New Zealand's Economy

Essay by awesomeman281College, Undergraduate April 2010

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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...