Banking was established early in New Zealand, and over the years several large state- and foreign-owned commercial (trading) banks emerged. In the first decades of organized settlement, those operated independently and issued their own currency. Today all banks must be registered with the Reserve Bank of New Zealand, which is the central bank and issues the country’s national currency, the New Zealand dollar. They are supplemented by nonbank financial institutions. From the early 1980s the financial industry was transformed by deregulation. The government loosened restrictions on the types of financial services the various institutions could perform, and the commercial banks lost their privileged position. The capital market became highly competitive with the establishment of new, often foreign-owned specialty institutions and a currency that floated against several other currencies. Many of the unregulated financial institutions have been vulnerable to national and global economic recessions, and there has been renewed pressure for greater regulation of financial markets. In the early 21st century most major banks were foreign-owned.

Trade

Agricultural products—principally meat, dairy products, and fruits and vegetables—are New Zealand’s major exports; crude oil and wood and paper products are also significant.

The major imports are crude and refined oil, machinery, and vehicles. New Zealand’s chief trading partners are China, Australia, the United States, Japan, Germany, and South Korea. A succession of trade agreements provided the basis of the Australia and New Zealand Closer Economic Relations Trade Agreement (known as CER), signed in 1983. That agreement eventually eliminated duties and commodity quotas between the two countries and was seen by some as the first step toward integrating their economies. New Zealand also has a free-trade agreement with China, and Australia and New Zealand together are associated in a free-trade arrangement with the Association of Southeast Asian Nations (ASEAN).

Services

The public-service sector is a large employer, especially in Wellington, where the head offices of government departments are located. Tourism is an important part of New Zealand’s economy. Most of the country’s visitors originate from Australia, the United Kingdom, the United States, and China. Since the late 1990s there has been a significant increase in the number of international students—notably from China, South Korea, Japan, India, and Saudi Arabia—studying in language schools, universities, and polytechnics, and education has thus become an important source of foreign exchange.

Labour and taxation

The labour force was organized into strong trade unions from the late 19th century. Like Australia, New Zealand evolved a system of compulsory arbitration in which the government played a major role. From the late 1960s, however, government policy generally alternated between periods of government-imposed freezes on wages and prices and periods of officially tolerated bargaining between unions and employers, although the strong link between the labour markets of New Zealand and Australia—especially in the skilled trades and professional vocations—constrained policy. However, after the passage of the Employment Contracts Act (1991), which ended compulsory union membership, the number of union members fell dramatically.

Although taxation in New Zealand in relation to national income is not particularly high in comparison with other developed countries, direct taxation (taxation of personal income) has traditionally been relied upon to an unusual extent. The introduction in 1986 of a value-added tax on goods and services thus represented a fiscal revolution, because it was linked to a reduction in income tax rates and to an increase in government transfer payments to low-income families. Since 1986, governments have progressively reduced direct, and increased indirect, taxation.

Transportation and telecommunications

In spite of the rugged nature of the country, most of the inhabited areas of New Zealand are readily accessible. The road system is good even in rural districts, and the main cities have express highway systems. Though the difficult terrain of the country often can make for slow journeys, the distances involved are seldom great.

In the 19th and much of the 20th century, New Zealand depended on shipping for trade and the movement of people. The main towns were located on or near good natural harbours. The major ports are now Auckland, Wellington, and Lyttelton (serving Christchurch). Other ports of note are at Marsden Point, Tauranga, and Napier on the North Island and Nelson, Westport, and Dunedin on the South Island. The import and export of goods via ship has declined from a boom period following World War II, and, consequently, so has maritime employment. Interisland ferries ply the route across Cook Strait.

The railway network was owned and operated by the government until the 1990s, and since then it has been in and out of private ownership. From 2008 the country’s freight and passenger railways were owned and operated by a state-owned enterprise known as KiwiRail (New Zealand Railways Corporation). The railway network comprises a main trunk line spanning both islands via roll-on, roll-off ferries and branch lines linking most towns. Rail travel is notoriously slow, which discourages passenger travel, but service is efficient for large-scale movement of goods over considerable distances. Long-standing regulations protecting the railways against competition from road carriers were abolished in the early 1980s, and, as a consequence, long-distance road haulage has increased.

The difficulty of the terrain has greatly encouraged air travel in New Zealand. Most provincial towns have airports, and all major urban centres are linked by air service. The national airline, Air New Zealand, has majority government ownership, although, like the railways, it was for a time privately owned. Air New Zealand, along with several foreign airlines, handles the country’s international service, with international air terminals at Auckland, Christchurch, and Wellington. Hamilton, Palmerston North, Queenstown, and Dunedin also offer limited international service.

New Zealand’s telecommunications industry has undergone numerous reforms to transform the country into one of the leaders in the field. The country’s Post Office originally had a monopoly on telecommunications services, but it was plagued by economic difficulties and poor service. The state-run Telecom Corporation of New Zealand—renamed Spark New Zealand in 2014—was formed in 1987 (privatized in 1990), and industry deregulation began in 1989. Undersea fibre-optic cables, like the direct-current cables, cross the Cook Strait to serve as a main telecommunications link between the two main islands. New Zealanders have adopted changes in information and communications technology rapidly. Cellular phone usage far exceeds the use of landlines. Internet usage is common among the vast majority of the population.