New Zealand’s Economic Turnaround: How Public Policy Innovation Catalysed Economic Growth

In the early 1980s, global events and New Zealand’s government response drove
the country towards economic collapse. Debt, inflation, and unemployment grew.
To address the crisis, several legislative reforms in the style of New Public
Management were passed between the mid-1980s and early 1990s. The
currency was floated, price and income controls were relaxed, state-owned
enterprises such as the national airline were corporatized, government
accounting was scrutinized, and outputs rather than inputs were monitored in
government departments. These reforms transformed New Zealand into a
country that holds transparency and accountability in high regard. The economy
recovered, and the population flourished and gained better access to a wider
range of goods and services. This chapter analyses the reasons and the
circumstances that led to the success of New Zealand’s economic reforms. The
authors also discuss what economic vulnerabilities remain for New Zealand and
consider the extent to which the New Zealand model offers lessons for other
countries.