Story: Economic history
People still crack jokes about the number of sheep in New Zealand, but wool and lamb exports are now a small part of a diverse economy. Economic activity has stagnated at times, but GDP per person has grown at 1.4% per year on average for around a century and a half.
Full story by Brian Easton
Main image: Patriotic postcard, 1939
The Short Story
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Before Europeans arrived the Māori economy was based on gift exchange and bartering. Resources such as forests were depleted, and some species became extinct, for example moa. But over time people learnt to manage their environment.
Europeans brought a money economy, and Māori quickly began to produce goods for trade. At first Māori trade thrived, but as fertile land was lost people no longer produced goods for sale.
Early European trade
New Zealand’s first European economy was based on sealing and whaling, and timber. There were gold rushes and people also exported kauri gum. These were all products which eventually ran out, but while they made money they helped to establish towns and transport.
A staple is a product which keeps on making money for the country over a long period of time. Wool from sheep was an early staple, mostly exported to Britain. After ships were refrigerated, meat, butter and cheese could be exported.
In the 1870s the government borrowed money to invest in roads and railways, and the economy boomed. Then money dried up in London markets and the economy went into a long depression. In the 1890s markets bounced back and there was another boom.
The great depression
After the First World War the economy was slow. Then in 1929 world markets collapsed, and New Zealand’s economy also went into depression.
Because many New Zealanders had come from Britain there were close ties between the two countries. New Zealand sent most of its exports to the UK, and most imports were from there.
New Zealand was small and its exports were at the mercy of world markets. The government tried to control imports, so more products would be made locally.
Most local manufacturing was small. Large factories included:
- farm processing – dairy factories made products like butter and cheese, and freezing works prepared meat
- resource processing – factories for steel and aluminium production, oil and gas conversion, and timber processing, including pulp and paper.
When Britain joined the European Union in 1963 New Zealand was forced to seek new markets and products. In 2009 major markets were Australia, the US, Japan and China.
Tourism became a major income earner, and wool became a minor one. Milk was processed into a range of products, and milk powder was an important export in the early 2000s.
In the 1980s the Labour government removed taxes on imports and reformed the economy. The economy slowed down and unemployment rose. Economists debate whether the reforms were good or bad. Most people think the reforms were necessary, but perhaps went too far, and could have been better managed.
New Zealand had a diverse economy in the early 2000s, though it remained dependent on farming. A big issue was sustainability – whether the environment could continue to support economic activities.