New Zealand Economy Overview

New Zealand has a robust economy supported by high productivity and good rate of employment. The economy has maintained a steady growth by bringing in measures and policies which favor liberalization, privatization and deregulation. New Zealand is a developed economy and is a part of the OECD which comprises of the most developed countries in the world. It has brought in best practices in building a strong economy. Being a mixed economy, running on free market principles, it has sustained the GDP growth. Sectoral contribution to the economyCountry’s economy has gained strength by developing, high production of agricultural products such as kiwi fruit, which the country exports largely to the world. New Zealand has become the second largest exporter of milk products.

Tourism and fishing are other two areas adding value to the economic growth. 7% of the labour force is engaged in agriculture which includes mainly fishing and farming. 19% of the labour are engaged by the industry primarily mining, energy production and some manufacturing. The biggest chunk that is 74% of labour force engagement is in the service sector such as finance, communication and government activities. Graph 1. 0 depicts the performance of the three sectors. The major finance capital market is the New Zealand Exchange market (NZX). Currently New Zealand is giving a lot of impetus to the tourism industry. New Zealand is rich in natural resources and it is utilizing the best technological and state of the art processes for mining, for renewable energy generation and petroleum industry. The biggest employer in New Zealand is the private sector followed by the central government. Gross Domestic Product (GDP)Gross Domestic Product(GDP) is the official measure of the economic growth. Both production and expenditure approach are used to calculate the GDP. The production approach measures the value of goods and services produced in NZ after deducting the cost of goods and services used in the production process. The expenditure approach measures the final purchase of goods and services produced in the country. Exports are added to the same and imports are subtracted from the same during calculation. The GDP is calculated quarter wise and in the current quarter the economy has grown by 1%(b). The latest quarter data reveals the investment spending was down by 0. 1%. The per capita GDP was up by 0. 5%. Primary industries The GDP of the country has witnessed ups and downs in the last two decades, but has maintained a steady upswing after the 2008 global financial meltdown. The government is continuously making efforts to bring down unemployment rates and creating equal opportunities for the workforce. It is also attracting skilled workforce from many countries by way of opening the immigration doors. This is directly affecting the labor utilization, the participation rate of the population and hence forth, the growth in GDP. As per May 2018 data by statistics New Zealand(a), The employment rate rose by 0. 6 percent.

The country is making tremendous progress in goods producing industry. Hydro electric generation has contributed to a greater household powering a 3. 7% increase. New Zealand’s gross national disposable income has increased over the years. The treasury plays an important role in New Zealand economy by providing forecasts on GDP, consumer prices, employment and unemployment and also the current account position of the country. The intervention of the treasury is important for lowering the inflation rate. The action plans made by the treasury govern the economic performance of the country. Government Revenue/TaxationNew Zealand is a tax friendly nation as per a 2016 report by a US based tax foundation, New Zealand’s overall tax system is ranked at second in the developed world and it tops in the personal taxes domain. It offers a conducive tax environment to individuals as there is hardly any tax besides income tax and GST. Also, New Zealand offers flexibility in personal tax return. The government’s main source of revenue is tax revenue also called the core crown revenue which was $75. 6 billion for the 2016-17 financial year. Businesses and corporates are taxed a flat rate of 28%. It offers attractive taxation to new migrants by giving exemption in the form of 4 year tax concession. It also provides credits for tax paid overseas on incomethat is also subject to New Zealand tax. Government spending in the form of goods and services is a major component of the GDP. Citizens of New Zealander are provided with good healthcare and education by the government. The treasury plays an important role in New Zealand economy by providing forecasts on GDP, consumer prices, employment and unemployment and also the current account position of the country. The intervention of the treasury is important for lowering the inflation rate. The action plans made by the treasury govern the economic performance of the country. PopulationBesides the local Maori community, New Zealand’s population projections are going towards an upward swing due to high migrant community coming to the country. On an average since 1960 the population has grown 1. 16% per year. The growing population will add to a productive labour work force making New Zealand a strong economy. Government SpendingGraph 3 depicts a constant annual increase in the spending which is a good indicator of government policies being implemented effectively. The government is investing in schemes related to social security such as education and health. Indirectly it is building a healthy and educated young workforce for a greater economic growth.

Overall New Zealand’s economy is consistently performing well due tomultiple factors such as outstanding exports, strong migration policy, innovation and technological advancement, free trade programs and policies, conducive taxation,smart work force and many more. The challenges that underscore the positives are mainly housing prices and underemployment due to skill mismatch. The short term economic scenario puts New Zealand in a strong position but it needs to make its mark in the international competitive environment. Tapping the future of new sources of energy, building infrastructure and engagement with the world community on better exports can be the changing points for the economic growth. Government spending on the social security will guarantee a healthy and educated population which will further become a productive workforce would be the key to the economic growth. Region Wise strategies and policies towards micro development would add to the national interest.