Macroeconomics of New Zealand

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Macroeconomics New Zealand 2001| May 12
This document contains 1552 words without the Harvard style referencing and the table of contents. | | -------------------------------------------------
Created by: Rausch Péter
Module: Macroeconomics

Economic profile of New Zealand3
Rate of GDP Growth4
Stance of Fiscal policy6
Government spending 20016
Financial System7
Exchange rate8
Balance of Payment9
Works Cited10

New Zealand’s Macroeconomic situation
This is going to be an analysis of New Zealand’s Macroeconomic situation taking into consideration the most important measures of a country’s economy. Economic profile of New Zealand
New Zealand has a market economy with sizeable manufacturing and services sectors complementing a highly efficient export-oriented agricultural sector. Energy-based industries, forestry, mining, horticulture and tourism have expanded rapidly over the last decade. Agriculture and commodity exports remain important to the country but significance of the service sector relative to primary production and manufacturing continues to grow.

Rate of GDP Growth
(See figure 1 for graphical analysis)
The economy of New Zealand grew rapidly in the mid-1990s. However the economy slipped over the first half of 1998 into recession because of the Asian economic downturn, in addition a summer drought occurred at the same time, which made the economy slow down. The decline of the economy was short-lived since it was recovering through 1998 and 1999. New Zealand’s economy has expanded by 3.9% in 1999 and by 3.7% in 2000. Growth slowed in the first half of 2000, it was due to the preparation of Y2K and other external factors. Business and consumer confidence also felt sharply, weakening domestic demand. However employment growth was strong in the second half of the year and unemployment rate fell to 5.6 % in December. In the first half of 2001 New Zealand’ economy saw an improvement in business confidence and consumer spending. Thanks to a good agricultural season and relatively high commodity prices and competitive exchange rate farm incomes started to boost, that actually helped boost consumer spending as well and to provide support for housing market. This contributed to a growth of 2.5% in the year 2001 September. Unfortunately, greater uncertainty occurred in the business life after the tragic events of 11 September 2001. While New Zealand could avoid the slowdown of the economy in the first half of 2001, it was unable to avoid the impacts of the tragic event and growth slowed in September.

Economy slowed down over the first half of 1998 into recession * Asian economic downturn
* summer drought occurred
New Zealand’s economy improved
* Good agricultural season
* relatively high commodity prices
* Competitive exchange rate
* consumer spending boosted This contributed to a growth of 2.5% in the year 2000 September.

Economy slowed down
* September 11, terror attack
* Greater uncertainty
* Inflation increased

Stance of Fiscal policy
Government operating balance has been reduced as a percentage of GDP from 41.6% in 1992/93 to 34.5% in 2000/01. Expenses have been controlled without output budgeting. In 2000/01, the operating balance was 1.4 billion dollar. Expenses as a percentage are expected to fall to around 32.4% by 2005/06. Net debt has fallen from 49% of GDP in 1992/93 to 18.1% in 2000/01. Debt payments have been financed from operating surpluses and asset sales proceeds. Net debt is projected to remain steady at a level of 18% of GDP. Net worth increased from -7.7 billion dollar in 1992/93 to 11.5 billion dollar in 2000/01. This improvement shows the ongoing operating surplus and revaluation of physical assets. Net worth is projected to reach 24.7 billion dollar in 2005/06. Since the adoption of...
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