New Zealand’s Economic Turnaround

Abstract

In the early 1980s, global events and New Zealand’s government response drove the country towards economic collapse. Debt, inflation, and unemployment grew. To address the crisis, several legislative reforms in the style of New Public Management were passed between the mid-1980s and early 1990s. The currency was floated, price and income controls were relaxed, state-owned enterprises such as the national airline were corporatized, government accounting was scrutinized, and outputs rather than inputs were monitored in government departments. These reforms transformed New Zealand into a country that holds transparency and accountability in high regard. The economy recovered, and the population flourished and gained better access to a wider range of goods and services. This chapter analyses the reasons and the circumstances that led to the success of New Zealand’s economic reforms. The authors also discuss what economic vulnerabilities remain for New Zealand and consider the extent to which the New Zealand model offers lessons for other countries.