Economy
GDP (December 2006): U.S. $93.1 billion.
Real annual GDP growth rate (December 2006): 1.5%.
Per capita income (2004): U.S. $23,910.
Natural resources: Timber, natural gas, iron sand, coal.
Agriculture (6.7% of GDP): Products--dairy products, meat, forestry products.
Industry (goods-producing industries 21.5% of GDP, service industries 67.5% of GDP): Types--finance, insurance, and business services; manufacturing; personal and community services; transport and communication; wholesale trade; construction; government administration and defense; fishing, forestry, and mining; electricity, gas, and water.
Trade (December 2006): Exports--U.S. $6.37 billion: dairy products, meat, forest/wood/paper products, machinery and equipment, fruit, fish. Major markets--Australia, U.S., Japan, China. Imports--U.S. $7.3 billion: motor vehicles, crude oil, refined oil, aircraft. Major suppliers--Australia, U.S., Japan, China.

NEW ZEALAND ECONOMY
New Zealand's economy historically has been based on a foundation of exports from its very efficient agricultural system. Leading agricultural exports include dairy products, meat, forest products, fruit and vegetables, fish, and wool. New Zealand was a direct beneficiary of many of the reforms achieved under the Uruguay Round of trade negotiations, with agriculture in general and the dairy sector in particular enjoying many new trade opportunities.

The country has substantial hydroelectric power and reserves of natural gas, although the largest natural gas condensate and oil field--supplying nearly 75% of the country's hydrocarbons--is expected to be tapped out by 2009. Leading manufacturing sectors are food processing, wood and paper products, and metal fabrication. Service industries, particularly financial, insurance, and business services, form a significant part of New Zealand's economy.

Since 1984, government subsidies including for agriculture were eliminated; import regulations liberalized; tariffs unilaterally slashed; exchange rates freely floated; controls on interest rates, wages, and prices removed; and marginal rates of taxation reduced. Tight monetary policy and major efforts to reduce the government budget deficit brought the inflation rate down from an annual rate of more than 18% in 1987. The restructuring and sale of government-owned enterprises in the 1990s reduced government's role in the economy and permitted the retirement of some public debt. As a result, New Zealand is now one of the most open economies in the world.

Economic growth has remained relatively robust in recent years (i.e., around 4%), benefiting from a net gain in immigration, rising housing prices, strong consumer spending and favorable international prices for the country's exported commodities. New Zealand did not experience the slowdown in growth seen in many other countries following the events of September 11, 2001, and the subsequent fall in overseas share markets. The prolonged period of good economic growth led the unemployment rate to drop from 7.8% in 1999 to 3.7% as of December 2006.

New Zealand's economy has been helped by strong economic relations with Australia. New Zealand and Australia are partners in "Closer Economic Relations" (CER), which allows for free trade in goods and most services. Since 1990, CER has created a single market of more than 22 million people, and this has provided new opportunities for New Zealand exporters. Australia is now the destination of 21% of New Zealand's exports, compared to 14% in 1983. Both sides also have agreed to consider extending CER to product standardization and taxation policy. New Zealand has had a free trade agreement with Singapore since 2001. In July 2005, both countries joined with Chile and Brunei to form a Trans-Pacific Strategic Economic Partnership, liberalizing trade in goods and services between them. In April 2005, New Zealand initialed a free-trade deal with Thailand.

The U.S. is the second-largest trading partner for New Zealand, with U.S. goods and services accounting for approximately 14% of all imports. With the New Zealand dollar approaching a 23-year high of almost U.S. $0.75 in April 2007 (the highest since the New Zealand dollar was floated), there are greater opportunities for U.S. exporters in 2007-2008. The market-led economy offers many benefits for U.S. exporters and investors. Investment opportunities exist in chemicals, food preparation, finance, tourism, and forest products, as well as in franchising. The best sales and investment prospects are for whole aircraft and aircraft parts, medical or veterinary instruments, motor vehicles, information technology, hotel and restaurant equipment, telecommunications, tourism, franchising, food processing and packaging, and medical equipment. On the agricultural side, the best prospects are for fresh fruit, snack foods, and soybean meal.

