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NZ Continues to Reap Dividends from 1980s Reforms

July 16, 2004

Report Shows New Zealand Continues to Reap Dividends from Successful Reforms of 1980s and 1990s

The reforms of the 1980s and 1990s continue to pay dividends for New Zealand , in terms of both economic growth and economic freedom, according to New Zealand Business Roundtable Policy Advisor Norman LaRocque .

Mr LaRocque was commenting on the findings of the Economic Freedom of the World 2004 Annual Report, which was released today by the international Economic Freedom Network, of which the New Zealand Business Roundtable is a member. Reflecting performance in 2002, it is the eighth report produced by hundreds of leading scholars including Nobel Laureates.

"New Zealand 's score of 8.2 on the economic freedom index is the same as last year, but down from 8.4 in 2000 and its 1995 peak of 8.5. In 2002, New Zealand was ranked third equal in the index - along with Switzerland , the United Kingdom and the United States . It trailed only Hong Kong (8.7) and Singapore (8.6). Australia and Canada ranked seventh-equal, just behind New Zealand , with a rating of 7.9.

"While our performance continues to be strong - a testament to the forward-looking reforms of the 1980s and 1990s - we cannot be complacent. Other countries are moving ahead, while we are spinning our wheels - it is almost 10 years since New Zealand 's index rating peaked. And recent anti-growth measures such as the changes to the Employment Relations Act and the 2004 budget spend-up will do nothing to move us forward."

New Zealand 's strongest areas in terms of economic freedom were credit market regulations (score of 9.7, ranking of 2nd ), access to sound money (9.4, 35th ) and legal structure and security of property rights (9.0, 6 th ).

Some of the longer-term trends in the individual components that make up the economic freedom index are worrying, especially in the area of business regulation, said Mr LaRocque.

"Between 1995 and 2002, New Zealand 's rating for time spent with government bureaucracy dropped from 9.3 to 6.8 and ease of starting a new business dropped from 8.5 to 7.3. Administrative obstacles to opening a new business have also increased, with New Zealand's index rating falling from 7.5 to 2.8 (below Argentina) between 2000 and 2002.

"Longer-term trends in labour market regulation are equally worrying, with New Zealand's rating in a number of areas over the 2000-2002 period being well below that of the mid-1990s. For example, New Zealand 's rating for the impact of the minimum wage has stood at 3.6 since 2000 (6.5 in 1995), while its rating for flexibility in hiring and firing has averaged only 3.7 since 2000 (7.6 in 1995). The country's rating for incentives from unemployment benefits fell to 3.8 in 2002 - below 4.8 in the previous two years and down from 5.3 in 1995.

"The deterioration in the business environment will come as no surprise to business owners, who have witnessed creeping government regulation first-hand", said Mr LaRocque. "And this is likely to continue given recent changes to OSH , parental leave and the Holidays Act, as well as proposed changes to the Employment Relations Act."

The Economic Freedom of the World Annual Report 2004 can be accessed through the NZBR website at www.nzbr.org.nz .

ENDS

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