New Zealand has experienced major economic reforms between 1980s and 1990s initiated by the Labour Government. The object of this essay is to discuss the reform outcomes by comparing and contrasting the economic performance of New Zealand and Australia over the last 25 years. The discussion will start off with an overview of the reform; include its background, process and outcomes. Then, comparison will be made based on different economic aspects: unemployment, productivity, GDP, Government spending, price stability and investment between the two countries will be considered and discussed with demonstration of relevant graphs. The essay will finish off with a conclusion summarising the key ideas and stating whether the labour market reform has brought favorable outcomes to the New Zealand economy.
New Zealand had the most regulated economy among all the member countries of OECD before its economic reform took place in 1984. The international sector of the economy was heavily protected through range of import tariffs and export subsidies, the government run a significant budget deficit over time as a result. The domestic economy was also deeply regulated. Compulsorily, all workers must have union membership; wages and awards are set; employers and employees are locked into the system, they have no choices; thus productivity was low. New Zealand became an inefficient economy, and its standard of living fallen dramatically compare to other countries in OECD. The following graph shows the real GDP per capita in New Zealand compared with OECD average.
Source: NZ Treasury
With the Lobour Government being elected in 1984 and the signing of the Closer Economic Relations Treaty with Australia, New Zealand started to embark on a remarkable economic reform. ...