New Zealand's Economic Reforms: An assessment

The Environmental Effects of New Zealand’s Free-Market Reforms

“…There were high costs in the short term, for example public debt rose from 49.2% of GDP in 1984 to 68.3% in 1995; reducing to 34.1% in 2002 (Colgate and Stroombergen, 1993;The Treasury, 2002). Real per capita GDP contracted by 1.4% between 1983-84 and 1991-92, and economic growth since has been below that which it would have been had it grown at the same rate as Australia after 1984 (Dalziel, 2002). Unemployment more than doubled between 1984 and 1989; and between 1988 and 1991 one in every three jobs in the manufacturing sector was lost (O'Brien and Wilkes, 1993, p. 65;Hazeldine, 1998, p. 22).…”

“…The lowest 10% of households saw a decrease in their average per capita real income of 21.6% between 1983-84 and 1991-92, and by 8.7% over the period 1983-84 to 1995-96. At the same time, the richest 10% of households increased their average per capita real income by 9.4% between 1983-84 and 1991-92, and by 36.3% over the period 1983-84 to 1995-96 (Dalziel -2002). Over the period 1983-84 to 1995-96 the bottom 40% of households saw a decrease in their real income of 3% due to rising unemployment and a NZ$1.3 billion reduction in social welfare income entitlements (Dalziel, 2002).…”

“…At the same time, the richest 10% of households increased their average per capita real income by 9.4% between 1983-84 and 1991-92, and by 36.3% over the period 1983-84 to 1995-96 (Dalziel -2002). Over the period 1983-84 to 1995-96 the bottom 40% of households saw a decrease in their real income of 3% due to rising unemployment and a NZ$1.3 billion reduction in social welfare income entitlements (Dalziel, 2002). This increasing income inequality is reflected in a rise in New Zealand's Gini coefficient from 0.253 in 1966 to 0.322 in 1996(Statistics New Zealand, 1999.…”

“…When Britain joined the European Community in 1972, New Zealand lost secure access to the British market and began to experience decreased export revenue. At the same time there was an increase in state spending on subsidies for agriculture, tax concessions for manufacturers, and large-scale construction projects (Dalziel, 2002). Largely as a result of these developments, between 1974 and 1984 net public debt rose from 5% to 32% of the GDP, unemployment rose from 0.2% to 4.9%, and in 1983 New Zealand lost its triple-A credit rating (Evans et al, 1996(Evans et al, , p. 1860.…”

“…They included a host of policies consistent with the neo-liberal development agenda, including removal of interest rate and foreign exchange controls in 1984; floating of the exchange rate in 1985; removal of agricultural subsidies and export assistance between 1984 and 1986; removal of import licensing between 1984 and 1989; progressive reduction of tariffs from 1984 onwards; corporatisation and privatisation of publicly owned entities; the introduction of a goods and services tax and cuts in income tax in 1986; removal of production and distribution controls in individual industries and services; substantial cuts in public expenditure; deregulation of the labour market; deregulation of financial markets; amendments to the Commerce Act to encourage efficient competition; transference of regulatory responsibilities from the executive to the judiciary; and sale of State assets (Kelsey, 1995;Evans et al, 1996;Dalziel and Lattimore, 1999;Dalziel, 2002). The goal of the reforms was to open the New Zealand economy to internal and external market forces as a means to increase efficiency and force a shift to maximise competitive advantages.…”