Economy Of New Zealand Essay, Research Paper
The United States and New Zealand established close ties in 1942, when the U.S. provided security for New Zealand during World War II, and have remained close ever since. However, in 1984, the Labour party came into power in New Zealand, with intentions to bar nuclear-armed and nuclear-powered warships from New Zealand ports. Implementation of this anti-nuclear policy was incompatible with U.S. policy and disrupted the alliance under the Australian, New Zealand, and United States (ANZUS) security treaty of 1951. After unsuccessful attempts to remedy the issue, the United States suspended its ANZUS security obligation to New Zealand in 1986.
Despite the rupture in the ANZUS alliance, New Zealand has maintained close political, economical, and social ties with the United States. In trade, the U.S. is New Zealand second-largest supplier and customer after Australia. Trade between the two countries totaled $3.5 billion (with a $300 million surplus in the favor of the U.S.) in 1996; U.S. merchandise exports were $1.9 billion. U.S. foreign investment in New Zealand that same year totaled $4.8 billion, and was largely concentrated in manufacturing, forestry, telecommunications services, and finance. The two countries have also worked closely together to promote free trade in the World Trade Organization and the Asia-Pacific Economic Cooperation forum.
The Labour party had not only changed nuclear policies in 1984, but also introduced a monetarist economic policy in a major effort to reduce the government budget deficit and inflation that resulted largely from an attempt in the 1970s to diversify New Zealand s production. This new plan was executed through seven major alterations:
1) The increase of privatizations through the sale of government-owned enterprises.
2) Elimination of Government subsidies.
3) Liberalization of import regulations.
4) Exchange rates freely floated.
5) Removal of controls on interest rates, wages, and prices.
6) Reduction of marginal rates of taxation.
7) Cutbacks on health, education and social security benefits.
This Laissez-Faire attitude did indeed decrease the deficit and lower inflation; it also increased growth, the value of the New Zealand Dollar, and unfortunately unemployment. The economy has improved greatly and with it unemployment has been brought down.
Currently New Zealand is finally recovering from the rapid economic growth it experienced in the mid-90s, now that the worst of the Asian financial crisis effects are over. New Zealand lost many export markets in Asia, but looked to the U.S. and European markets to replace the lost customers. The country remains dependent on trade due to its small size and isolation; price and access to foreign markets are a constant concern. U.S. goods and services are increasingly competitive in New Zealand. The market-led economy offers many opportunities for U.S. exporters and investors. A number of U.S. companies have branches in New Zealand. Many companies operate through local agents, and some are in association in joint ventures. In 1992, the U.S. Government recognized the generally liberal trading environment in New Zealand by signing a bilateral Trade and Investment Framework Agreement in 1992, which provided for periodic government-to-government consultations on bilateral and multilateral trade and investment issues and concerns.
An outline of the current economic status of New Zealand is provided below.
-The gross domestic product of New Zealand for 1998 was $61.1 billion, this is an over 150% increase from 1989 when it was $39.1 billion. In 1989 New Zealand had a per capita GDP of $11,600, now it has a per capita GDP of $17,000 which is near the amount of the big Western European economies.
-The GDP growth of the past ten years has been volatile at times, but it is predicted to be much more stable in the years to come.
-New Zealand currently has one of the lowest inflation in the industrial world 1.1%. This is down more than 18 percentage points from the rate in 1987.
-For over a decade the unemployment rate of the New Zealand work force has been decreasing to last year s rate of 7.6%.
-The major industries of New Zealand are currently food processing, wood and paper products, textiles, machinery, transportation equipment, banking and insurance, tourism, mining.
-In 1998 exported about $12.9 billion worth of goods, the majority being wool, meat, fish, dairy products, chemicals, forestry products, fruits and vegetables, and manufactured products. In the same year, the country only imported $13 billion worth of goods, consisting mainly of machinery and equipment, vehicles and aircraft, petroleum, consumer goods, and plastics.
-The worth of the New Zealand Dollar in U.S. Dollars had declined from 1990 until 1993 when it began to increase due to the tight monetary policy. In 1997 the NZ$ value relative to the US$ started decreasing with the loosening of monetary conditions and has been even since. Currently one NZ$ is worth 0.54 US$.
It is my belief that New Zealand is entering a phase of economic stability as a World economic power that supports open markets. We should continue to embrace them as our partner and maintain our combined efforts to increase free trade.
The World Guide 1997/98, Aotearoa/New Zealand. Pg 98-100.
http://www.cia.gov/cia/publications/factbook/nz.html The World Factbook 1999, New Zealand. CIA.
http://www.rbns.govt.nz/fs2.htm What is inflation? Reserve Bank of New Zealand.
http://www.mft.govt.nz/foreign/trade.html Trade & Investment. Ministry of Foreign Affairs and Trade.
http://www.stats.gov.nz New Zealand Official Yearbook on the Web.
http://pl.net/ keithr/rf98_GrowthCycles.html Cycles of Growth. Keith Rankin.
http://www.treaasury.govt.nz/pubs/bmb/pre-elec99/contents.htm Pre-election Economics & Fiscal Update 1999-10/21/1999. New Zealand Government Online.