New Zealand - Economy

Economy

New Zealand has a modern, prosperous and developed market economy with an estimated gross domestic product (GDP) at purchasing power parity (PPP) per capita of roughly US$28,250. The currency is the New Zealand dollar, informally known as the "Kiwi dollar"; it also circulates in the Cook Islands (see Cook Islands dollar), Niue, Tokelau, and the Pitcairn Islands. New Zealand was ranked 5th in the 2011 Human Development Index, 4th in the The Heritage Foundation's 2012 Index of Economic Freedom, and 13th in INSEAD's 2012 Global Innovation Index.

Historically, extractive industries have contributed strongly to New Zealand's economy, focussing at different times on sealing, whaling, flax, gold, kauri gum, and native timber. With the development of refrigerated shipping in the 1880s meat and dairy products were exported to Britain, a trade which provided the basis for strong economic growth in New Zealand. High demand for agricultural products from the United Kingdom and the United States helped New Zealanders achieve higher living standards than both Australia and Western Europe in the 1950s and 1960s. In 1973 New Zealand's export market was reduced when the United Kingdom joined the European Community and other compounding factors, such as the 1973 oil and 1979 energy crisis, led to a severe economic depression. Living standards in New Zealand fell behind those of Australia and Western Europe, and by 1982 New Zealand had the lowest per-capita income of all the developed nations surveyed by the World Bank. Since 1984, successive governments engaged in major macroeconomic restructuring (known first as Rogernomics and then Ruthanasia), rapidly transforming New Zealand from a highly protectionist economy to a liberalised free-trade economy.

Unemployment peaked above 10 percent in 1991 and 1992, following the 1987 share market crash, but eventually fell to a record low of 3.4 percent in 2007 (ranking fifth from twenty-seven comparable OECD nations). However, the global financial crisis that followed had a major impact on New Zealand, with the GDP shrinking for five consecutive quarters, the longest recession in over thirty years, and unemployment rising back to 7% in late 2009. As of May 2012, the general unemployment rate was around 6.7%, while the unemployment rate for youth aged 15 to 21 was 13.6%. New Zealand has experienced a series of "brain drains" since the 1970s that still continue today. Nearly one quarter of highly skilled workers live overseas, mostly in Australia and Britain, which is the largest proportion from any developed nation. In recent years, however, a "brain gain" has brought in educated professionals from Europe and lesser developed countries.