Figure 1.--New Zealand is diversifying its economy which was once dependent on sheep rancing and dairy products. These moodern New Zealand farmers are raising salmon. |
|
New Zealand enjoys a high level of prosperity based on exports from its efficient agricultural system. New Zealand is one of the most highly urbanized countries in the world. Over 80 percent of New Zealanders live in towns and cities. Even so, New Zealand was from early British settlement, primarily an agricultural economy. Agricultural production continues to be the basis of New Zealand's economy and is the largest export earner. The New Zealand economy, however, has diversified significantly in recent years. The country is no longer totally dependent on agriculture. Tourism, forestry, horticulture, fishing manufacturing, and a growing services sector have become increasingly important economic sectors in recent years.
Australia is New Zealand's largest export market, followed by Japan, Asia, the United States and the United Kingdom.
New Zealand has a market economy based on agriculture, small-scale industry, and a growing services sector--especially tourism.
Agriculture: The country is one of the world's most efficient producers of agricultural products. New Zealand's farmers have placed about 20 million acres [DW: hectares?] under cultivation, concentrating mainly on grains, including wheat, oats, and barley. Dairy and livestock production, especially sheep developed as key agricultural sectors. One third of the country's total area is sown in pasture and that sheep out number people
by twenty five to one. While most farms are relatively small operations, Government programs and producer organizations have helped to introduce highly efficient production methods. Many of these products are marketed through cooperative marketing boards formed by the producers and the Government. Boards first formed during the 1920s exist for butter, cheese, meat, wool, and fruits. The country, as a result, prospered based on an export based economy. Leading agricultural exports included wool, meat, and dairy produce. These commodities continue to be some of the major export products, although farmers have significantly expanded fruit exports in recent years.
Forestry: Expanding pine plantations have helped make the country a growing source of timber.
Energy: New Zealand also benefits from substantial hydro-electrical development and sizeable reserves of natural gas.
Industry: Leading manufacturing sectors include food processing, metal fabrication, and wood and paper products. Protectionist legislation enacted by Labour and National Governments resulted in the development of relatively inefficient domestic manufacturing industries. As a result economic growth gradually slowed and many New Zealand companies found themselves unable to compete in world markets.
Services:
Leading agricultural exports include meat, dairy products, forest products, fruit and vegetables, fish, and wool.
New Zealand reliance on agriculture has shifted significantly in recent years as the country has developed a modern service based economy. The agricultural sector while still important currently accounts for only 9 percent of the Gross National Product (GNP), primarily wool, meat, and dairy products, employing about 10 percent of all workers. Industry now accounts for over 22 percent of GNP, including food processing, textiles, machinery, transport equipment, fish, and forest products. Forestry and fisheries in particular are assuming increasing importance. New Zealand has one of the world's largest 200-mile Exclusive Economic Zone (EEZ) because of the many outlying islands. The country until recently has paid little attention to fisheries, but is in the process of developing a major fishing industry.
One of the most promising economic developments in recent years has been the raid development of the tourist industry. In fact much of the recent growth in the economy has been traced to the tourist industry. Until recently New Zealand has attracted tourists from Europe and America.
Recently increasing numbers of Asian tourists have found New Zealand. While the Japanese are the single most important group the economic expansion of the Pacific rim countries has enabled tourists from a long list of Asian countries to visit New Zealand. It has become a common sight to see bus loads of camera-toting Japanese tourists at major tourist sites. Unlike Europeans and Americans who often travel in individual family or other small groups, the Japanese almost always are to be found in large, organized groups. Signs in Japanese and restaurants offering Japanese food are now common place. On a recent visit to Christchurch the authors even witnessed artists offering World War II scenes such as paintings of Japanese torpedo ships sinking U.S. ships.
The growing importance of tourism has not been lost on New Zealand schools. For years New Zealand secondary sponsored important agricultural programs. Many schools, especially in tourist areas, have launched vocational programs to prepare students for jobs in the sector. Schools throughout New Zealand have launched foreign language programs to better prepare young New Zealanders to do business abroad and to host tourists at home. Many of those programs include Japanese-language courses.
