactured goods dominate imports, including machinery, vehicles and aircraft. Fuel is also an important import.