New Zealand flag New Zealand: Economic and Political Overview

The economic context of New Zealand

Economic Indicators

Thanks to exemplary pandemic management, New Zealand rebounded quicker than many other advanced economies. This resilience bolstered economic activity, complemented by robust investment and consumption, facilitated by generous fiscal and monetary support. However, after considerable policy tightening, the economy slipped into a technical recession, witnessing a 0.1% quarter-on-quarter (seasonally adjusted) decline in real GDP in 2023Q1, following a 0.7% drop in GDP in 2022Q4. For the year as a whole, the IMF estimated growth at 1.1% due to deteriorating terms of trade, elevated debt servicing costs, and subdued consumer sentiment amid declining house prices and a soft labor market. Growth is expected to stay restrained in 2024 (1%) as the impact of monetary tightening unfolds fully, before accelerating to 2.1% in 2025 (IMF).

In May 2023, the government disclosed its revised plan to attain a fiscal surplus by the fiscal year ending June 2026 (FY26), postponing it by a year from the initial schedule. This adjustment was prompted by a less optimistic economic growth and tax revenue outlook, alongside 0.7% of GDP attributed to fiscal costs related to recent floods. Additionally, the government allocated an additional cumulative 1.5% of GDP for the implementation of a new National Resilience Plan. The government deficit was estimated at 5.4% of GDP in 2023 by the IMF; it should remain at the same level this year and decrease to 3.4% by 2025. The debt-to-GDP ratio, at 46.1% last year, is expected to follow an upward trend, reaching 49.9% in 2024 and 52.3% in 2025, as per the IMF. Consumer price inflation began to ease in Q2/2023, averaging an estimated 4.9% over the year. It should return within the Reserve Bank of New Zealand’s 1–3% target range in 2024 (at 2.7%, IMF). Economic challenges include dependence on foreign investment, high household and corporate debt, reliance on Chinese demand, insufficient skilled workers, low R&D, and a shortage of housing. The economy is also vulnerable to international commodity prices, particularly dairy and meat. Strong public funds have been allocated to the reconstruction of roads, railways, and the KiwiBuild Programme.

Labor market conditions remain tight, characterized by record high labor force participation and negligible slack, evidenced by historically low levels of unemployment and underemployment rates. This scenario has led to upward pressure on wages, especially within the services and construction sectors. While the recent surge in migration has alleviated some labor market strain, expectations for wage growth, particularly in the short term, remain elevated. Unemployment was estimated at 3.8% in 2023, from 3.3% one year earlier. It is forecast to increase to 4.9% this year (IMF). Some key social issues faced by the New Zealand government include dealing with an ageing population and increasing health care costs, boosting employment and household incomes, and increasing housing affordability.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 242.35249.04257.63266.77277.69
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 47,28447,53748,53149,64551,049
General Government Balance (in % of GDP) -5.1-4.9-4.2-2.8-1.9
General Government Gross Debt (in % of GDP) 47.245.947.448.748.8
Inflation Rate (%)
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) -21.27-17.08-15.53-14.27-13.31
Current Account (in % of GDP) -8.8-6.9-6.0-5.4-4.8

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

New Zealand's economy is based on agriculture and services such as tourism, retail, and wholesale trade. The agricultural sector is the largest industry in the country, with pastoral farming and horticulture being the most important categories. Agriculture represents 5.7% of GDP and 6% of the total workforce (World Bank, latest data available). Main agricultural products include dairy (the country is the 7th largest milk producer in the world in 2023), meat, wood, fruit (mainly peaches, plums, nectarines, drupe, cherries, apricots, and kiwi), vegetables, seafood, wheat, and barley. New Zealand also has a thriving wine industry and is rich in many natural resources, in particular gas, oil, and coal. On average, migrants make up 15% of the agricultural workforce in New Zealand.

Industry represents 19.7% of GDP and 21% of the workforce (World Bank). Main industries include log and wood articles, food processing, manufacturing, mining, transportation equipment, construction, aluminum production, and paper products. The manufacturing sector as a whole is estimated to account for 9% of GDP. The construction industry plays a vital role in the country's economy, contributing over NZD 17.5 billion to the GDP for the year ending September 2023 (Statista).

The services sector accounts for 66.7% of GDP and employs 73% of the active population (World Bank). Main services include financial services, real estate services, and tourism - which is one of the most important sources of foreign currency. Other important sectors include retail and wholesale trade, restaurants, and hotels. According to the latest figures from the national statistics institute, in 2023, the overall tourism expenditure amounted to NZD 37.7 billion, marking a surge of 39.6% (NZD 10.7 billion) compared to the preceding year. International tourism expenditure soared by 456.9% (NZD 8.9 billion) to reach NZD 10.8 billion. As per the banking sector, By 2023, there were 27 registered banks functioning in the country, as per the Reserve Bank of New Zealand. Similar to the banking sector in Australia, New Zealand is predominantly controlled by four major banks: ANZ, ASB, BNZ, and Westpac, all of which are Australian-owned. In 2022, banks made a direct contribution of NZD 9.1 billion to the New Zealand economy (data NZ Banking Association).

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 6.1 20.0 73.9
Value Added (in % of GDP) 5.7 19.7 66.7
Value Added (Annual % Change) -0.5 3.9 5.9

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025


Country Risk

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Latest Update: May 2024