New Zealand’s economy
is developed, but it is comparatively small in the global marketplace. In the
late 19th and early 20th centuries, New Zealand’s standard of
living, based on the export of agricultural products, was one of the highest in
the world, but after the mid-20th century the rate of growth tended to be one
of the slowest among the developed countries. Impediments to economic expansion
have been the slow growth of the economy of the United Kingdom (which
formerly was the main destination of New Zealand’s exports) and its eventual
membership in the European Community (later the European Union) and the high tariffs imposed by the
major industrial nations against the country’s agricultural
products (e.g., butter and meat). New Zealand’s economic history since the
mid-20th century has consisted largely of attempts to grow and diversify its
economy by finding new markets and new products (such as wine and paper products),
expanding its manufacturing base, and entering into or supporting free-trade
agreements.
New Zealand has had a long
history of government intervention in the economy, ranging
from state institutions’ competing in banking and insurance to an extensive social
security system. Until the early 1980s most administrations strengthened
and supported such policies, but since then government policy has generally
shifted away from intervention, although retaining the basic elements of social
security. Most of the subsidies and tax incentives to agricultural and manufacturing exporters
have been abolished, and such government enterprises as the Post Office have
become more commercially oriented and less dependent on government subsidies.
In addition, administrations have attempted to increase the flexibility of the labour market by amending labour
laws and encouraging immigration.
Agriculture
New
Zealand’s farming base required a relatively complex economy. Highly productive
pastoral farming, embracing extensive sheep grazing and large-scale milk production,
was made possible by a temperate climate, heavy investment in land
improvement (including the introduction of European grasses and regular
application of imported fertilizers), and highly skilled farm
management by owner-occupiers, who used one of the highest ratios of
capital to labour in farming anywhere in the world. The farms supported and
required many specialized services: finance, trade, transport, building
and construction, and especially the processing of butter, cheese,
and frozen lamb carcasses and their by-products. That economy could be
described as an offshore European farm, which exported wool and
processed dairy products and imported a variety of finished manufactured
consumer and capital goods, raw materials, and petroleum. Pastoral
farming, especially dairying, has remained significant, but other sectors such
as forestry (and the production of paper and other wood products, horticulture, fishing, deer farming,
and manufacturing have produced a more-balanced economy. Viticulture has
also flourished, and many New Zealand wines have come to rank among the world’s
best.
Apart from gold mining’s brief
heyday in the mid- to late 19th century, biological resources have always been
more significant than minerals. Domesticated animals introduced from Europe thrived
in New Zealand. Forestry has always been important, but the emphasis has swung
from felling the original forest for timber to afforestation with pine and fir trees for
both timber and pulp. Although New Zealand’s forestry industry is small on the
world scale, it is a significant supplier of wood products to the Asia-Pacific
region.
Manufacturing
Even in the 19th century New Zealand’s
relative geographic isolation made necessary a proportionately large industrial
labour force engaged in the manufacture and repair of agricultural machinery
and in shipbuilding, brewing, and timber processing. After the 1880s the
factory processing of farm products swelled those numbers, while the country’s
temporary isolation during World Wars I and II stimulated the production of a
wide range of manufactured goods that previously had been imported.
Protectionist policies first espoused, although weakly, by governments in
the late 19th century were strengthened after World War I. From the end of World
War II until the early 1970s, manufacturing industries were
protected by import-licensing fees in order to maintain full employment. Some
labour-intensive, heavily protected, and uneconomic activities—such as automobile and
consumer-electronics assembly (with the manufacture of some parts and
components)—were developed but were not able to remain competitive. Some
industries have taken their manufacturing activities offshore, although the
sector has remained significant as an employer and as a contributor to gross
domestic product.
Trade
Agricultural products—principally meat, dairy
products, and fruits and vegetables—are New Zealand’s major
exports; crude oil and wood and paper products are also significant.
The major imports are crude and refined oil, machinery, and vehicles.
New Zealand’s chief trading partners are Australia, China, the United
States, and Japan. A succession of trade agreements provided the basis of
the Australia and
New Zealand Closer Economic Relations Trade Agreement (known as CER), signed in
1983. That agreement eventually eliminated duties and commodity quotas
between the two countries and was seen by some as the first step toward integrating their
economies. New Zealand also has a free-trade agreement with China, and
Australia and New Zealand together are associated in a free-trade arrangement
with the Association of Southeast Asian Nations (ASEAN).
Services
The public-service sector is a large
employer, especially in Wellington, where the head offices of government
departments are located. Tourism is an important part of New Zealand’s
economy. Most of the country’s visitors originate from Australia, the United
Kingdom, the United States, and China. Since the late 1990s there has
been a significant increase in the number of international students—notably
from China, South Korea, Japan, India, and Saudi Arabia—studying
in language schools, universities, and polytechnics, and
education has thus become an important source of foreign exchange.
