ECONOMY
New Zealand's economy historically has been based on a foundation of exports from its very efficient agricultural system. Leading agricultural exports include dairy products, meat, 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 reserves of natural gas,
although the largest natural gas condensate and oil field--supplying nearly 75%
of the country's hydrocarbons--is expected to be tapped out by 2009. Leading
manufacturing sectors are food processing, wood and paper products, and metal
fabrication. Service industries, particularly financial, insurance, and business
services, form a significant part of New Zealand's economy. As of September 2007
New Zealand had 1,505,100 Internet subscribers, amounting to approximately 65%
of New Zealand households, ranking above Australia, the U.K., and the U.S.
Since 1984, government subsidies including for agriculture were eliminated; import regulations liberalized; tariffs unilaterally slashed; exchange rates freely floated; controls on interest rates, wages, and prices 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. As a result, New Zealand is now one of the most open economies in the world.
In the statistical year ending September 2007, the economy grew 2.7%, an increase over the 2.2% growth rate in 2006. Household spending was up 3.4%, and investment in new housing was up 2.2%. The demand for new housing is in part driven by immigration, but the net increase in new arrivals has begun to slow. The net permanent long-term migration inflow to New Zealand in the year ending February 2008 amounted to 4,600, down from a net inflow of 13,200 in 2007. The net outflow to Australia was 29,600 in the year ending February 2008, reaching the highest level since 2001, when it was 30,000. New Zealand did not experience the slowdown in growth seen in many other countries following the terrorist events of September 11, 2001, and the subsequent fall in overseas share markets. The prolonged period of good economic growth led the unemployment rate to drop from 7.8% in 1999 to 3.2% as of December 2007.
New Zealand's economy has been helped by strong economic relations with Australia. New Zealand and Australia 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 20% 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 has had a free trade agreement with Singapore since 2001. In July 2005, both countries joined with Chile and Brunei to form a Trans-Pacific Strategic Economic Partnership, liberalizing trade in goods and services between them. In April 2005, New Zealand initialed a free-trade deal with Thailand. In April 2008 New Zealand concluded a free trade agreement (FTA) with China and is negotiating an FTA with the Gulf Cooperation Council (GCC). New Zealand held its first round of the New Zealand-GCC FTA in Wellington in July 2007 with representatives from the Gulf states (Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates, and Oman).
New Zealand's top six trading partners from June 2006-June 2007 included
Australia, the United States, Japan, the People's Republic of China, the United
Kingdom, and the Republic of Korea. Australia continued as New Zealand's
principal export market, worth $5.3 billion with exports to Australia rising by
6%. The United States and Japan were New Zealand's second- and third-largest
export markets, receiving $3.3 billion and $2.6 billion worth of goods,
respectively. New Zealand's fourth-largest export destination was China with
exports worth $1.4 billion from June 2006 through June 2007.
The U.S. is the second-largest trading partner for New Zealand, with U.S. goods and services accounting for approximately 13% of all imports. With the New Zealand dollar reaching a 24-year high of over U.S. $0.80 in July 2007 (the highest since the New Zealand dollar was floated), there are greater opportunities for U.S. exporters in 2007-2008. New Zealand's total imports from the U.S., as of June 2007, amounted to U.S. $3.3 billion. The market-led economy offers many benefits for U.S. exporters and investors. Investment opportunities exist in chemicals, food preparation, finance, tourism, and forest products, as well as in franchising. The best sales and investment prospects are for whole aircraft and aircraft parts, medical or veterinary instruments, motor vehicles, information technology, hotel and restaurant equipment, telecommunications, tourism, franchising, food processing and packaging, and medical equipment. On the agricultural side, the best prospects are for fresh fruit, snack foods, and soybean meal.
New Zealand welcomes and encourages foreign investment without discrimination. The Overseas Investment Office (OIO) must give consent to foreign investments that would control 25% or more of businesses or property worth more than NZ$100 million. Restrictions and approval requirements also apply to certain investments in land and in the commercial fishing industry. OIO consent is based on a national interest determination. Foreign buyers of land can be required to report periodically on their compliance with the terms of the government's consent to their purchase. The OIO, part of Land Information New Zealand, took over the functions of the Overseas Investment Commission in August 2005. Full remittance of profits and capital is permitted through normal banking channels. As of March 2007, the U.S. accounted for 12% of all foreign direct investment in New Zealand, amounting to U.S. $7.76 billion.
A number of U.S. companies have subsidiary branches in New Zealand. Many operate through local agents, and some are in association in joint ventures. The American Chamber of Commerce is active in New Zealand, with its main office in Auckland.
GDP (September 2007, current prices): U.S. $131 billion; (1996 prices) U.S. $103 billion.
Real annual GDP growth rate (September 2007, current prices): 2.7%.
Per capita income (September 2007): U.S. $30,994; (1996 prices) U.S. $24,545.
Exchange rate (average for Jan. to May 2008): U.S. $1 = NZ $1.2646 (U.S. $0.79 = NZ $1).
Natural resources: Timber, natural gas, iron sand, coal.
Agriculture (4.9% of GDP): Products--dairy products, meat, forestry products.
Industry (goods-producing industries 21.5% of GDP, service industries 68.1% of GDP): Types--finance, insurance, and business services; manufacturing; personal and community services; transport and communication; wholesale trade; construction; government administration and defense; fishing, forestry, and mining; electricity, gas, and water.
Trade (September 2007): Exports to U.S.--$3.572 billion: frozen beef, casein, whey, timber, sheep meat, wine, unwrought aluminum, cheese, and butter. Imports from U.S.--$3.212 billion: consisting primarily of aircraft petroleum oils (crude), medical or veterinary instruments, motor vehicles, computers, aircraft parts, machinery, turbojets, insecticides, and telephone equipment. Major trading partners (rank ordered)--Australia, United States, Japan, People's Republic of China, the United Kingdom, and the Republic of Korea.
