New Zealand. 1993-1994.

160 Pages·1994·8.982 MB·English

by  OECD

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19934994
NEW ZEALAND
ORGANISATIONFORECONOMICCO-OPERATIONANDDEVELOPMENT
ORGANISATION FOR ECONOMIC
CO-OPERATION AND DEVELOPMENT
Pursuant toArticle 1 ofthe Convention signed in Paris on 14th
December 1960, and which came intoforce on 30th September 1961,
the Organisation for Economic Co-operation and Development
(OECD)shallpromotepoliciesdesigned:
to achieve the highest sustainable economic growth and
employment and a rising standard of living in Member
countries,whilemaintainingfinancialstability,and thusto
contributetothedevelopmentoftheworldeconomy;
to contribute to sound economic expansion in Member as
well as non-member countries in the process ofeconomic
development;and
to contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accordance with
internationalobligations.
The original Member countries of the OECD are Austria,
Belgium, Canada, Denmark, France, Germany, Greece, Iceland,
Ireland,Italy, Luxembourg,theNetherlands,Norway,Portugal,Spain,
Sweden, Switzerland, Turkey, the United Kingdom and the United
States. The following countries became Members subsequently
through accession at the dates indicated hereafter: Japan (28th April
1964), Finland (28th January 1969), Australia (7th June 1971), New
Zealand (29th May 1973) and Mexico (18th May 1994). The
Commission ofthe European Communities takes part in the work of
theOECD(Article 13oftheOECDConvention).
Publiéégalementenfrançais.
©OECD1994
Applicationsforpermissiontoreproduceortranslate
allorpartofthispublicationshouldbemadeto:
HeadofPublicationsService,OECD
2,rueAndré-Pascal,75775PARISCEDEX 16,France
Table of contents
Introduction 9
I. Recent trends and short-term prospects 11
A strong recovery 1 1
Characteristics of the upturn 13
Short-term outlook 26
II. Economic policies 29
Overview 29
Fiscal stance and budget outlook 31
Monetary management 38
Structural reform 44
III. International openness and economic performance 53
New Zealand's external sector: an historical overview 53
The policies of openness 65
Economic responses 74
Future policy priorities 90
IV. Conclusions 106
Notes and references 112
Bibliography 1 18
Annexes
I. Summary of structural reforms since 1984 121
II. The savings-investment imbalance in the last two decades 125
III. The implications of the Uruguay Round for New Zealand 129
IV. Chronology of main economic events 133
Statistical annex 137
Tables
Text
1. Demand and output developments 13
2. The labour market situation 17
3. Wages and prices 21
4. Trade volumes and prices 24
5. Balance of payments 25
6. Short-term economic prospects 26
7. Budget projections and outcomes 32
8. Money and credit aggregates 42
9. Openness of New Zealand economy compared with selected
OECD countries 55
10. Total merchandise exports by type of product 56
11. Major export products 57
12. Composite export concentration indicator 57
13. New Zealand's major trading partners 58
14. New Zealand's imports 60
15. External trade price volatility 63
16. Global rates of assistance 68
17. Export volume growth 83
18. Sectoral total factor productivity growth 88
Statistical annex
Selected background statistics 138
A. Gross domestic product and expenditure (new SNA) 139
B. Gross domestic product by kind of activity 140
C. Labour market 141
D. Prices 141
E. Money supply and selected liquid asset holdings of public 142
F. Central government expenditure and revenue 143
G. Balance of payments 144
H. Imports: value, volume, prices and commodity group 145
I. Foreign trade by area 146
J. Exports: value, volume, prices and commodity group 147
K. Production structure 148
L. Labour-market indicators 149
M. Household Labour Force Survey, employment by sector 150
N. The public sector 151
O. Financial markets 152
Diagrams
Text
1. Real GDP 12
2. Contribution to GDP growth 14
3. Labour productivity 18
4. Inflation indicators 20
5. Competitiveness and export performance 23
6. Budgetary developments 30
7. Public debt 36
8. Interest and exchange rates 41
9. Indicators of trade performance 54
10. Exports of services 59
1 1. Trade prices 62
12. Decomposition of the current balance 63
13. Capital flows and external debt 64
