Economics of New Zealand

Describe your country’s force (age and sex distribution of population, education) natural resources, capital. What is the current allocation of each to agriculture, manufacturing, and services?

According to the Statistics New Zealand June 2012, New Zealand has a population of approximately 4,327,944 people. The country is the 125^th highest populated in the world. The age structure in New Zealand is as follows: between 0 to 14 years there are 448,838 males and 426,799 females who compose about 20.2% of the total population, between the age of 15-64 years there are 1,432,723 males and 1,428,633 females which comprise 66.2% of the total population, and between 65 years and above there are 270,468 males and 313, 432 female which compose about 13.6% of the total population. The population growth rate is at 0.863%.

According to the Statistical profile New Zealand January 18, 2012 the country spends approximately 6.1% of the total Gross Domestic Product. The literacy level of New Zealand is high. For example, for the population above 15 years, 99% can be able to read and write well. In this percentage, 99% are literate males and 99% are literate females. In primary and tertiary educational institutions, there is a school life expectancy of 19 years. The males have a school life expectancy of 19 years while that of the females is 20years (Statistics New Zealand 2010). The natural resources in New Zealand include natural gas, sand, coal, timber, hydropower, gold, iron ore and limestone.

The capital of the nation comprises of budget revenue of 63.08 billion dollars, and an expenditure of 76.44 billion dollars. The country has 123.8 billion dollars purchasing power, 161.9 billion dollars in exchange rate, 1.4 GDP real growth rate and 28,000 dollars in per capita income (Statistics New Zealand 2010).

The allocation of this capital is distributed to various sectors in the following way: the agriculture sector receives 4.9%, the industry sector is allocated 23.5%, and the services sector is allocated 71.6% (Statistics New Zealand 2010).

Analyze current gross domestic product percentages to consumption, investment, foreign trade. Trace these back 10 to 20 years. How big is government in GDP?

In the last 20 years, the economy of New Zealand has been transformed from being agriculture-based to industrial and market based economy. According to Statistics New Zealand June 2012, the per capita income rose for the last seven years until 2007, especially in terms of the country’s purchasing power. However, it declined in 2008 to 2009. The current GDP purchasing power stands at 123.8billion dollars in 2011, 122 billion dollars in 2010 and 120.5 billion dollars in 2009. The GDP exchange rate in the country was 161.9 billion dollars in 2011. The per capita income per person was 28,000 dollars in 2011, 27,900 dollars in 2010, and 27,900 dollars in 2009. In fact, “By 1982, New Zealand had the least per capita income compared to other developed nations” (Evans, 1982, p.47). No person lives below the poverty line in New Zealand. New Zealand taxes and other revenue account for 39% of the total GDP, which is rated as the 54^th in the world. Public debt in New Zealand stands at 36.1% of the total GDP and is rated as the 93^rd country in the world. Therefore, “ the stability of an economy like this by observing that with such accumulated capital, investors reinvest their profits increasing product range, jobs, markets and buying ability hence the economy grows” (Parenti 13).

Explain the country’s monetary system: definition of currency unit, central bank powers, financial markets (stocks and bonds), and their use by business and individuals?

The monetary system in New Zealand is the New Zealand Dollar (NZD). According to Statistics New Zealand, the central bank discount rate was at 2.5% on 31^st December 2009. This is the 70^th in the world. In 2008 December, 31 it was at 5%. The commercial bank prime lending rate was at 6.11% on 31^st December 2011, which was rated 138 in the world. In 2010 December 31, it was at 6.26%. The stock of narrow money was at 26.26% billion on December 31, 2011 and was rated the 59^th in the world. The stock of Broad money was at 154.6 billion US dollars as at 31^st December, 2010 and was rated 45^th in the world. In the previous year, 2010 December 31^st, it was at 145.3%. The stock of domestic credit was at 239.1 billion by December 31, 2011 and 67.06 billion at the same time in the previous year. The market value of the shares that are traded in public was at 27.66 billion dollars as at 31^st December, 2011, 36.3 billion dollars at the same time in 2010, and 67.06 billion dollars at a similar time in 2010.

Chart inflation and unemployment for 15 years or longer. Explain how inflation is measured. What has been the impact of international transactions and exchange rates if any?

According to Statistics New Zealand June 2012, the unemployment rate in New Zealand was at 6.5% in 2011, and the same percentage in the previous year. In fact, according to (Craig, 2010) unemployment rate in New Zealand has been higher, especially for Maori and the Pacific. This indicates that since the native Maori people have higher numbers of uneducated people, the rate of unemployment in this community is high. The majority of the unemployed are the youth. A chart of unemployment in New Zealand from 1986 to 2011. Source: Statistics New Zealand, Household Labor Force Survey.

