1 thought on “New Zealand’s remarkable economic transformation”

  1. Posted 29/09/2016 at 11:19 | Permalink

    It is true that the achievements in the period 1985-93, under finance ministers Roger Douglas (Labour) and Ruth Richardson (National), were startling but as the blog notes New Zealand (NZ) was coming from a pretty low base. At it is also true that NZ saw positive results off the back of these reforms with per capita income growth exceeding the OECD average in the late 1990s and early 2000s. However, this uptick was brief and since the trend of NZ under achieving relative to many of its western counterparts has continued.

    And yes it is to NZ’s credit that its institutions are of very high quality, it has low levels of corruption, its fiscal position is strong with low government debt levels and it scores highly in terms of the ease of doing business. But this to some extent masks significant structural problems and, in particular, persistently low (and falling) productivity growth.

    There area myriad of reasons for this but key drivers are falling education standards, increasingly damaging regulatory interventions across a broad range of sectors (particularly in land use – see Auckland’s highly distorted housing market), the dominance and lack of dynamism of NZ’s primary producer boards e.g. Fonterra and the general inefficiencies in quasi state run institutions (SOEs). Whilst the Key government has had some successes, particularly in welfare reform, it has by and large sat on its hands being highly populist in character whilst largely ignoring the need to reform education, the regulatory and tax environment or implement other changes that will improve NZ economic performance.

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