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New Zealand's Economy Essay

2257 words - 9 pages

New Zealand has a rich history even though it is a young nation. Like many other countries around the world, New Zealand went through a fairly significant depression during the Great Depression in the 1930's. As New Zealand grew and became more politically independent it also would become more dependent economically on refrigerated shipping. New Zealand based its entire economy on the export of meat and dairy products to Britain. As a result the depression lead to the first Labour Government being implemented in New Zealand. This Labour Government set up a comprehensive welfare state and a protectionist economy. Woolen mills, meat freezing works, and dairy factories were greatly affected by the Great Depression. Farmers had less to spend in the towns. Unemployment was on the rise, and some of the jobless people began to farm once again as previous generations of families had once done. But a protracted balance of payments crisis was avoided, since the demand for imports fell sharply in response to the drop in incomes. As tax and customs revenue fell, the government cut down some expenditures in an attempt to balance the budget. More cuts were then made to government spending. The government intervened in the labor market ordered for an all-round reduction in wages. It pressured and then forced the banks to reduce interest rates. The final factor that contributed to the recovery to the depression was when the New Zealand pound was devalued by 14 percent against sterling in January 1933. Majority of exports were sold for sterling, which was converted into New Zealand pounds. Devaluation increased the money supply which would inevitably lead the country out of their depression.

New Zealand's economy is a market economy, which is controlled by the free market. The government oversees the importing and exporting but will not control it. The economy and market is similar to that of Australia and Britain. The Government plays both and indirect and direct role in the economy. The restructuring and sale of government-owned enterprises in the 1980s and 1990s reduced government's role in the economy and permitted the retirement of some public debt, but simultaneously massively increased the necessity for greater welfare spending and has led to considerably higher rates of unemployment than were standard in New Zealand in earlier decades. New Zealand has a welfare system for the unemployed, and or homeless. New Zealand is known around the world for being a very business friendly country with an 18 day average startup time for opening a business. The United States is a market economy. It is regulated in two main ways, economic regulations and social regulations. The government has sought to prevent monopolies such as electric utilities from raising prices beyond the level that would ensure them reasonable profits. The government has also exercised control over private companies to achieve social goals, such as improving the public's health and safety or...

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