New Zealand welcomes and encourages foreign investment without discrimination. The Overseas Investment Office (OIO) must give consent to foreign investments that would control 25% or more of businesses or property worth more than NZ$100 million. Restrictions and approval requirements also apply to certain investments in land and in the commercial fishing industry. OIO consent is based on a national interest determination. Foreign buyers of land can be required to report periodically on their compliance with the terms of the government's consent to their purchase. The OIO, part of Land Information New Zealand, took over the functions of the Overseas Investment Commission in August 2005. Full remittance of profits and capital is permitted through normal banking channels. As of December 2006, total foreign investment was U.S. $6.6 billion. Of this, U.S. $3.4 billion came from foreign direct investment, U.S. $1.4 billion from portfolio investment, and U.S $1.8 billion from other investments.

A number of U.S. companies have subsidiary branches in New Zealand. Many operate through local agents, and some are in association in joint ventures. The American Chamber of Commerce is active in New Zealand, with its main office in Auckland.

NATIONAL SECURITY
New Zealand has three defense policy objectives--defend New Zealand against low-level threats, contribute to regional security, and play a part in global security efforts. New Zealand has considered its own national defense needs to be modest. Its defense budget generally has provided for selected upgrades in equipment, most of which have been devoted to the army. Shortly after winning the 1999 election, the Labour government canceled a lease-to-buy agreement with the U.S. for 28 F-16 aircraft. In 2001, the government contracted to purchase 105 LAVIIIs for U.S. $300 million, with initial delivery in 2003. In 2002, it announced planned upgrades of its P3 and C-130 Hercules aircraft, and committed to spend U.S. $250 million to purchase a multi-role vessel and several offshore patrol vessels, and U.S. $100 million for two used Boeing 757s as replacement VIP jet transport aircraft.

In May 2001, the government announced it was scrapping its combat air force. New Zealand states it maintains a "credible minimum force," although critics maintain that the country's defense forces have fallen below this standard.

With a claimed area of direct strategic concern that extends from Australia to Southeast Asia to the South Pacific, New Zealand necessarily places substantial reliance on its defense relationship with other countries, in particular Australia. However, acknowledging the need to improve its defense capabilities, the government in 2005 allocated an additional NZ$4.6 billion (U.S. $3.19 billion) over 10 years to modernize the country's defense equipment and infrastructure and increase its military personnel. The funding represented a 51% increase in defense spending since the Labour government took office in 1999.

New Zealand is an active participant in multilateral peacekeeping. It has taken a leading role in trying to bring peace, reconciliation, and reconstruction to the Solomon Islands and the neighboring island of Bougainville. New Zealand maintains a contingent in the Sinai Multinational Force and Observers and has contributed to UN peacekeeping operations in Angola, Cambodia, Somalia, and the former Yugoslavia. It also participated in the Multilateral Interception Force in the Persian Gulf. New Zealand's most recent PKO experience has been in East Timor, where it initially dispatched almost 10% of its entire defense force. New Zealand participated in Operation Enduring Freedom and has fielded a Provincial Reconstruction Team in Afghanistan, as well as having deployed a frigate to the Gulf of Oman. In support of the effort to reconstruct Iraq, New Zealand deployed an engineering team to the country.

New Zealand participates in sharing training facilities, personnel exchanges, and joint exercises with the Philippines, Thailand, Indonesia, Papua New Guinea, Brunei, Tonga, and South Pacific states. It also exercises with its Five-Power Defense Arrangement partners--Australia, the United Kingdom, Malaysia, and Singapore. Due to New Zealand's antinuclear policy, defense cooperation with the U.S., including training exercises, has been significantly restricted since 1986.