Economic Studies
New Zealand

New Zealand

Population 4.9 million
GDP per capita 41,667 US$
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  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 2.8 2.5 -4.5 6.0
Inflation (yearly average, %) 1.6 1.4 1.5 1.8
Budget balance (% GDP)* 0.8 0.1 -8.9 -6.3
Current account balance (% GDP)* -3.8 -3.8 -1.3 -2.0
Public debt (% GDP)** 29.8 29.8 35.8 39.4

(e): Estimate (f): Forecast *Fiscal year 2021:July 2020 – June 2021 **General government gross debt


  • Proximity to Asia and Australia
  • Touristic appeal
  • Large and competitive agricultural sector (world’s leading exporter of dairy products)
  • Balanced public accounts and contained public debt in normal times
  • High quality of life
  • Excellent business environment (ranked 1st in the Doing Business ranking)


  • Island nation
  • Reliance on foreign investment
  • High household and corporate debt levels (especially in agriculture)
  • Reliance on Chinese demand
  • Shortage of skilled labour
  • Housing shortage and soaring prices (+85% since 2008, including a 10% increase in 2020)
  • Lack of R&D and low labour productivity growth compared to other OECD countries


An economic recovery expected in 2021

Even before the country recorded its first Covid-19 death, New Zealand imposed quarantine requirements for anyone entering the country in mid-March 2020, closed its border to foreigners and shut down all non-essential services. These strict measures led to a sharp decline in New Zealand's GDP in 2020. However, the country is expected to return to a high growth rate in 2021. That being said, after declining by an estimated 6% in 2020, private consumption will be curbed by household deleveraging (their debt amounts to 90% of GDP and 163% of their disposable income) and low population growth (reduced immigration). Moreover, gross fixed capital formation is not expected to reach its pre-crisis level in 2021. Nevertheless, investment will be driven by public investment and the development of numerous public-private partnerships to build road and social infrastructure. Exports of services will remain weak in 2021 because of the fall in tourism, while exports of goods, especially agricultural goods such as dairy products and beef for China, should not suffer from the crisis.

In terms of supply, the primary sector seems to have held up well, as the agricultural sector, which represents 5.8% of GDP, has hardly been affected by the crisis, unlike the mining industry (1% of GDP with gold and coal). New Zealand’s agriculture should continue to do well in 2021, as growth in demand, especially for proteins in Asia, should support the prices of meat, dairy and horticultural products. The secondary sector has been hard hit by the crisis, but should make a comeback in 2021 with the resumption of construction, capital goods manufacturing and so on. Services will probably continue to struggle in 2021. It is unlikely that tourism, which accounts for 15% of GDP and 19% of jobs, will pick up again this year, with a second wave of infections hitting the country in the second half of 2020, especially since local tourism is constrained by the impact of the crisis on wages and employment. However, other types of services, such as catering, could see their activity increase again in 2021. The various sectors will be supported by sustained fiscal stimulus. Regarding monetary policy, the central bank’s official rates are at almost zero and should remain low, which will facilitate credit.


Although still significant, the public deficit is shrinking

New Zealand has sound public finances, making it easier to implement ambitious stimulus plans when needed. In May 2020, this made it possible to release NZD 50 billion (17% of GDP) as part of the Rebuilding Together budget programme to fight the crisis. These funds are in addition to the initial NZD 12.1 billion package announced in January 2020. Government spending is therefore expected to increase by 24% between FY 2019 and FY 2020 and by a further 10% between 2020 and 2021. The stimulus plan, combined with the recession and the slowdown in world trade, pushed the public balance into the red in 2020 and it will remain negative in 2021, despite a slight improvement. The plan is being partly financed by the country's central bank, which extended the limit of its asset-buying programme in May 2020 to purchase a large number of government bonds over 12 months. Public debt will continue to increase, but its GDP share will remain relatively low. Accordingly, the country will not be punished by the financial markets.
The current account deficit is expected to widen slightly in 2021, but will remain small. In 2020, the decline in domestic demand weighed on imports, while agricultural exports were still in high demand. As the domestic situation improves, imports are expected to recover in 2021. The goods surplus will continue to offset partly the services deficit that emerged in 2020, following the collapse of tourism and transport, and will start to decline very slowly in 2021. The income account, which is structurally in deficit due to profit repatriation by foreign investors, should remain stable. The current account deficit will be financed mainly by portfolio investment and FDI.


A stable political situation

New Zealand is a stable parliamentary democracy with strong institutions. After having been postponed from September to October due to the occurrence of new Covid-19 cases in Auckland, the parliamentary elections of 17 October 2020 resulted in the victory of the Labour Party of outgoing Prime Minister Jacinda Ardern. Rewarded for its management of the crisis, the party won 65 seats out of 120 and is thus the first party to obtain an absolute majority in Parliament for more than a decade. Even though this victory allowed the party to govern alone, Jacinda Ardern invited the Green Party to join her in government under a "cooperation agreement".


Last updated: February 2021


Primary payment methods in New Zealand consist of card (debit card and credit card) and electronic credit or debit (direct debits and credits, automated bill payments and electronic transfers). There has been a rapid increase in the use of contactless payments, mobile phone-based applications, and payments using the internet. Although cash remains important, its use is reducing significantly and cheque usage halved between 2013 and 2016. Wire transfers and SWIFT bank transfers are the most commonly used payment methods for domestic and international transactions. Most of New Zealand’s banks are connected to the SWIFT network.

Debt Collection

The debt collection process usually begins with serving a letter of demand, where the creditor notifies the debtor of their payment obligations (including any contractual interest due) with a time limit for making the payment.


