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U.S. DEPARTMENT OF STATE
NEW ZEALAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                           NEW ZEALAND

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                    1992      1993      1994

Income, Production and Employment:  1/

Real GDP (1983 prices)            19,883    19,256    21,078
Real GDP Growth Rate (pct.)         -1.3       2.9       5.3
GDP (at current prices)           41,290    40,742    45,157
By Sector:
  Agriculture                      2,524     2,525     2,668
  Fishing/Hunting/Forestry/Mining  1,712     1,763     2,708
  Manufacturing                    7,426     7,878     8,919
  Electricity/Gas/Water            1,204     1,074     1,315
  Construction                     1,212     1,166     1,580
  Trade/Restaurants/Hotels         5,977     6,182     6,617
  Owner-Occupied Dwellings         3,297     3,170     3,419
  Transport/Storage                2,072     1,891     1,785
  Finance/Insurance/Business Svcs  5,895     6,032     6,399
  Communications/Other Services    3,481     3,482     3,762
  General Government Services      4,978     4,565     4,804
Net Exports of Goods and Services  1,312     1,059     1,339
Real Per Capita GDP (USD)          5,821     5,578     6,038
Labor Force, June (000s)           1,634     1,648     1,685
Unemployment Rate, June (pct.)      10.1       9.9       8.4

Money and Prices:  (annual percentage growth) 1/

Money Supply (M2 July/July)         -1.7      -0.9      12.7
Base Lending Rate (actual Sept)     11.0       9.8      10.1
Personal Saving Ratio 2/             6.2       7.0       7.7
Consumer Price Index                 0.8       1.0       1.3
Producer Price Index (June-June)     1.9       2.5       1.5
Exchange Rate (USD/NZD)           0.5660    0.5324    0.5532

Balance of Payments and Trade:  3/

Total Exports (FOB) 4/             9,899    10,103    11,162
  Exports to U.S.                  1,272     1,202     1,256
Total Imports (CIF) 4/             8,591     9,230    10,407
  Imports from U.S.                1,558     1,704     1,872
Aid Receipts                           0         0         0
External Public Debt              15,163    14,202    16,022
Debt Service Ratio (March yr.) 5/   57.4      47.0      43.4
Gold and Foreign Exch. Reserves    2,983     3,337     4,011
Trade Balance                      1,308       873       755
  Trade Balance with U.S.           -286      -502      -616


1/   National income accounts reporting years ending March 31.
2/   Estimates by N.Z. Institute of Economic Research.
3/   Fiscal year ending June 30.  1994 data is provisional.
4/   Merchandise Trade.
5/   Principal payments on medium and long term debt plus 
interest payments on total debt, as a percent of exports of
goods and services and investment income.



1.  General Policy Framework

    New Zealand is a modern developed economy, with a heavy
reliance on foreign trade.  Its manufacturing and export
sectors are still significantly based on a large and efficient
agricultural sector.  Tourism has become the single most
important foreign exchange earner, surpassing meat exports. 
Since agricultural and processed agricultural product exports
are so important to the economy, New Zealand ratified the GATT
Uruguay Round agreements and became a founding member of the
World Trade Organization (WTO) on January 1, 1995.  After
several years of economic restructuring, the New Zealand
economy is now largely market driven.  Most formerly
government-owned industries have been privatized, with electric
power generation and transmission the primary remaining
government-owned industries.  In late 1994 economic growth was
strong, inflation was under control, unemployment was falling,
and the government was running budget surpluses for the first
time in seventeen years.

    While the New Zealand government is no longer running
deficits, it refinances its maturing debt (including
substitution of domestic for foreign debt) and manages its cash
flow through periodic issuance of government stock and treasury
bills, which are held by both domestic and foreign investors. 
The government obtains most of its income from direct taxes
(about US $11.8 billion) on company profits and personal
incomes.  The maximum personal income tax rate is 33 percent. 
The second largest revenue earner is a "goods and services"
(GST) tax of 12.5 percent on all sales of goods and services. 
This appears as a sales tax to the consumer.

    The Reserve Bank of New Zealand Act of 1989 instructs the
Reserve Bank to direct monetary policy towards achieving and
maintaining price stability.  The Act requires the Reserve Bank
Governor and the Minister of Finance to agree on policy
targets.  The current agreement, reached in December 1992, set
a goal of maintaining a zero to two percent annual rise in the
consumer price index (CPI), with certain factors from this
"headline" inflation removed to arrive at "underlying"
inflation.  These factors include interest rate rises,
government taxes and charges, and one-off external shocks, such
as large oil price increases.  While the CPI increase has
remained below two percent per annum since late 1991, it is
expected to exceed that level by late 1994, and peak at about
three percent in early 1995.  Underlying inflation is expected
to remain below the two percent target.  The Reserve Bank uses
one day loans to banks of government receipts, daily open
market operations, and twice weekly Reserve Bank bill tenders
to implement its monetary policy.


