New Zealand Economy

March 17, 2010New Zealandby EconomyWatch Content

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Comprising two main landmasses and several other smaller islands, the North Island and the South Island, New Zealand is an island country located in the south-western Pacific Ocean. The country is situated about 2,000 km (or 1,250 miles) southeast of Australia, across the Tasman Sea. Its closest neighbors to the north are New Caledonia, Fiji and Tonga. New Zealand is a developed country that ranks high on factors such as human development, quality of life, life expectancy, literacy, public education, peace, prosperity, economic freedom, ease of doing business and lack of corruption.

New Zealand’s economy has shifted from an agrarian structure, dependent on concessionary British market access, to a free market, over the past 20 years. The country’s economy is now highly dependent on international trade, mainly with Australia, the European Union, the US, China and Japan. With this rapid growth, New Zealand’s per capita income has risen rapidly for ten consecutive years until 2008, in terms of purchasing power parity, after which it fell in 2009. 

New Zealand Economy: New Zealand’s Economic Profile

New Zealand's economy is based on agricultural exports. The most popular export products for the country are meat, dairy products, forest products, fruits and vegetables, fish and wool. Until the 1930s, New Zealand's dairy export quota was around 35%-45% of the total exports. However, with the country losing its preferential trading position with the UK in 1973 and a decline in commodity prices for these exports, New Zealand’s purchasing power adjusted GDP per capita fell from about 115% of the Organization of the Economic Cooperation and Development (OECD) average, to 80% in 1990.

Following the economic restructuring in 1984, New Zealand has seen a boost in real income, besides undergoing broadening and deepening of the technological capabilities in the industrial sector. The country also brought down the inflation rate from an annual rate of more than 18% in 1987 to 1.8% in 2009 (est.) with the help of tight monetary policies and government budget deficit reduction efforts.

New Zealand’s economy is now perceived as successful. However, New Zealand’s income levels, which used to be significantly higher than that of Western Europe before the crisis of the 1970s, pose a challenge. Despite the government’s measures, the country’s income, calculated in New Zealand dollars (NZD), never recovered in relative terms, and as of 2005, Zealand’s GDP per capita stood at 63% of that of the US.

New Zealand’s GDP (purchasing power parity):

 

  • US$118 billion (2007 est.)

  • US$118 billion (2008 est.)

  •  

    US$116.5 billion (2009 est.)

     

     

The following data maps the contribution of various sectors to the GDP as of 2009:

 

  • Agriculture: 4.5%

  • Industry: 25.8%

  • Services: 69.7% 

Of the 4,346,700 strong population, the labor force stood at 2.17 million, according to the 2009 estimate. The three main sectors provide employment to varying degrees (as of 2006):

 

  • Agriculture: 7%

  • Industry: 19%

  • Services: 74% 

The value of the NZD has decreased in relationship to the US dollar. In 2009, US$1 was equivalent to 1.6204 NZD, from only 1.4151 NZD in 2008.

 

 

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