Economy of New Zealand

The economy of New Zealand is a highly developed free-market economy. It is the 52nd-largest national economy in the world when measured by nominal gross domestic product (GDP) and the 62nd-largest in the world when measured by purchasing power parity (PPP). New Zealand has one of the most globalised economies and depends greatly on international trade, mainly with China, Australia, the European Union, the United States, and Japan. New Zealand's diverse economy is made up of various types of informal and formal organisations, divided between two sectors, public and private. It has a sizeable service sector, accounting for 63% of all GDP activity as of 2013. As a large island nation New Zealand has abundant natural resources and mineral wealth. Prominent manufacturing industries include aluminium production, food processing, metal fabrication, wood and paper products. Mining, manufacturing, electricity, gas, water, and waste services accounted for 16.5% of GDP as of 2013. The primary sector continues to dominate New Zealand's exports, despite accounting for only 6.5% of GDP as of 2013. The information technology sector is growing rapidly. New Zealand's currency, the New Zealand dollar (informally known as the "Kiwi dollar"), also circulates in four Pacific Island territories. The New Zealand dollar is the 10th-most traded currency in the world.

Top Sectors in New Zealand

Transport in New Zealand

The New Zealand state highway network consists of 11,000 km of road, with 5981.3 km in the North Island and 4924.4 km in the South Island, built and maintained by the NZ Transport Agency, and paid for from general taxation and fuel excise duty. Heavy road users must pay Road User Charges as well, there is limited use of tolling on state highways. There is also 83,000 km of local roads built and maintained by local authorities. Railway network: The railway network is owned by state-owned enterprise KiwiRail and consists of 3,898 km of railway line, built to the narrow gauge of 1,067 mm (3 ft 6 in). Of this, 506 km is electrified. Airways: There are seven international airports and twenty-eight domestic airports. Air New Zealand, 52% government-owned, is the national carrier and a state-owned enterprise. Airways New Zealand, another state-owned enterprise, provides air traffic control and communications. Seaports: New Zealand has 14 international seaports.

Telecommunications in New Zealand

Present-day telecommunications in New Zealand include telephony, radio, television, and internet usage. The copper wire and fibre cable networks are mostly owned by Chorus Limited, a publicly listed company. Chorus wholesales services to retail providers (such as Spark). In the mobile sector, there are three operators: Spark, One NZ and 2degrees. Internet: New Zealand has a high rate of internet use. As of October 2014, there are 1,916,000 broadband connections and 65,000 dial-up connections in New Zealand, of which 1,595,000 are residential and 386,000 are business or government. The majority of connections are digital subscriber line over phone lines. The Government has two plans to bring Ultra-Fast Broadband to 97.8% of the population by 2019, and is spending NZ$1.35 billion on public-private partnerships to roll out fibre-to-the-home connection in all main towns and cities with populations over 10,000. The program aims to deliver ultra-fast broadband capable of at least 100 Mbit/s download and 50 Mbit/s upload to 75% of New Zealanders by 2019. In total, 1,340,000 households in 26 towns and cities will be connected.

Energy in New Zealand

New Zealand will be potentially among the main winners after the global transition to renewable energy is completed; the country is placed very high - no. 5 among 156 countries - in the index of geopolitical gains and losses after energy transition (GeGaLo Index). Electricity: The electricity market is regulated by the Electricity Industry Participation Code administered by the Electricity Authority (EA). The electricity sector uses mainly renewable energy sources such as hydropower, geothermal power and increasingly wind energy. The 83% share of renewable energy sources makes New Zealand one of the most sustainable economies in terms of electricity generation; in terms of total energy consumption in the New Zealand economy, this represents the 30% that comes from renewable sources.

New Zealand - Key Economic Indicators

Exports & Imports

Data: New Zealand's economy is heavily reliant on international trade. Here's a look at some key products: (i) Exports: Dairy products (milk powder, cheese), meat (lamb, beef), fruit (kiwi, apples), forestry (wood pulp, logs), and wine are major export earners. (ii) Imports: Machinery, vehicles, fuel, and manufactured goods are the primary imports.

Infrastructure Development

New Zealand has a well-developed infrastructure network, with a total road length exceeding 100,000 km. Ongoing projects focus on improving public transportation, upgrading rural roads, and investing in renewable energy infrastructure.

Fiscal Policy

The New Zealand government aims to maintain a balance between economic growth and fiscal responsibility. They are focused on managing public debt and investing in social programs like healthcare and education.

Monetary Policy

The Reserve Bank of New Zealand (RBNZ) is responsible for managing inflation and promoting financial stability. They primarily utilize interest rate adjustments to influence economic activity and control inflation. Recent actions likely involve raising interest rates to combat inflation.

Trade Agreements

New Zealand actively participates in international trade through agreements like the Closer Economic Relations (CER) with Australia and free trade agreements with China, the European Union, and others. These agreements provide access to larger markets for New Zealand exports.

Environmental Regulations

New Zealand has a strong focus on environmental protection. Regulations address issues like pollution control, sustainable resource management, and protecting endangered species. The government is continuously working to balance economic development with environmental concerns.

Tax system

Capital gains tax: No separate capital gains tax exists. Profits from most investments are taxed as income under the income tax bracket applicable to your total income.
Corporate tax rate: The corporate tax rate remains a flat 30% for most companies.
Sales tax (GST): The Goods and Services Tax (GST) is currently 15% applied to most goods and services supplied in New Zealand. This is a broad-based tax included in the price of most goods and services.
Property tax: Local councils in New Zealand levy rates on residential and commercial properties. These rates are often referred to as "rates" or "council rates" instead of property tax. Rates vary depending on location, property value, and the services provided by the local council.
Payroll tax: New Zealand does not have a separate payroll tax. However, employers are required to withhold income tax and contribute to social security on behalf of their employees. These deductions appear on employee payslips.
Tax deductions and credits: New Zealand offers a variety of tax deductions and credits to reduce tax liability. These can include work-related expenses, charitable donations, and deductions for those with dependents.
Tax compliance: New Zealand's tax compliance rate is considered high. The Inland Revenue Department (IRD) utilizes various tools for efficient tax collection.
Tax burden: The overall tax burden in New Zealand is considered moderate. Individuals face a progressive income tax system, meaning higher earners pay a larger portion of their income in taxes. Businesses face a flat corporate tax rate.

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Tonga Parliament

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01 Jun 2024

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