Summary judgment proceedings

If the creditor does not receive payment after issuing a letter of demand, a next possible step is to issue summary judgment proceedings. This procedure is intended for situations where the debtor has no defence against the claim. An application can be made to the District Court or High Court, depending on the value of the claim. The District Court has jurisdiction to hear matters for claims up to NZD 350,000, and the High Court typically hears matters for claims above NZD 350,000. A statement of claim must be filed, along with a notice of proceedings, an application for summary judgment and a supporting affidavit by the creditor (or in the case of a company, an individual with personal knowledge of the facts who is authorised to submit an affidavit on behalf of the company), which sets out the facts of the claim. A summary judgment typically involves a hearing, which lasts around one day (if the debtor raises a defence), with evidence given by way of affidavit rather than requiring witnesses. If the application is successful, the Court may enter a judgment in favour of the creditor. If the application is undefended, judgment may be entered by default in favour of the creditor, without the need for a full hearing although an appearance in Court to call the matter will be required. If the defendant is able to show an arguable defence, the Court may decline summary judgment and direct the matter to be heard as an ordinary proceeding.


Ordinary proceedings

Ordinary proceedings are used where summary judgment is unavailable because the debtor has raised a genuine defence, or if summary judgment is not granted. Ordinary proceedings are initiated by filing a notice of proceeding and a statement of claim. Depending on the value of the claim (as outlined above), these proceedings can take place in the District Court or the High Court. Unlike summary judgment, an ordinary defended proceeding may involve additional processes, such as discovery, hearing of evidence and interlocutory applications, or serving of briefs of evidence, depending on the nature of the proceeding.



The High Court determines appeals from the District Court. The Court of Appeal has jurisdiction to hear appeals from the High Court. Appeals are generally restricted to questions of law only. Appeals to the highest appellate court in New Zealand, the Supreme Court, can only be heard with leave of that Court. Leave will be granted if the Supreme Court is satisfied that it is necessary in the interests of justice to hear the appeal.

Enforcement of a Legal Decision

If the Court enters judgment in favour of the creditor, there is no appeal, or all appeal avenues have been exhausted, the creditor can apply to the High Court, or District Court (depending on the value of the claim as outlined above), seeking enforcement action. This can include a deduction from the debtor’s wages or benefits (if the debtor is an individual), seizure of property, garnishee proceedings, or placing a charge on the debtor’s property.

Foreign judgments must first be recognised by the Court under the Reciprocal Enforcement of Judgments Act 1934, or common law.

Insolvency Proceedings


If the creditor does not receive payment after obtaining judgment against a debtor and that debtor is an individual, the creditor can issue a bankruptcy notice served on the debtor. Failure by the debtor to comply with a bankruptcy notice is considered by the law to be an act of bankruptcy.


Statutory demand

If the debtor does not make payment pursuant to the letter of demand and that debtor is a company, a further potential step is for the creditor to prepare and serve a statutory demand for the outstanding debt. This can be used as an alternative to summary judgment or ordinary proceedings. A statutory demand can only be issued if there is no substantial dispute over the debt. Once the statutory demand is served on the debtor, the debtor has 15 working days to pay the debt, or to enter into an arrangement for payment which is agreed by the creditor. If the debtor company does not make payment pursuant to the statutory demand, the creditor has a further 30 working days to commence liquidation proceedings against the debtor company, using non-compliance with the statutory demand as evidence of the debtor’s inability to pay its due debts. However, a debtor company can make an application to set aside a statutory demand within 10 working days of being served with it. The Court may set aside the statutory demand if there is a substantial dispute as to whether or not the debt is due, if the debtor company has a counterclaim, set-off or cross-demand, or if there are other adequate grounds to do so.



Liquidation involves the realisation and distribution of a debtor company’s assets when the company is insolvent, or does not expect to remain in business. A liquidator is appointed to the company, who takes over the management of the company, realises its assets, pays its creditors and distributes the remainder to its shareholders.


Creditors’ compromise

There are two potential forms of creditors compromise, either an informal agreement between debtor and creditor, or a formal creditors’ compromise under the Companies Act 1993. A formal creditors’ compromise is a binding agreement between a debtor company and its creditor(s) regarding the payment of its debts, with terms and conditions that are less exacting than the strict legal rights of creditors. A compromise may involve payments over time, deferred payments, or accepting a lesser sum in full and final settlement of the debt. Once a creditors’ compromise is approved by the required majority of creditors, or the Court, the compromise binds all creditors. An equivalent procedure exists for individuals under the Insolvency Act 2006.


Voluntary administration

The debtor company may go into voluntary administration to try and maximise the chances of an insolvent company continuing to operate, or if that is not possible, to allow for a better return for creditors than immediate liquidation. It enhances the existing creditors’ compromise procedure as an alternative to liquidation, by imposing a moratorium on creditors taking steps to enforce their debts.


Business Debt Hibernation

The business debt hibernation is a scheme established to help businesses affected by COVID-19. It enables businesses to gain protection from debt recovery actions for a month while they negotiate with creditors, and a further six months’ protection if creditors agree to an arrangement for repayment. The scheme has a number of conditions that must be fulfilled before a business can enter business debt hibernation.


Other alternative processes

The Disputes Tribunal conducts an informal and confidential process run by a referee to encourage both sides to reach an agreement, or make a binding decision if both sides cannot agree. At the first instance, this is typically a less costly option, as it avoids lawyers. However, the Disputes Tribunal can only hear claims for disputed debts of below NZD 15,000 or, if both parties agree to extend the financial limit, of up to NZD 20,000.

Arbitration or mediation (often less expensive than court proceedings) may also be used to resolve disputes and obtain more rapid out-of-court settlements.

Insolvency trend - New zealand