14. Sectoral rates of assistance 68
15. Foreign direct investment 71
16. Trans-Tasman merchandise trade under ANZCER 73
17. The twin deficit 75
18. Competitiveness indicators 75
19. Competitiveness of the manufacturing industry 80
20. Exports of manufactured goods 81
21. Export performance 82
22. Export and import volume indices 84
23. Consumer good import penetration 85
24. Manufactured price competitiveness by sector 90
25. Migration flows 97
Annex
Al. Savings-investment imbalance 126
BASICSTATISTICSOFNEWZEALAND
THELAND
Area(1000sq.km) 270.5 Urbanpopulation,'percentage
Totaloccupiedfarmland, oftotal(1991 census) 75.9
percentageoftotal, 1988 66.2 Populationofmajorurbanareas
ofwhich: Grassland 51.4 (1991census1000persons):
Auckland 885.6
Christchurch 307.2
Wellington 325.7
THEPEOPLE
Population,5.3.1991 (1000) 3434.9 Civilianemployment,
Inhabitantspersq.km 12.8 June1994(1000) 1545.1
ofwhich:
Agriculture 154.7
Manufacturing 283.4
Trade(wholesaleandretail) 320.0
Communityandpersonal
services 430.1
PARLIAMENTANDGOVERNMENT
PresentcompositionofParliament:
NationalParty 50
LabourParty 45
Alliance 2
NewZealandFirst 2
PresentGovernment: NationalParty.
Nextgeneralelection: atlatestbyNovember1996.
PRODUCTION1
GrossNationalProduct, GNPpercapita,1992-1993(NZ$) 21029
1992-1993(NZ$million) 73483
FOREIGNTRADE(1993)
Mainexports(percentageoftotal): Mainimports(percentageoftotal):
Manufactures 25.0 Machineryandtransportequipment 39.9
Mealandmeatpreparations 15.6 Othermanufactures 27.2
Dairyproduce 14.4 Mineralfuels,lubricants,etc. 6.3
Wool 4.7 Chemicals 10.5
THECURRENCY
Monetaryunit: NewZealanddollar. CurrencyunitperUSdollar,average
ofdailyfigures:
Year1993 1.8506
September1994 1.6586
1. Definedasthepopulationinthe30mainandsecondaryurbanareas.
2. Yearending31March.
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
This Survey is based on the Secretariat's study
preparedfor the annual review ofNew Zealand by the
Economic and Development Review Committee on
4July 1994.
After revisions in the light ofdiscussions during the
review, final approval ofthe Surveyforpublication was
given bythe Committeeon3 OctoberJ994.
The previous Survey ofNew Zealand was issued in
January 1993.
Introduction
Over the past eighteen months or so, New Zealand's economic performance
has improved remarkably, suggesting that the country has started reaping the
benefits of the vast structural reform programme implemented since the
mid-1980s. In 1993, the economy achieved one ofthe highest growth rates in the
OECD area while maintaining one of the best inflation performances. At the
same time, the external deficit remained low by historical standards. And,
although the unemployment rate is still relatively high (at around 9 per cent), the
recovery has brought about substantial job creation.
These favourable developments are expected to continue in 1994 and 1995.
Secretariat projections suggest that economic growth over this period could
average more than 3]h per cent. Notwithstanding a likely pick-up in labour-force
participation, such robust growth should make for a gradual decline in unemploy¬
ment. Persistent labour-market slack should, however, tend to moderate wage
increases, consistent with holding inflation within the 0 to 2 per cent official
target range. The external balance is projected to narrow further, aided by mod¬
estly improving terms of trade.
With the upturn gaining momentum, the challenge now facing policy mak¬
ers is to prevent possible adverse implications for the external balance and price
stability. In the past, periods ofstrong growth have usually been accompanied by
rising wage and price inflation and growing current-account deficits. This is less
likely to occur at present as recent structural reforms - in particular the Employ¬
ment Contracts Act and the Reserve Bank Act - have resulted in more flexible
labour-market arrangements as well as reduced expectations of generalised
wage/price increases and less uncertainty about inflation developments. How¬
ever, this new regulatory and institutional framework has yet to be tested in an
environment of sustained expansion in activity. In this regard, the task ofmone¬
tary policy could be facilitated if, following the substantial progress made in