2014 Index of Economic Freedom

New Zealand

overall score81.2
world rank5
Rule of Law

Property Rights95.0

Freedom From Corruption94.0

Limited Government

Government Spending32.3

Fiscal Freedom71.2

Regulatory Efficiency

Business Freedom96.1

Labor Freedom90.2

Monetary Freedom86.3

Open Markets

Trade Freedom86.8

Investment Freedom80.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 4.4 million
  • GDP (PPP):
    • $132.0 billion
    • 2.5% growth
    • 0.6% 5-year compound annual growth
    • $29,730 per capita
  • Unemployment:
    • 6.9%
  • Inflation (CPI):
    • 1.1%
  • FDI Inflow:
    • $2.9 billion
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New Zealand’s economic freedom score is 81.2, making its economy the 5th freest in the 2014 Index. Its score is slightly lower than last year, reflecting modest declines in four economic freedoms, including business freedom and freedom from corruption, that outweigh improvements in monetary freedom and labor freedom. New Zealand is ranked 4th out of 42 countries in the Asia–Pacific region.

New Zealand was first graded in the 1996 Index, and its economic freedom score has advanced since then by over 3 points. Improvements in seven of the 10 economic freedoms, including business freedom, investment freedom, trade freedom, and fiscal freedom, have enabled New Zealand to move from “mostly free” almost 20 years ago to “free” today. Since 2007, New Zealand has been rated one of the world’s five freest economies.

New Zealand’s modern and competitive economy benefits from a strong commitment to open-market policies that facilitate engagement in global commerce. Transparent and efficient regulations are applied evenly in most cases, encouraging dynamic private-sector entrepreneurial activity. Buttressed by a strong tradition of minimum tolerance for corruption, New Zealand’s vigorous defense of effective rule of law sustains the foundations of economic freedom and contributes to the high level of lasting prosperity.

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Background

New Zealand is a parliamentary democracy and one of the Asia–Pacific region’s most prosperous countries. After 10 years of Labor Party–dominated governments, the center-right National Party, led by Prime Minister John Key, returned to power in November 2008 and was re-elected in November 2011. Far-reaching liberalization in the 1980s and 1990s largely deregulated the economy. It is powered mainly by agriculture but also benefits from a flourishing manufacturing sector, thriving tourism, and a strong renewable geothermal energy resource base. Following a sizable financial contraction during the global economic recession, the economy has been expanding since 2010.

Rule of LawView Methodology

Property Rights 95.0 Create a Graph using this measurement

Freedom From Corruption 94.0 Create a Graph using this measurement

New Zealand is renowned for its efforts to ensure transparent, competitive, and corruption-free government procurement. Stiff penalties against bribery of government officials and those who accept bribes are strictly enforced. The judicial system is independent and functions well. Private property rights are strongly protected, and contracts are notably secure. Enforcement of intellectual property rights is solid.

Limited GovernmentView Methodology

The top individual income tax rate is 33 percent, and the top corporate tax rate is 28 percent. Other taxes include a goods and services tax (GST) and environmental taxes. The overall tax burden equals 31.7 percent of gross domestic income. Government spending equates to about 47.5 percent of GDP, and public debt is steady at 38 percent of GDP. Ongoing earthquake recovery and rebuilding burden the government’s budget.

Regulatory EfficiencyView Methodology

Start-up companies enjoy great flexibility under licensing and other regulatory frameworks. It takes only one procedure to start a business, and no minimal capital is required. Flexible labor regulations facilitate a dynamic labor market, increasing overall productivity. The removal of all farm subsidies 20 years ago spurred the development of a vibrant and diversified agriculture sector.

Open MarketsView Methodology

New Zealand’s average tariff rate is 1.6 percent, and there are few non-tariff barriers to trade. The government screens foreign investment in certain sectors. The well-developed financial sector offers a wide range of financing instruments. The financial system has remained stable, and prudent regulations allowed banks to withstand the global financial turmoil with little disruption.

Country's Score Over Time

Bar Graph of New Zealand Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing New Zealand to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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