What comes to mind when you think about New Zealand? If you are like most people outside the small Asia Pacific country, you probably are going to think about sheep, kangaroos and milk. You would be forgiven for this assumption, because New Zealand has historically been a farming country. The country was first recognized when William Hobson signed a treaty with chiefs of native tribes in 1840. The European settlers worked with natives to build a strong agricultural community, which was the basis for the nation’s economy for many years.
However, New Zealand has since grown into a more developed country. It has come remarkably far in the past half century and its economy is disproportionately larger than its population. Many different industries play a role in strengthening the New Zealand economy.
The economy has grown substantially as New Zealand becomes more diversified. It is now the 53rd largest economy in the world, even though it is only the 126th most populated. This wouldn’t have been possible if it remained a purely agricultural society.
What changes have helped make New Zealand a growing economy? What lessons can developing nations take from this country success story? Here are some examples of economic reforms and developments that have propelled the company to success.
Globalization and investment of the manufacturing industry
New Zealand has historically had a rather weak manufacturing sector. One of the biggest reasons for this was their emphasis on protectionism that became a tradition after the country was first founded. New Zealand started to shift towards globalization around the beginning of the 20th Century. The first world war caused the country to pull back from globalization and reinforce its protectionist approach. The country went back-and-forth between globalization and isolationism for the following decades, but it has finally started to embrace the benefits of a global manufacturing model.
Today, the manufacturing sector is the second largest employer in the country. There are 287,800 New Zealanders working in manufacturing businesses. They account for over 15% of all employees.
Industrialization is playing an important role in economic growth. More New Zealanders will benefit from this transition. New Zealand has started to outsource a lot of products that it used to import. This is fixing the trade balance and is making the country more self-sufficient.
Growth of e-commerce
E-commerce is becoming increasingly important to New Zealand. A report released last summer showed the New Zealand e-commerce sector was worth $4.2 billion. This was a 16% increase from the previous year. Some of the sectors are growing faster than others. A number of gaming companies are emerging in NZ, which are growing surprisingly rapidly. This sector is now worth around $2.4 billion.
E-commerce has proven to be a highly efficient model for economic growth. It has also incentivized the country to invest in the Internet infrastructure that gives New Zealanders access to the global gig economy. This has enabled New Zealanders to earn money from other countries, which further stimulates the economy.
Importance of a strong central bank and social safety nets
New Zealand has a strong central bank. The country has been more dependent on government involvement than most other developed economies. It has a highly advanced social security system for such a small country. This has apparently played a key role in strengthening the economy.
Emerging economies should consider these findings
Emerging markets are growing at an unprecedented pace this century. Developing economies in Asia, Africa and the Middle East are looking towards other recently developed economies for inspiration.
New Zealand is a stellar success story of a country that crew from humble beginnings in a short period of time. There are a couple of major takeaways that smaller developing economies should focus on, as they try to learn from New Zealand’s growth. They should consider the importance of a strong manufacturing sector, which has played an important role in driving growth in New Zealand. They should also invest in a strong central bank and social safety nets that come with it.