2018 Index of Economic Freedom

New Zealand

overall score84.2
world rank3
Rule of Law

Property Rights95.1

Government Integrity95.7

Judicial Effectiveness88.4

Government Size

Government Spending49.5

Tax Burden70.5

Fiscal Health98.3

Regulatory Efficiency

Business Freedom91.5

Labor Freedom84.4

Monetary Freedom90.0

Open Markets

Trade Freedom87.4

Investment Freedom80.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 4.7 million
  • GDP (PPP):
    • $177.0 billion
    • 3.4% growth
    • 2.9% 5-year compound annual growth
    • $37,294 per capita
  • Unemployment:
    • 5.2%
  • Inflation (CPI):
    • 0.6%
  • FDI Inflow:
    • $2.3 billion
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New Zealand’s economic freedom score is 84.2, making its economy the 3rd freest in the 2018 Index. Its overall score has increased by 0.5 point, with an improvement in government integrity outpacing a decline in the labor freedom indicator. New Zealand is ranked 3rd among 43 countries in the Asia–Pacific region, and its overall score is far above the regional and world averages.

A global leader in economic freedom, New Zealand has followed a long-term, bipartisan market-oriented policy framework that fosters economic resilience and growth. The new government, however, has pledged to be more interventionist, promising “an economy that delivers for everyone” by reducing immigration, banning foreign housing investors and hiking property investors’ capital gains taxes, imposing tougher restrictions on the sale of farmland to foreigners, tightening rules on foreign direct investment, repealing some income tax cuts, and raising the minimum wage.

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Background

The former British colony of New Zealand is one of the Asia–Pacific region’s most prosperous countries. The center-right National Party, led by Prime Minister John Key, returned to power in 2008 and was reelected in 2011 and 2014. When Key resigned, his deputy, Bill English, succeeded him in late 2016. September 2017 elections resulted in a hung parliament, with the “kingmaker” and populist New Zealand First party subsequently forming a minority coalition, enabling new Prime Minister Jacinda Ardern’s Labor Party to return to power. Far-reaching deregulation and privatization since the 1980s have largely liberated the economy. Agriculture is important, as are manufacturing, tourism, and a strong geothermal energy resource base. The economy has been expanding since 2010.

Rule of LawView Methodology

Property Rights 95.1 Create a Graph using this measurement

Government Integrity 95.7 Create a Graph using this measurement

Judicial Effectiveness 88.4 Create a Graph using this measurement

New Zealand recognizes and strongly enforces secured interests in property, both movable and real. Contracts are notably secure. The country has a generally strong record of protecting intellectual property rights. The judicial system is independent and functions well. New Zealand ranked first out of 176 countries surveyed in Transparency International’s 2016 Corruption Perceptions Index.

Government SizeView Methodology

The top income tax rate is 33 percent, and the top corporate tax rate is 28 percent. Other taxes include goods and services and environmental taxes. The overall tax burden equals 32.8 percent of total domestic income. Over the past three years, government spending has amounted to 41.0 percent of total output (GDP), and budget surpluses have averaged 0.3 percent of GDP. Public debt is equivalent to 29.5 percent of GDP.

Regulatory EfficiencyView Methodology

The entrepreneurial environment is one of the world’s most efficient and competitive. Transparent, well-enforced labor laws facilitate a dynamic labor market. New Zealand, which has the lowest subsidies among OECD countries, removed all farm subsidies more than three decades ago and spurred the development of a vibrant and diversified agriculture sector.

Open MarketsView Methodology

Trade is significant for New Zealand’s economy; the combined value of exports and imports equals 55 percent of GDP. The average applied tariff rate is 1.3 percent. Nontariff barriers impede some trade. In general, government policies do not significantly interfere with foreign investment. 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

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Regional Ranking

rank country overall change
1Hong Kong90.20.4
2Singapore88.80.2
3New Zealand84.20.5
4Australia80.9-0.1
5Taiwan76.60.1
6Malaysia 74.50.7
7South Korea73.8-0.5
8Japan72.32.7
9Macau70.90.2
10Vanuatu69.52.1
11Kazakhstan69.10.1
12Thailand 67.10.9
13Philippines65-0.6
14Azerbaijan64.30.7
15Indonesia64.22.3
16Brunei Darussalam64.2-5.6
17Tonga63.10.1
18Kyrgyz Republic 62.81.7
19Fiji62-1.4
20Bhutan61.83.4
21Samoa61.53.1
22Cambodia58.7-0.8
23Tajikistan58.30.1
24China57.80.4
25Sri Lanka57.80.4
26Solomon Islands57.52.5
27Mongolia55.70.9
28Papua New Guinea55.74.8
29Bangladesh 55.10.1
30India54.51.9
31Pakistan 54.41.6
32Nepal54.1-1.0
33Burma53.91.4
34Laos53.6-0.4
35Vietnam53.10.7
36Micronesia52.3-1.8
37Uzbekistan51.5-0.8
38Afghanistan51.32.4
39Maldives51.10.8
40Kiribati50.8-0.1
41Timor-Leste48.11.8
42Turkmenistan47.1-0.3
43North Korea5.80.9
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