Recent history

Historically New Zealand enjoyed a high standard of living which relied on its strong relationship with the United Kingdom, and the resulting stable market for its commodity exports. New Zealand's economy was also built upon on a narrow range of primary products, such as wool, meat and dairy products. High demand for these products created sustained periods of economic prosperity, such as the New Zealand wool boom of 1951. However, in 1973 the United Kingdom joined the European Community which effectively ended this particularly close economic relationship between the two countries. During the 1970s other factors such as the oil crises (1973 and 1979) undermined the viability of the New Zealand economy; which for periods before 1973 had achieved levels of living standards exceeding both Australia and Western Europe. These events led to a protracted and very severe economic crisis, during which living standards in New Zealand fell behind those of Australia and Western Europe, and by 1982 New Zealand was the lowest in per-capita income of all the developed nations surveyed by the World Bank.

Since 1984, successive governments have engaged in major macroeconomic restructuring, transforming New Zealand from a highly protectionist and regulated economy to a liberalised free-trade economy. These changes are commonly known as Rogernomics and Ruthanasia after Finance Ministers Roger Douglas and Ruth Richardson. A recession began after the 1987 share market crash and caused unemployment to reach 10% in the early 1990s. Subsequently the economy recovered and New Zealand’s unemployment rate reached a record low of 3.4% in the December 2007 quarter, ranking fifth from twenty-seven OECD nations with comparable data. In 2009, New Zealand's economy ranked as the fifth freest in the world according the Heritage Foundation's Index of Economic Freedom.

The current government's economic objectives are centred on pursuing free-trade agreements and building a "knowledge economy". On 7 April 2008, New Zealand and China signed the New Zealand China Free Trade Agreement, the first such agreement China has signed with a developed country. Ongoing economic challenges for New Zealand include a current account deficit of 7.9% of GDP, slow development of non-commodity exports and tepid growth of labour productivity. New Zealand has experienced a series of "brain drains" since the 1970s, as well as educated youth leaving permanently for Australia, Britain or the United States. In recent years, however, a brain gain brought in educated professionals from poor countries, as well as Europe, as permanent settlers.

COMPREHENSION CHECK

Ex. 3. Answer the following questions:

1. Describe the main steps in New Zealand’s movement towards self-government and virtual independence from Britain.

2. What was New Zealand’s position in the major military conflicts of the 20^th century?

3. What was the basis of New Zealand’s economy up to the 1980s?

4. Why did the government of New Zealand adopt a more liberalized free-trade economic policy in the last decades of the 20^th century?

5. How do you understand a “knowledge economy”?

6. What are the underlying reasons why a country may experience a brain drain or a brain gain?