New Zealand's financial system has fared reasonably well given the tumult in international banking sector, though the economy as a whole has struggled. Weak demand domestically, plus falling export revenues and housing prices, plus a depreciation of the New Zealand dollar, all have contributed to the Reserve Bank of New Zealand's decision to loosen credit. The banking sector has benefited greatly from the resilency of Australia's banks, which operate four of New Zealand's largest banks as subsidiaries.
New Zealand's banking sector only opened itself to fully to globalization in the late 1990s, having previously been heavily regulated. The economy prior to 1993, when privatization policies began, was highly inflationary and heavily weighted toward the public sector. The liberalization of the economy led to a period of very strong growth and lower interest rates between 1998 and 2006, though a low savings rate led the Reserve Bank to keep interest rates higher than in comparable Organizaton of Economic Co-Operation and Development (OECD) nations. During the boom, according to the central bank's own history of the period, "unemployment fell to record low levels, and New Zealand became the first country in the OECD to run long-term fiscal surpluses." The Reserve Bank was also the first inflation targeting central bank in the world.
If you are an RGE client please log in to your account.
If you have a client code, please enter it here to activate your client account.
Click here for a free trial.