Story: Economic history
Page 3 – First European economies
The first European commercial activity in New Zealand exploited natural resources in an unsustainable manner. People harvested timber, and also seals and whales, often to near extinction. In the 1860s there were gold rushes, and in the last decades of the 19th century native timber, gold from quartz, other minerals and kauri gum were all taken.
Quarrying gave a temporary boost to the economy, but when the resources were depleted the exploiters moved on. Local settlements benefited temporarily. There were also long-term benefits from the development of infrastructure such as roads, and the emergence of a merchant-capitalist class who reinvested their capital in sustainable activities such as farming, manufacturing and commerce.
Dunedin was the richest city in New Zealand by the 1880s, largely on the back of investments from the gold rush.
This ‘quarrying’ phase of economic development was largely exhausted by the end of the century, although it remained important in some localities, for example on the West Coast, up till the end of the 20th century. Taranaki became a new quarry economy following gas and oil discoveries from 1958. Early quarries were usually depleted in a few years. But in the early 2000s resources were often depleted slowly enough to sustain decades of economic activity, though some fish stocks declined rapidly.
Quarrying for gold led to the quick emergence of settlements which have subsequently disappeared. In Central Otago, Bendigo was a thriving gold-quartz mining community with four stores and seven hotels by 1870. Today there is nothing more than a few stone ruins amid the vineyards. In the 1890s the mining community of Lyell in the Buller Gorge had a bank, a post office, a weekly newspaper, a court house and a police station. Today only the cemetery headstones can be found in the bush.
The first European settlements relied on the capital they brought with them, including their baggage, or they borrowed to sustain economic activity. Grain production, the initial economic hope, often proved expensive to establish and gave poor returns. Settlements flourished in association with temporary quarrying of limited resources, or were sustained by further borrowing. In Wellington in the 1850s and Auckland in the 1860s capital was acquired through externally funded warfare with Māori.
In order to survive, settlements had to find a staple product which would generate export revenue to pay for imports, and service their borrowing. The first great staple was wool, which began to be exported from the Wellington settlement as revenue from whaling was exhausted in the late 1850s.