The economy because of the small domestic population is still dependent largely on foreign markets. Exports totaled nearly $8 billion in 1988, mostly meat, wool, manufactured products, forest products, and dairy products. While the overall importance of agriculture in the economy has declined, it continues to be the most important export earner. Major export markets include Australia, the United States, Japan, and the United Kingdom. Imports totaled nearly US$6 billion in 1988, primarily machinery and manufactured goods. The major suppliers were Japan, Australia, the United States, and the United Kingdom. [DW: insert C.. data]
The New Zealand economy has experienced growing difficulties since the 1970s.
The Labour Government elected in 1984 enacted a comprehensive program of economic reform designed to reverse New Zealand's economic decline and stimulate growth through economic competition. The opposition National Party supported the economic liberalization program and free-market reform, but the two parties differed on pursuing further economic deregulation, especially in the labor market. Fiscal policy and social expenditures also proved contentious issues. The Government since 1984 has eliminated numerous subsidies, liberalized import regulations, floated exchange rates, removed controls on interest rates, wages, and prices, and reduced tax rates. Tight monetary policy and sharp cuts in Government spending have cut inflation from an annual rate of 18 percent (1987) to about 5 percent (1989). The restructuring and sale of government-owned enterprises has reduced the Government's role in the economy and permitted the retirement of a significant portion of the public debt. The reforms, however, have lead to economic dislocations and levels of unemployment unknown since the Great Depression of the 1930s. As a result, unemployment has over taken inflation as the country's most serious economic issue. The discouraging economic situation has caused an unprecedented number of skilled New Zealanders to seek economic opportunities abroad.
New Zealand's liberalization efforts, especially fiscal and monetary constraints, whatever their long term advantages caused the economy to constrict. Unemployment continues at high levels and consumption and real income indexes show declines. The GDP actually declined slightly (-0.7 percent) in Fiscal 1989 (April 1988-March 1989). Lean, well-managed companies, however, are profiting from the increasingly deregulated economic environment. Despite this, investments declined in 1989 and business surveys indicate further contraction in 1990. Over a longer term, investment may revive with an easing of interest rates and improving economic activity in important sectors. Agricultural production improved in 1988, responding to favorable weather conditions. Long-term trends, however, are less encouraging. The recession of the late 1980s has forced many farmers to leave the land and overall agricultural production is expected to decline in 1989.
The Government has achieved improved foreign trade balances. Healthy prices for most of the country's basic exports have added to the trade surplus and narrowed the current account deficit. The country's foreign debt has declined. The cyclical upswing in demand for New Zealand export products may have peaked and the high value of the Kiwi dollar makes the export sector less competitive while at the same time encouraging import penetration in spite of falling domestic demand.
New Zealand exporters continue to be concerned about prices and market access. The United Kingdom was the traditional market for New Zealand products. Trade between the two countries, however, has been declining since the end of World War II. This decline was accelerated by the U.K.'s entry into the European Union (EU) during 1973. The New Zealand Government has been aggressively working to retain access to the EU market for meat and dairy products. Other major markets are Japan, Australia, and the United States. Australia and New Zealand have formed a "Closer Economic Relationship" which in 1990 created a single market of some 19 million consumers. Previously, New Zealand's small domestic market and import substitution policies limited the country's ability to promote export industries. Total exports accounted for only 22 percent of the GDP.
New Zealand's Gross National Product totaled US$37 billion in 1988, a slight decline from 1987 levels. The inflation rate reached 9 percent in 1989. Per-capita income totaled about US$11,000. The work force totaled 1.7 million workers in 1988 divided among: services and government (47 percent), industry and commerce (41 percent), and agriculture and mining (12 percent). Government expenditures exceeded revenue in 1989 and the balanced was covered by increasing deficit financing. The principal source of revenue is personal income taxes.
Problem: growth impeded because of dependance on imported oil, foreign capital, and consumer goods.
[Org. problems/dated info]
National Production
E-Mail:
[Return to the New Zealand country Page]
[Return to the New Zealand School Home Page]
[Contributions]
[Table of Contents]