New Zealand is physically remote; two specks of green in the vast Pacific Ocean and 1,500 km away from our nearest neighbour, Australia. Despite this physical remoteness, New Zealand is a sophisticated country, deeply engaged with the rest of the world economically, culturally and through a myriad of personal connections.
Our population is small, just over four million, but is ethnically diverse as New Zealand is a nation of migrants. The statistics tell the story. One in every four people now working in New Zealand was born elsewhere while one New Zealander in four is currently living and working overseas.
New Zealand enjoys a stable democracy with a proportional representation voting system which tends to produce coalition governments. We are rated second (one point behind Denmark) for freedom from corruption by Transparency International.
Our stock exchange is the first in the world to open trading each day as our time zone (in GMT) puts us two hours ahead of Sydney, three hours ahead of Tokyo, four hours ahead of Beijing, 12 hours ahead of London and 17 hours ahead of New York.
New Zealand culture assigns a high value to fairness, ingenuity, practicality, modesty, restraint and informality. These values have remained remarkably consistent over time, surviving radical changes to the country’s social and economic fabric.
The pattern of economic change in New Zealand over the past 40 years has been driven by three core principles: diversification, liberalisation and transparency.
When New Zealand was Britain’s farm and could make a good living by selling sheep carcasses, cheese and butter to the British market, life was fairly uncomplicated. Our export earnings were so strong that we were able to insulate the domestic economy from marketplace realities through widespread use of subsidies and import controls to shelter a manufacturing sector, much of which was either inefficient or only marginally efficient.
When Britain joined the European Economic Community in 1973, however, all of that became unsustainable. We had no choice but to diversify both our products and our markets. The adjustment process was initially slow and difficult but New Zealand now exports throughout the Asia-Pacific region as well as to North America, the Middle East and Europe. Dairy and meat are still significant contributors to overall GDP but tourism now rivals pastoral agriculture as a leading export earner. We also have developing industries in export education, boat building, IT, horticulture, wine and film.
The loss of the preferential trade relationship with Britain and the need to compete for export sales with lower cost countries forced a radical re-engineering of New Zealand’s economic policies. As a result, New Zealand now has one of the most open economies in the world and is ranked first of 181 countries in the latest World Bank Doing Business survey for ease of starting a new business and second for ease of doing business.
Moves to deregulate the economy have included floating the New Zealand dollar, privatising or corporatising many State-Owned Enterprises, deregulating the labour market and dismantling protectionism. The policy preference of both major political parties — National and Labour — is to rely on market disciplines except where those disciplines are blunted by market dominance (as in competition law) or where the political judgement is that they might deliver outcomes which are socially unacceptable (occupational health and safety, the statutory minimum wage).
Those tariffs which remain are few by comparison with almost all other countries, and low. New Zealand is also party to a number of free trade agreements, including with China and Australia.
The agreement with Australia has created a trans-Tasman marketplace for most goods and services and significant harmonisation of regulatory requirements. Since the FTA with China took effect in 2008, exports to China have more than trebled and it has overtaken Australia as our largest export market.
Few restrictions are imposed on businesses establishing in New Zealand, with freedom of choice extending to the type of business, its size and its location. Capital is allowed to flow freely both inwards and outwards.
Transparency and clear accountability are key features of New Zealand’s public sector and institutional framework.
The Reserve Bank Act 1989 makes the Reserve Bank independent from government and tasks it with keeping future price inflation between 1% and 3% on average over the medium term. There is, however, flexibility within the Act for the Reserve Bank to “look through” one-off price shocks in order to avoid unnecessary instability in output, interest rates and the exchange rate.
The Fiscal Responsibility Act 1994 requires the Government to set explicit fiscal objectives and to specify its intentions for fiscal management beyond the next 12 months. It also commits the Treasury to produce regular updates through the year on the fiscal and economic position. The idea is to encourage fiscal discipline.
New Zealand has a common law system similar to that in England and many other western countries, and has familiarity with most international legal structures — especially in the finance and corporate law areas.
We have a hierarchy of generalist courts: the District Court, the High Court, the Court of Appeal and the Supreme Court. Most criminal and civil matters are dealt with by the District Court with the High Court handling the larger and most serious cases. A right of appeal exists from the High Court to the Court of Appeal and, with leave, to the Supreme Court.
New Zealand has a single legal profession in which most members hold a practising certificate as barrister and solicitor. Judges are appointed by the Governor-General on the advice of the Attorney-General and have a strong tradition of judicial independence.