Structural Reform in New Zealand: A Review

This paper discusses the reasons for the change in economic policy direction adopted in New Zealand in 1984. The paper briefly outlines the economic history of New Zealand in the period from the early 1970′s to 1996. The ultimate test of the success of the economic reforms is whether they have increased the growth rate of potential per capita output in the economy. I discuss the evidence on this hypothesis and conclude that the evidence does support the hypothesis of a structural change in this measure. Five of the major areas of reform are discussed, these areas are goods, capital and labour market liberalisation and the fiscal and monetary policy framework adopted in New Zealand.

Introduction: Since the late 1970s many countries have adopted a more liberal market oriented economy to increase the living standards of their citizens; New Zealand is one such country. At this stage, it is still difficult to say whether the reforms have been a success, but evidence strongly points us in this direction. As a result of this success, Governments and academics from around the world have become interested in the approaches taken in New Zealand in an attempt to understand their impact and to study the feasibility of adopting them in their own country.

Author: Peter Reward

Source: Research Discussion Papers, Bank of Finland

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