From the above chart, it is evident that unemployment in 1986 was very low but it began rising steadily in the early 1990s. Inflation then went down in the years between 2000 and 2007, before it began rising again in 2008. Up to date, unemployment is still high at 6.5%. According to (Winkielman 2000) New Zealand has been able to obtain educated people from Europe and even from the developing countries to man the economy. According to Statistical Profile New Zealand (January 18, 2012), the unemployment rate rose to 7.3 percent in September 2012 quarter, up from 6.8 percent in the June 2012 quarter.

According to Statistical profile New Zealand January 18, 2012 the rate of inflation in New Zealand was at 0.8% in 2012. However, since 1918 to date, the inflation rate in New Zealand has been at an average of 4.91%. Inflation is the rise of item prices against the purchasing power of the people in an economy. Inflation is measured using the Consumer Price Index CPI. The CPI is measures the consumer prices plus the deflator of GDP. According to the New Zealand Statistics, Consumer Price Index went up by 0.3 % by September of 2012. The prices of telecommunication and consumable good went down by 9.3% in 2012. Inflation is normally caused by the way supply of money interacts with its output and its exchange rates. When banking authorities supply more money to a domestic economy, then inflation is likely to occur. Increase in the inflation rates in the world economies and the economic recessions in the world have negatively impacted on the economy of New Zealand. For example, the banks have increased their lending rates against the consumer purchasing power.

What is the major economic problem confronting your country? What economic policy do you recommend to resolve this problem?

The major economic challenge facing New Zealand is globalization. This is because with the increase in the level of interaction between countries of the world, the nature of trade continues to change. This is as a result of better and sophisticated communication technology and transport. Globalization has therefore deepened the economic links that exist between nations of the word. This has indeed increased the level of competition in the world. Many countries have therefore streamed into the world economy. Today, reduced transport cost has made globalization grow at a super speed. According to Obstfeld (2003), compared to 1930s, the cost of shipping is half, cost of telecommunication is only1%, and that of freight is 1/6^thcurrently. There has been increase in the flow of capital, people, ideas, and trade in the world. This is impacting on both the domestic and international trade in New Zealand. Goods from other countries are available in better quality and lower prices than those from New Zealand. This has made many people turn to the imports and neglect the locally manufactured goods. There is also high competition in prices of goods especially with the inception of the import goods that have better prices. For example, goods from China have fetched a big market in the country due to their low prices.

To counter this negative effect, New Zealand needs to enact some economic policies, for example, enactment of policies to offer a competitive environment that encompasses variety of international and domestic businesses. This will enable the country to open more avenues for its internally produced products and also be able to import other commodities from the international market. New Zealand should also enact policies that improve on the quality and quantity of natural resources, for instance, iron ore and agricultural products both for domestic and international market. This will ensure that it fetches better prices and also compete favorably in the markets. The country should also enact policies to better its energy sources and optimize the industrial production since it has low energy prices. This will enable it produce goods that attain better prices globally.

Works Cited

Craig, Ellen, McDonald, Gan, Adams, Joe. The Health of Pacific Children and Young People with Chronic Conditions and Disabilities in New Zealand. Dunedin: New Zealand Child and Youth Epidemiology Service. 2010. Print.

Evans, Neil. “Up From Down Under: After a Century of Socialism, Australia and New Zealand are Cutting Back Government and Freeing Their Economies”. National Review 46 (16): (2012) pp47–51. Print.

Obstfeld, Meil and Taylor, Amtser. Global Capital Markets: Integration, Crisis and Growth Cambridge: Cambridge University Press. 2003. Print.

Parenti, Mary. Against Empire, City Lights Books, San Francisco. 1995. Print.

Statistics New Zealand. Hot Off the Press Household Labour Force Survey: June 2011. Web. 10 Nov. 2012. Quarter. http://www.stats.govt.nz

Statistical profile New Zealand. New Zealand January 18, 2012. OECD Library. Web. 10 Nov. 2012.

http://www.oecd-ilibrary.org/economics/country-statistical-profile-new-zealand_20752288-table-nzl

Winkelmann, Rainer. “The labour market performance of European immigrants in New Zealand in the 1980s and 1990s”. The International Migration Review. The Center for Migration Studies of New York 33 (1): (2000) pp.33–58. Print.