2.  Exchange Rate Policy

    The New Zealand dollar has floated since March 1985 as part
of a broad based deregulation of financial markets.  The 
Reserve Bank has not intervened in the foreign exchange market
since the float.  In mid-October 1994, the New Zealand dollar,
at about 61 U.S. cents, had reached its highest point against
the U.S. dollar since late 1990, having appreciated by almost
20 percent against the U.S. dollar since late 1992.  At these
levels, U.S. goods and services remain competitively priced in
the New Zealand market.

    In pursuing the objective of price stability, the Reserve
Bank uses the following check list of indicators:  exchange
rates; level and structure of interest rates; growth of money
and credit; inflation expectations; and trends in the real
economy.  The interest rate yield gap and the trade weighted
exchange rate are seen as the principal indicators.  While not
attempting to run a fixed exchange rate band, the Reserve Bank
does seek "comparative exchange rate stability."  The Reserve
Bank's control of primary liquidity influences the exchange
rate indirectly through its impact on short-term interest rates.


3.  Structural Policies

    Certain New Zealand manufacturers, primarily motor vehicle
assemblers and car tire, textile, carpet, footwear and apparel
manufacturers, retain high but decreasing effective rates of
tariff protection.  In March 1991, a program was announced to
cut most tariffs by one-third from 1993 to 1996. 
Liberalization beyond 1996 will be determined by a review held
in 1994.  Most observers expect further gradual reduction in
tariff protection for these industries, in spite of stiff
opposition from those directly affected.

    In December 1990, the new National Party government
introduced industrial relations reform legislation, resulting
in the Employment Contracts Act, which came into effect on
May 15, 1991.  This law abolished compulsory unions and the
practice of nationwide occupational awards.  The removal of
these restrictive practices has generated more flexible
workplace arrangements with consequent improvements in
productivity.

    The National Party government also implemented reductions
in expenditures for social benefits through better targeting,
and a broad review of the social assistance structure.  This
process was extended in the July 1991 budget package through
the introduction of partial user charges for health and
education and rationalization of housing assistance.  In
August 1993, despite strong public resistance, the three major
political parties agreed to changes to the universal retirement
system to bring its costs to the government under control.


4.  Debt Management Policies

    Gross public debt grew from 45 percent of GDP in 1973 to a
peak of 77 percent of GDP in 1987.  In June 1994, total public
debt was US $27.2 billion, equivalent to 57 percent of GDP. 
This improvement is largely due to the use of proceeds from
privatization to repay external debt, and to the improving
economy.  In the fiscal year ending March 1988, debt service on
the public debt reached US $3.3 billion, or 8.4 percent of GDP
and 20 percent of government expenditure.  Public debt service
dropped to US $1.97 billion in FY1994, or 4.4 percent of GDP
and 12.1 percent of expenditures.

    External debt accounted for 59 percent of the total in
mid-1994.  Interest on external debt in 1994 equaled 12.4
percent of exports of goods and services, and investment income.


5.  Significant Barriers to U.S. Exports

    New Zealand embarked on a unilateral tariff liberalization
program in 1985 with the announcement that tariffs on goods not
produced in New Zealand would be reduced to zero.  In 1988, the
government reported that 93 percent of imports entered duty
free.  In December 1987, a general tariff reduction plan was
announced for goods not covered by industry plans.  (Five
categories of goods were covered by industry plans:  footwear;
carpet; textiles; apparel; and motor vehicles.)  Tariffs on
other goods were reduced in four stages between July 1988 and
July 1992 from a range of 30 to 40 percent to a range of
between 16 to 19 percent.  In 1991 it was announced that tariff
reductions would be continued between 1993 and 1996.

    Under separate treatment for goods covered by the former
industry plans, present relatively high tariffs for apparel,
textiles, curtains, carpets, footwear, motor vehicles and car
tires will be reduced in stages to July 1996 by about one
quarter to one third of the existing tariffs.  However, even
after July 1996, passenger vehicles and original equipment
tires will still face a tariff of 25 percent; replacement
tires, 15 percent; and apparel, 30 percent.  A review for the
post-1996 period was conducted in 1994.  Most observers expect
further gradual reduction in tariff protection for these
industries, despite stiff opposition from some domestic
producers.

    One example of a protected industry is the car assembly
sector, where tariff protection will drop from the present
30 to 25 percent on July l, 1996.  The assemblers maintain that
further tariff reductions will jeopardize their ability to
maintain an employment level of 2,500, and kill a potential
export market to Australia.  Their opponents (importers of used
cars, mostly from Japan) counter that the present duties make
cars an average of US $3000 more expensive for every New
Zealand motorist.

