New Zealand

   
 

Executive Summary

Minority government changes leaders.
Coalition defection leads to shift in power
Throughout much of the period under review, New Zealand’s center-right National Party led government as the largest party in a formally minority government. Generally able to command a legislative majority, the National Party negotiated confidence and supply agreements with three smaller parties, the Maori Party (two seats), United Future (one seat) and the ACT Party (one seat). In early December 2016, shortly after the end of the review period for the SGI 2017, Prime Minister and National Party leader John Key, who had served as head of government since 2008, announced that he would step down. He was succeeded by Bill English, who had previously served as Deputy Prime Minister and Finance Minister. In February 2017, English announced that there would be a general election on 23 September. Although the National Party won the highest proportion of votes, two of its three support parties failed to win parliamentary seats, leaving the New Zealand First Party leader, Winston Peters, holding the balance of power. Instead of endorsing the more favored National Party, Peters decided to form a coalition government with Labour, while the Green Party offered legislative support from the cross-benches. The new prime minister under this three-party arrangement is the 37-year-old Labour leader, Jacinda Ardern, who is the youngest New Zealand prime minister in modern times.
Strong governance capacities
Throughout the review period, New Zealand performed well with regard to indicators of governance capacity, policy performance and quality of democracy. New Zealand’s democratic system is based on a unicameral parliament, working rule of law, a strong executive branch and effective government. The system is healthy and stable. Despite an ongoing debate about adopting a written constitution, the fundamental structure and operation of governance reflects a fundamental continuity.
Stable, open economic environment
The country’s commitment to economic freedom is reflected in its leading position in the World Bank’s 2018 Doing Business report. According to the report, New Zealand provides the world’s best protection for investors. In addition, it is one of the safest countries in the Asia-Pacific region and offers a “low-risk environment for business investment.” Political reforms implemented over recent decades have created a policy framework that demonstrates impressive economic resilience. Openness to global trade and investment are firmly institutionalized. The government has entered into several free trade agreements. For instance, in June 2017 New Zealand launched FTA negotiations with the Pacific Alliance (Chile, Colombia, Mexico and Peru), has been an initiator of the 11-member Trans-Pacific Partnership Agreement. and is exploring the possibility of a free trade agreement with the European Union.
Quick rebound from
global recession
New Zealand’s economy rebounded quickly from the global recession. The impact of several severe earthquakes on economic growth has been limited; indeed, the subsequent rebuilding programs have contributed significantly to economic growth in the South Island. On the other hand, the recent influx of immigrants and the repatriation of many New Zealanders from Australia is placing severe strain on the housing market, especially in Auckland.
Low debt levels with robust growth
According to IMF figures, net general-government debt remained well under control at 8.8% of GDP in 2015. The equivalent rate in the United Kingdom was 80.3% and in the United States it was 79.9% for the same year. During the review period, economic growth has been relatively strong, and inflation has remained under control. Economic recovery from the global economic crisis has been driven by exports and the rebuilding of Christchurch. However, although the New Zealand economy came through the world financial crisis comparatively well, the government was forced to prioritize budgetary policy at the cost of other reform projects. As a result and despite strong performance in terms of macroeconomic indicators, fiscal austerity policies have widened the socioeconomic gap between the rich and poor.
Child poverty a
pressing issue
In the lead-up to the 2017 election, the rise in levels of child poverty became a particularly salient issue, with close to one in three children being defined as living in poverty. In response, the government introduced a number of initiatives to combat the problem.
Workforce development
a key goal
Long-term policy challenges have not changed during the review period. First, New Zealand’s economic well-being strongly depends on developing a larger, more highly skilled and better paid workforce. This will require new initiatives and further investment in education and training, as well as a stronger commitment to research and development. Recent trends in immigration and employment have been positive, particularly employment rates in Auckland, the largest metropolitan area. Currently, the construction boom has created a demand for skilled labor that has yet to be met. Whereas New Zealand has demonstrated relative success with integrating immigrants, greater investment is needed to advance improved education outcomes and skills training among the Maori and Pasifika populations. New Zealand also needs to develop stronger links with its neighbors in the Pacific region.
Newly committed to climate-change policy
Despite the government’s decision to withdraw from its Kyoto obligations, New Zealand’s own vulnerability to the consequences of climate change were recognized in its endorsement of the objectives of the United Nations Climate Change Conference in Paris in October 2016. The new government has expressed a strong commitment to addressing the causes and effects of climate change.
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