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World > Oceania > New Zealand > Economy (Notes)

New Zealand - Economy (Notes)


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.

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.

Economic growth has remained relatively robust in recent years (i.e., around 4%), benefiting from a net gain in immigration, rising housing prices, strong consumer spending and favorable international prices for the country's exported commodities. New Zealand did not experience the slowdown in growth seen in many other countries following the 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 3.7% as of December 2006.

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 21% 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.

The U.S. is the second-largest trading partner for New Zealand, with U.S. goods and services accounting for approximately 14% of all imports. With the New Zealand dollar approaching a 23-year high of almost U.S. $0.75 in April 2007 (the highest since the New Zealand dollar was floated), there are greater opportunities for U.S. exporters in 2007-2008. 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 December 2006, total foreign investment was U.S. $6.6 billion. Of this, U.S. $3.4 billion came from foreign direct investment, U.S. $1.4 billion from portfolio investment, and U.S $1.8 billion from other investments.

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.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions - New Zealand Dollar Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions
New Zealand Dollar Exchange Rates


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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