Summary

New Zealand operates a free market open economy with manufacturing, services and agricultural sectors. The New Zealand economy fared well during the COVID-19 pandemic and quickly recovered. However, it quickly overheated causing the Reserve Bank to tighten monetary policy in an effort to stabilise the economy and slow inflation. Like Australia, New Zealand has experienced soaring house prices in recent times.

Economy and GDP

The New Zealand economy, although largely resilient throughout the COVID-19 pandemic, is expected to remain sluggish until 2025 with a budgetary surplus not expected until 2027 at the earliest. The costs of the pandemic, Tropical Cyclone Gabrielle, and major flooding in early 2023 are largely to blame for the deficit. Tourism has been negatively affected due to lower global growth. This has also reduced the prices of many commodity exports.

New Zealand’s key export commodities are meat, dairy products, fruits, and vegetables with their major imports consisting of crude and refined oil, machinery, and vehicles. Their top trading partners are China, Australia, the United States, Japan, Germany, and South Korea.

New Zealand’s agriculture, although crucial to the economy, has been relatively complex to maintain economically due to high reliance on finance, trade, transport, building, construction, and import of European grasses and fertilisers to be viable. In particular, the processing of dairy and meat products is heavily reliant on these services. Forestry and viticulture have more recently come to the forefront of New Zealand trade. The New Zealand government continues to grow and diversify its economy while attempting to reduce impediments to growth by entering into free trade agreements with other nations. 

Coal, iron sands, and natural gas are all mined and – along with construction materials – are quarried for both export and domestic use. New Zealand’s energy is produced through renewable and non-renewable sources including extensive hydroelectric plants. 

For further information on New Zealand’s Economy, see the resource below: 

Articles:

1. New Zealand Economic Snapshot – OECD
2. New Zealand – Economy, Trade, Agriculture | Britannica
3. New Zealand’s economy to stay sluggish for two more years (afr.com)
4. The New Zealand economy | The Treasury New Zealand
5. New Zealand is officially in a recession. These charts show how Australia compares – ABC News
6. 2023 Economic Freedom Index – New Zealand

Videos:

1. The "Perfect" Little Economy of New Zealand | Economics Explained (youtube.com)         
2. New Zealand’s recession is ‘necessary’ (youtube.com)
3. A Super Quick History of New Zealand – YouTube

Trade with Australia

New Zealand and Australia’s formal trade partnership formally dates back to as early as 1922 and they now share the New Zealand Closer Economic Trade Agreement signed in 1983. This eliminated duties and commodity quotas between the two countries. As a result, New Zealand and Australia have one of the most diverse trade relationships in the world. The agreement effectively generates a free trade area which encompasses both countries for the trade of not only goods, but also services. The first of its kind to do so. The largest trade between the two nations in 2022 was tourism and travel followed by professional, technology and other business services, and transport services.

For further information on New Zealand and Australia’s trade, see the resource below: 

Articles:

1. New Zealand | Australian Government Department of Foreign Affairs and Trade (dfat.gov.au)
2. New Zealand Economic trade with Australia Fact Sheet