Introduction

A major program of economic reform was undertaken in New Zealand in the 1980s. The process of transformation of the economy started with a number of changes in the late 1970s, in particular a closer economic relations agreement with Australia and the start of an import licensing liberalization process. The changes were greatly accelerated after a change in government in July 1984, with the majority of reforms being either implemented or announced in the period between July 1984 and March 1985.

The restructuring of New Zealand's economy was based on a strategy of economic and financial liberalization, supported by macroeconomic policies intended to provide a stable and more efficient financial system and a low rate of price inflation (Spencer 1990). The removal of all interest-rate, ratio, and credit regulations, the lifting of controls on capital flows in international markets, and the floating of the exchange were, along with the reduction of border protection, the principal components of the reform program.

Economic liberalization is a continuous process. This study analyzes and discusses the New Zealand experience from 1984 to 1992 recognizing the problems encountered in the derivation of definitive conclusions. The process of liberalization of the New Zealand economy has not been easy nor without significant social and economic costs. However, the benefits of the economic revolution that has taken place in New Zealand should not be overlooked. This process of transformation not only has created a more modern, efficient, and open economy but also has contributed significantly to a number of important cultural and social changes in the New Zealand society.