Liberalisation[edit]
Since 1984, the New Zealand government has undertaken major economic restructuring (known first as
Rogernomics and then
Ruthanasia), moving an agrarian economy dependent on concessionary British market access toward a more industrialised,
free-market economy that can compete globally. This growth has boosted real incomes, broadened and deepened the technological capabilities of the industrial sector, and contained
inflationary pressures. Inflation remains among the lowest in the industrial world. Per-capita GDP has been moving up towards the levels of the big West European economies since the trough in 1990,
but the gap remains significant. New Zealand's heavy dependence on trade leaves its growth prospects vulnerable to economic performance in Asia, Europe, and the United States.
Between 1984 and 1999, a number of measures of New Zealand's economic and social capital showed a steady decline: the youth suicide rate grew sharply into one of the highest in the developed world;
[17] the number of food banks increased dramatically;
[18] marked increases in violent and other crime were observed;
[19] the number of New Zealanders estimated to be living in poverty grew by at least 35% between 1989 and 1992;
[20] and health care was especially hard-hit, leading to a significant deterioration in health standards among working and middle-class people.
[21]
Between 1985 and 1992, New Zealand's economy grew by 4.7% during the same period in which the average OECD nation grew by 28.2%.
[22] From 1984 to 1993 inflation averaged 9% per year, New Zealand's credit rating dropped twice, and foreign debt quadrupled.
[20] Between 1986 and 1993, the unemployment rate rose from 3.6% to 11%.
[23]
Outlook and challenges[edit]
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New Zealand net overseas debt 1993–2012
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New Zealand government overseas debt 1990–2012
The New Zealand economy has recently been perceived as successful. However, the generally positive outlook includes some challenges. New Zealand income levels, which used to be above much of Western Europe prior to the deep crisis of the 1970s,
have never recovered in relative terms. For instance, the New Zealand nominal GDP per capita is about 80% that of the United States.
Income inequality has increased greatly, implying that significant portions of the population have quite modest incomes. Further, New Zealand has a
very large current account deficit of 8–9% of GDP. Despite this, its public debt stands at 33.7% (2011 est.)
[24] of the total GDP, which is small compared to many developed nations. However, between 1984 and 2006, net foreign debt increased 11-fold, to NZ$182 billion, NZ$45,000 for each person.
[12]
The combination of a modest public debt and a large net foreign debt reflects that most of the net foreign debt is held by the private sector. At 31 June 2012, gross foreign debt was NZ$256.4 billion, or 125.3% of GDP.
[25] At 31 March 2012, net foreign debt was NZ$141.65 billion or 104.4% of GDP.
[26]
New Zealand's persistent current-account deficits have two main causes. The first is that
earnings from agricultural exports and tourism have failed to cover the imports of advanced manufactured goods and other imports (such as imported fuels) required to sustain the New Zealand economy. Secondly, there has been an
investment income imbalance or net outflow for debt-servicing of external loans.
The proportion of the current account deficit that is attributable to the investment income imbalance (a net outflow to the Australian-owned banking sector) grew from one third in 1997 to roughly 70% in 2008.[27]