Comparing the New Zealand and United States Economies

 

Briefing to a Fulbright Orientation Panel: 7 February 2014 (Note there is a minor joke in this paper which New Zealanders may miss. Thomas Frank has written a widely discussed book about US politics entitled “What’s the Matter with Kansas?”.  

Keywords: Political Economy & History;

 

Tena koutou katoa. Welcome to New Zealand.

 

I am glad you are going to stay awhile. Coming to another country confronts you with similarities and differences but you really need to spend some time there to appreciate them. My task today is to draw your attentions to some differences between the US and New Zealand economies.

 

For starters New Zealand is smaller. In population and area terms we are closer to, say, the state of Kansas. The big difference from Kansas is that we are surrounded by sea – more like Hawaii. And we are remote from the world, even further than Alaska where a governor told us she could see Russia from her front porch. Actually we are so remote that we don’t have any real enemies.

 

That we are remote from the world does not mean we are disconnected from it. About a quarter of us were born overseas – about double the American proportion – and a big chunk of us have lived elsewhere – in my case Australia, Britain and the US, the latter as a guest of Fulbright. You will probably find New Zealand news coverage of the US irritatingly narrow, but it covers the world better, I think, and if you want to follow the US, or anywhere else, more closely it is relatively easy – with the exception of North Korea.

 

What about our standard of living? The international GDP per capita figures suggest we are about 10 percent poorer than Kansas, but I am not particularly convinced they tell you much about the real standard of living because GDP leaves an awful lot of important things out. I don’t see any rush of New Zealanders wanting to migrate to Kansas.

 

The big difference is that Kansas is a part of the United States and New Zealand is not. We don’t send anyone to Congress; instead we have an embassy in Washington. We don’t pay taxes to Washington and we don’t receive grants from it either. We have our own domestic currency although – like everywhere else in the world – we use US dollars for international transactions.

 

The lack of fiscal and monetary unity is both an advantage and disadvantage.  New Zealand was not as heavily impacted by the Global Fiscal Crisis as the US. In fact we are now in our fourth quarter of the recovery and unemployment is falling. The reasons are two-fold. Like Kansas we don’t have a large financial sector, but in our case we are not as directly hooked into the New York one. And unlike Kansas (and the economies in the EMU) we have the fiscal and monetary independence to be able to address the shock in terms of our particular needs.

 

Most of Kansas’s exports go to the rest of the United States. New Zealand exports to China, Australia, the European Union, ASEAN and the US. The rankings change. Once upon a time we exported mainly to Britain, then Australia became the leader, now it is China. More generally Asia is becoming of increasing interest to New Zealand.

 

Our main sources of imports are the EU and the US, but often they are first further processed in Australia and Asia. Our main exports are based on natural resources – the big ones are dairy products and tourism but there are a lot of other farm, fishing and  forestry exports. Many of them, though, are further processed before they leave New Zealand, so our manufacturing sector is an important exporter too. Some of its primary processed exports are quite sophisticated – like pharmaceuticals derived from meat and milk. And of course there are exports from the service sector – I’ve mentioned tourism.

 

A major challenge facing New Zealand is the vicious protection in many countries against many of our key exports. That includes the US. For instance our butter quota to there is based on our 1933 exports and amounts to half a pound of butter per inhabitant of Honolulu. It is a bit of a sore point down here, but it is one between friends.

 

Because we don’t have to agree with 49 other states we can do things differently in New Zealand. For instance, ours is a unified more publicly funded health care system. (The easy way for an American to think about it is that in New Zealand you get medicare from before you are born, and don’t have to wait until you are 65.) Our accident compensation system is also different. I’m hoping that you wont have to find out personally what the differences are.

 

There are many other differences. Most importantly New Zealanders are more likely to involve the government  when tackling economic problem. You see that in health care; you see that in the proportion of government spending (and we don’t spend as much on the military). That is true whatever the political colour of the government;  it is said that the political position of our right wing National government is closer to that of the Democratic Party than the Republican one.

 

Whether the New Zealand system is better or worse often comes down to one’s personal taste reflecting one’s country experiences. What is important is to keep an open mind when you make the comparison – to ask yourself why does New Zealand do it differently from where you come from? Doing that will enrich the experience of being a visitor.

 

Kia ora.

 

SOME COMPARISONS

  New Zealand Kansas United States Comment
Population 4.5m 2.9m 314m Louisiana =

4.6m

Proportion foreign born 25.1%   14.3%  
Area (land) 104,000sqms 82,000 sqms 3,537,000 sqms Colorado  =

104,000 sqms.

GDP per capita

(USD)

$30,400 $34,200 $45,700 Maine =

$30,300

Special industries Primary & processing, especially grass-fed dairy and meat. Tourism. Grain, oil and aerosystems Finance  
Export Destinations China, Australia, EU, ASEAN, US. Other US Canada, EU Mexico, China,

Japan.

 
Exports/ GDP 29%   14%  
Government

spending/ GDP

 

35%

   

27%

 
Public funding

of health  spending

83%   46%  

 

The figures are generally derived from the generally Wikipedia; they may be neither accurate nor up-to-date but the orders of magnitude are right.