Historical background

The Polynesian Maori reached New Zealand in about A.D. 800. In 1840, their chieftains entered into a compact with Britain, the Treaty of Waitangi, in which they ceded sovereignty to Queen Victoria while retaining territorial rights. In that same year, the British began the first organized colonial settlement. A series of land wars between 1843 and 1872 ended with the defeat of the native peoples. The British colony of New Zealand became an independent dominion in 1907 and supported the UK militarily in both World Wars. New Zealand's full participation in a number of defense alliances lapsed by the 1980s. In recent years, the government has sought to address longstanding Maori grievances.

Economic overview

Over the past 20 years the government has transformed New Zealand from an agrarian economy dependent on concessionary British market access to a more industrialized, free market economy that can compete globally. This dynamic growth has boosted real incomes - but left behind some at the bottom of the ladder - and broadened and deepened the technological capabilities of the industrial sector. Per capita income has risen for nine consecutive years and reached $27,900 in 2008 in purchasing power parity terms. Debt-driven consumer spending drove robust growth in the first half of the decade, helping fuel a large balance of payments deficit that posed a challenge for economic managers. Inflationary pressures caused the central bank to raise its key rate steadily from January 2004 until it was among the highest in the OECD in 2007-08; international capital inflows attracted to the high rates further strengthened the currency and housing market, however, aggravating the current account deficit. The economy fell into recession in 2008. In line with global peers, the central bank has cut interest rates aggressively; the new government is responding with plans to raise productivity growth and develop infrastructure.