    Thus, despite extensive reform, tariffs on goods competing
with domestic products remain relatively high.  With the entry
into force of the GATT Uruguay Round Agreement in 1995, tariffs
on only two categories of imports, used motor cars and used
clothing, will be unbound.  Items of particular export interest
to the United States subject to high tariffs include printed
matter for commercial use, aluminum products and wine. 
Reductions in tariff levels in accordance with the
aforementioned plan should result in expanded commercial
opportunities for U.S. exporters.

    New Zealand has completed the dismantling of a highly
restrictive import licensing regime.  The remaining import
license controls for goods under the former industry plans were
eliminated in 1992.  This liberalization has benefitted U.S.
exporters.

    The New Zealand Apple and Pear Marketing Board, a producer
organization, had a monopoly right to import apples and pears,
except from Australia.  This monopoly was abolished effective
January 1, 1994.

    New Zealand welcomes and encourages foreign investment
without discrimination.  Approval by the Overseas Investment
Commission (OIC) is required for foreign investments over
NZD ten million or investments of any size in specific
sectors.  The review of investments above NZD ten million
applies to both acquisitions and greenfield investments. 
Specified sectors are commercial fishing and rural land. 
Foreign investment in commercial fishing is limited to a
24.9 percent holding, unless an exemption is granted by the
Ministry of Agriculture and Fisheries.  While the level of
ownership is not restricted for rural land, foreign purchasers
are required to demonstrate that the purchase is beneficial to
New Zealand.  In practice, the OIC approves virtually all
investment applications, and its approval requirements have not
been an obstacle for U.S. investors.  For example, the entire
national railroad system, including the only regular passenger
and rail ferry service connecting the two main islands, was
sold to a majority U.S. owned consortium in 1993.  In 1991, the
former government telecommunications monopoly was sold to two
U.S. telecommunications companies.  No performance requirements
are attached to foreign direct investment.  Full remittance of
profits and capital is permitted through normal banking
channels.

    The U.S. Government recognized the generally liberal
trading environment in New Zealand by signing a bilateral Trade
and Investment Framework Agreement (TIFA) in October 1992.  The
TIFA provides for periodic government to government
consultations on bilateral and multilateral trade and
investment issues and concerns.  The first TIFA meeting was
held in Washington in April 1993.


6.  Export Subsidies Policies

    New Zealand acceded to the GATT subsidies code in 1981.  At
that time, New Zealand undertook to eliminate seven export
subsidy programs that were inconsistent with the code by
March 1985.  While five of the programs were eliminated on
schedule, two programs were extended through March 1987,
leading the United States to deny New Zealand imports use of
the injury test in countervailing duty cases.  One of these
programs, the export market development taxation incentive, was
extended a second time, but expired in 1990.  The United States
reinstated the injury test for New Zealand once tax rebates
under this last inconsistent program were complete.


7.  Protection of U.S. Intellectual Property

    New Zealand is a member of the World Intellectual Property
Organization, the Paris Convention for the Protection of
Industrial Property, and the Berne Copyright and Universal 
Copyright Conventions.  New Zealand has generally supported
measures to enhance intellectual property protection at
multilateral organization meetings.

    The Government of New Zealand strongly endorses the
protection of intellectual property and enforces effectively
its laws which offer such protection.  This is done to protect
New Zealand innovators both at home and abroad, and to
encourage technology transfer.  The government recognizes that
New Zealand is heavily dependent on imported technology and
that the country derives considerable benefit in providing
intellectual property protection.

    In 1992 New Zealand repealed Section 51 of the Patents Act,
1953, which contained permissive rules for compulsory licensing
of pharmaceutical products.  While no licenses had ever been
issued under these provisions, in 1990 a number of applications
were filed with the Commissioner of Patents, generating a great
deal of concern among international pharmaceutical companies. 
The repeal of Section 51 brought New Zealand's patent act into
conformity with the intellectual property legislation in other
industrialized countries.

    The government is engaged in a full review of its
intellectual property rights regime.  It is expected that major
new copyright legislation, including provisions on parallel
importing, will be enacted in 1994, as well as new legislation
on layout designs.  In addition, some amendments to patent and
trademark laws, as required by the Uruguay Round's Trade
Related Aspects of Intellectual Property (TRIPS) Agreement,
were before the parliament in late 1994, as well as a new
regime for the protection of geographical indications, expected
to be enacted in 1994.  Draft legislation will also protect
certain data which are supplied to New Zealand regulatory
authorities who give marketing approvals for pharmaceuticals
and agrochemicals.  These reforms are mainly aimed at bringing
New Zealand's intellectual property rights law into conformity
with the TRIPS Agreement.  It is expected that further reform
legislation will be introduced in 1995 on trademarks, patents,
designs and plant variety rights.


