Assignment 1.2: Forum Discussion − Macroeconomic Theory and Current Events

Ra’Quell Yarbrough
Jones International University
October 6th, 2011

Although New Zealand’s industrial sector has expanded vastly over twenty years, it still depends heavily on its extremely efficient agricultural sector. New Zealand is still profoundly reliant on on the primary sector with commodities accounting for half of total goods exports, and exports account for about one third of New Zealand’s GDP.
The recession arose with a drought between 2007 and 2008 which led to lesser production of dairy products for the first half of 2008. Consumption and investment decelerated significantly due to high fuel and food prices, high interest rates and falling real estate prices. New Zealand was already at a shortcoming before the global financial crisis hit and by September of 2008 the economy only got worse.
As of 2010 the unemployment rate floated around 6.8% and was lower than the OECD average of 8.6% and was ranked 12th of 27 OECD countries with standardized unemployment rates. New Zealand is a leader in economic freedom due to its diversified and modern economy, with high levels of prosperity and institutional strengths that include strong protection of property rights and an efficient legal structure. In spite of the recent stress on the economy, New Zealand remained relatively unharmed, with public debt, increased by crisis spending and now above 20% of GDP, remains moderate compared to other advanced countries. Trade is moderately open but do contain some non-tariff barriers like import restrictions, services market access barriers and import fees. As far as fiscal freedom, New Zealand has a fairly high income tax and a moderate corporate tax. The top income tax rate is 38% with a flat corporate tax rate of 30%. The 2010 Budget Act details reforms starting October 1, 2010