Economy of New Zealand

Mother Earth Travel > Country Index > New Zealand > Map Economy History

New Zealand's economy has traditionally been based on a foundation of exports from its very efficient agricultural system. Leading agricultural exports include meat, dairy products, forest products, fruit and vegetables, fish, and wool. New Zealand was a direct beneficiary of many of the reforms achieved under the Uruguay Round of trade negotiations, with agriculture in general and the dairy sector in particular enjoying many new trade opportunities. The country has substantial hydroelectric power and sizable reserves of natural gas. Leading manufacturing sectors are food processing, metal fabrication, and wood and paper products.

Since 1984, government subsidies including for agriculture have been eliminated; import regulations have been liberalized; exchange rates have been freely floated; controls on interest rates, wages, and prices have been removed; and marginal rates of taxation reduced. Tight monetary policy and major efforts to reduce the government budget deficit brought the inflation rate down from an annual rate of more than 18% in 1987. The restructuring and sale of government-owned enterprises in the 1990s reduced government's role in the economy and permitted the retirement of some public debt.

Economic growth, which had slowed in 1997 and 1998 due to the negative effects of the Asian financial crisis and two successive years of drought, rebounded in 1999. A low New Zealand dollar, favorable weather, and high commodity prices have boosted exports, and the economy is estimated to have grown by 2.5% in 2000. Growth is likely to slow in 2001 given the economic slowdown in important export markets. The return of substantial economic growth led the unemployment rate to drop from 7.8% in 1999 to 5.2% in mid-2001, the lowest rate in 13 years.

The large current account deficit, which stood at more than 8% of GDP in 2000, has been a constant source of concern for New Zealand policymakers. The rebound in the export sector is expected to help narrow the deficit to lower levels.

New Zealand's economy has been helped by strong economic relations with Australia. Australia and New Zealand are partners in "Closer Economic Relations" (CER), which allows for free trade in goods and most services. Since 1990, CER has created a single market of more than 22 million people, and this has provided new opportunities for New Zealand exporters. Australia is now the destination of 19% of New Zealand's exports, compared to 14% in 1983. Both sides also have agreed to consider extending CER to product standardization and taxation policy. New Zealand initialed a free trade agreement with Singapore in September 2000 and is seeking other bilateral/regional trade agreements in the Pacific area.

Investment opportunities exist in chemicals, food preparation, finance, tourism, and forest products, as well as in franchising. The best sales prospects are for medical equipment, information technology, and general consumer goods. On the agricultural side, the best prospects are for fresh fruit, snack foods, specialized grocery items such as organic foods, and soybean meal.

New Zealand welcomes and encourages foreign investment without discrimination. The Overseas Investment Commission (OIC) must give consent to foreign investments that would control 25% of more of businesses or property worth more than NZ$50 million. Restrictions and approval requirements also apply to certain investments in land and in the commercial fishing industry. OIC consent is based on a national interest determination, but no performance requirements are attached to foreign direct investment after consent is given. Full remittance of profits and capital is permitted through normal banking channels.

GDP: purchasing power parity - $67.6 billion (2000 est.)
GDP - real growth rate: 3.1% (1999 est.), 3.6% (2000 est.)
GDP - per capita: purchasing power parity - $17,700 (2000 est.)
GDP - composition by sector:
agriculture:  8%
industry:  23%
services:  69% (1999)
Household income or consumption by percentage share:
lowest 10%: 0.3%
highest 10%: 29.8% (1991 est.)
Inflation rate (consumer prices): 1.3% (1999 est.), 2.4% (2000 est.)
Labor force: 1.88 million (2000)
Labor force - by occupation: services 65%, industry 25%, agriculture 10% (1995)
Unemployment rate: 7% (1999 est.), 6.3% (2000 est.)
Budget:
revenues:  $19.2 billion
expenditures:  $19.2 billion (1999 est.)
Industries: food processing, wood and paper products, textiles, machinery, transportation equipment, banking and insurance, tourism, mining
Industrial production growth rate: 6.2% (2000)
Electricity - production: 37.952 billion kWh (1999)
Electricity - production by source:
fossil fuel:  30.49%
hydro:  61.42%
nuclear:  0%
other:  8.09% (1999)
Electricity - consumption: 35.295 billion kWh (1999)
Electricity - exports: 0 kWh (1999)
Electricity - imports: 0 kWh (1999)
Agriculture - products: wheat, barley, potatoes, pulses, fruits, vegetables; wool, beef, dairy products; fish
Exports: $12.2 billion (f.o.b., 1998 est.), $14.6 billion (f.o.b., 2000 est.)
Exports - commodities: dairy products, meat, fish, wool, forestry products, manufactures
Exports - partners: Australia 22%, US 14%, Japan 13%, UK 7% (1999)
Imports: $11.2 billion (f.o.b., 1998 est.), $14.3 billion (f.o.b., 2000 est.)
Imports - commodities: machinery and equipment, vehicles and aircraft, petroleum, consumer goods, plastics
Imports - partners: Australia 24%, US 17%, Japan 12%, UK 4% (1999)
Debt - external: $53 billion (1998), $30.8 billion (2000 est.)
Economic aid - donor: ODA, $123 million (1995)
Currency: New Zealand dollar (NZD)

SOURCES: The World Factbook, U.S. Department of State

Mother Earth Travel > Country Index > New Zealand > Map Economy History