8.  Worker Rights

    a.  The Right of Association

    New Zealand workers have unrestricted rights to establish
and join organizations of their own choosing and to affiliate
these organizations with other unions and international
organizations.  The principal labor organization, the New
Zealand Council of Trade Unions (NZCTU), is affiliated with the
International Confederation of Free Trade Unions (ICFTU).  A
second, smaller national labor federation, the New Zealand
Trade Union Federation (TUF), was established in 1993.  TUF is
not affiliated with any global international, although some of
its affiliates retain longstanding ties with the ICFTU's
international trade secretariats.  There are also a number of
independent labor unions.  Unions are protected by law from
governmental interference, suspension, and dissolution.

    Unions have and freely exercise the right to strike. 
Strikes designed to force an employer to become party to a
multi-company contract are prohibited.  Moreover, police
officers are barred from striking or taking any form of
industrial action.  Police, however, do have freedom of
association and the right to organize and to bargain
collectively.

    b.  The Right to Organize and Bargain Collectively

    The right of workers to organize and bargain collectively
is provided by law and observed in practice.  Unions actively
recruit members and engage in collective bargaining.  Only
uniformed members of the armed forces are not permitted to
organize unions or to bargain collectively.

    Labor market deregulation intended to make New Zealand more
competitive internationally was initiated with the Employment
Contracts Act (ECA) of 1991, which marked a sharp break with
almost a century of pro-union industrial legislation.  Under
the ECA, unions lost their special legal status and have no
inherent right to represent any particular group of workers. 
Compulsory unions and the closed shop were abolished.  Monopoly
union coverage was dropped and workers may not be forced to
join a particular union.

    The ECA ended a previous system of national "awards" under
which a wage agreement would apply to all employers and
employees in an industry whether or not they had been involved
in the award negotiations.  Under the ECA, employment
relationships are based on contracts.  Individual employees and
employers may choose to conduct negotiations for employment
contracts on their own behalf or may authorize any other person
or organization to do so as their representative.  Mediation
and arbitration procedures are conducted independently of
government control.  The Employment Court hears cases arising
from disputes over the interpretation of labor laws.  A less
formal body, the Employment Tribunal, is available to handle
wage disputes and assist in maintaining effective labor
relations.  There are no export processing zones.

    c.  Prohibition of Forced or Compulsory Labor 

    Forced or compulsory labor is prohibited.  Inspection and
legal penalties ensure respect for these provisions.

    d.  Minimum Age for Employment of Children

    Department of Labour inspectors effectively enforce a ban
on the employment of children under age 15 in manufacturing,
mining, and forestry.  Children under the age of 16 may not
work between the hours of 10 P.M. and 6 A.M.  In addition to
explicit restrictions on the employment of children, New
Zealand's system of compulsory education ensures that children
under the minimum age for leaving school (now 16) are not
employed during school hours.

    e.  Acceptable Conditions of Work

    New Zealand law provides for a 40-hour workweek, with a
minimum of three weeks' annual paid vacation and eleven paid
public holidays.  Under the Employment Contracts Act, however,
employers and employees may agree to longer hours than the
40-hour per week standard.  The government-mandated minimum
wage of approximately US $3.75 an hour, applies to workers
20 years of age and older.  Effective April 1, 1994, a minimum
wage for younger workers was introduced at 60 percent of the
adult minimum.  A majority of the work force earns more than
the minimum wage.

    New Zealand has an extensive body of law and regulations
governing health and safety issues, notably the Health and
Safety in Employment Act of 1992.  Under this legislation,
employers are obliged to provide a safe and healthy work
environment and employees are responsible for their own safety
and health as well as ensuring that their actions do not harm
others.  Under the Employment Contracts Act, workers have the
legal right to strike over health and safety issues.  Unions
and members of the general public may file safety complaints on
behalf of workers.  Safety and health rules are enforced by
Department of Labour inspectors who have the power to shut down
equipment if necessary.

    f.  Rights in Sectors with U.S. Investment

    The conditions in sectors with U.S. investment do not
differ from conditions in other sectors of the economy.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                               339
Total Manufacturing                                     778
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             110
  Metals, Primary & Fabricated                7
  Machinery, except Electrical                3
  Electric & Electronic Equipment            38
  Transportation Equipment                  (1)
  Other Manufacturing                       317
Wholesale Trade                                         108
Banking                                                 (1)
Finance/Insurance/Real Estate                           198
Services                                                (1)
Other Industries                                      1,587
TOTAL ALL INDUSTRIES                                  3,037    

(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis

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