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New Zealand

Executive Summary

After weathering the pandemic better than most countries, the New Zealand economy has begun to overheat. Net debt to GDP has increased from 19.5 percent prior to the onset of Covid restrictions to 34.5 percent at the end of 2021. The increase in debt has been due in part to spending measures the government has undertaken for Covid response and recovery. These measures were able to support economic activity during extensive Covid-related domestic lockdowns and travel restrictions, but along with supply chain disruptions, they have begun to contribute to higher inflation. Nationwide labor shortages across a variety of sectors have also had a sizeable impact on the economy. In response to war in Ukraine, the New Zealand government rapidly passed historic sanctions legislation targeting individuals, companies, and assets associated with Russia’s invasion. Sanctions are expected to have a limited direct impact on the investment climate in New Zealand.

While a swift border closure and the imposition of lockdowns originally helped stamp out community transmission of Covid, the appearance of the Omicron variant in January 2022 resulted in an outbreak that put pressure on the health system. At time of writing, border restrictions were being phased out in favor of a management approach to the pandemic. The government announced its plans to open the New Zealand border to travelers from visa-waiver countries on May 1. By October, it is expected that the border will fully reopen. Since 2020, the tourism sector has suffered the most, while primary exports and the housing market have helped to sustain the economy. Unemployment is currently 3.2 percent, a record low.

New Zealand has an international reputation for an open and transparent economy where businesses and investors can make commercial transactions with ease. Major political parties are committed to an open trading regime and sound rule of law practices. This has been regularly reflected in high global rankings in the World Bank’s Ease of Doing Business report and Transparency International’s Perceptions of Corruption index. New Zealand is party to a multitude of free trade agreements (FTA). In February 2022, the country signed its latest, an FTA with the United Kingdom.

Successive governments accept that foreign investment is an important source of financing for New Zealand and a means to gain access to foreign technology, expertise, and global markets. Some restrictions do apply in a few areas of critical interest including certain types of land, significant business assets, and fishing quotas. These restrictions are facilitated by a screening process conducted by a government agency.

The current Labour-led government welcomes productive, sustainable, and inclusive foreign investment, but since being elected in October 2017 and reelected in October 2020, there has been a modest shift in economic priorities to social initiatives while continuing to acknowledge New Zealand’s dependence on trade and foreign investment. Cabinet has agreed a whole-of-government framework that will drive climate change policy. This national initiative is currently underway to reduce the country’s emissions and is developing a pathway for farmers to reduce agricultural emissions. The rapidly developing digital and e-commerce landscape is supported by government initiatives that expand the knowledge base, while making a priority of digital inclusion. Along with its focus on post-pandemic recovery, the New Zealand government has invested in a digital, innovative future that aims to secure multilateral agreements with e-commerce rules that address the complexities of the evolving digital economy.

The 2022 Investment Climate Statement for New Zealand uses the exchange rate of NZD 1 = USD 0.70

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 1 of 180 https://www.transparency.org/en/cpi/2021 
Global Innovation Index 2021 26 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $12,900 https://ustr.gov/countries-regions/southeast-asia-pacific/new-zealand 
World Bank GNI per capita 2020 $41,550 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The Treasury monitors 12 State-Owned Enterprises (SOEs), three mixed-ownership-model entities, and 29 Crown entities. Together, these entities make up the broader SOE sector in New Zealand, which is concentrated in the energy and transportation sectors. In the year to June 2021, the asset base of the 12 SOEs was NZD 50.7 billion (USD 35.5 billion). While figures for net income are not available, the operating balance for the sector was NZD 184 million (USD 129 million). In the same period, mixed ownership companies reported an asset base of NZD 28.8 billion (USD 20.2 billion) and an operating balance of NZD 410 million (USD 287 million). For more information on the financial performance of the SOEs and Crown entities, please visit https://www.treasury.govt.nz/publications/year-end/financial-statements-2021-html  where a partial list of SOEs is available.

The Treasury’s Governance & Appointments team provides advice to Ministers on board appointments, which typically involve local personnel. Legislation of SOEs falls under the State-Owned Enterprises Act 1986, which sets up processes to improve efficiency in the sector. All SOEs are registered as public companies and are bound by the Companies Act and the Fair Trade Act, which clearly define the relationships between companies and their directors/shareholders, and the market. In the late 1990s, competition law under the Commerce Act was strengthened to provide for penalties for misuse of a dominant position. The Commerce Commission “ComCom” sets out guidelines and policies for anti-competitive behavior. A suspected breach of the Commerce Act, inclusive of those involving an SOE, is reported to ComCom’s website at https://comcom.govt.nz/contact-us  and is immediately investigated.

8. Responsible Business Conduct

The New Zealand government actively promotes corporate social responsibility (CSR), which is widely practiced throughout the country. There are New Zealand NGOs dedicated to facilitating and strengthening CSR, including the New Zealand Business Council for Sustainable Development, the Sustainable Business Network, and the American Chamber of Commerce in New Zealand.

New Zealand is committed to both the OECD due diligence guidance for responsible supply chains of minerals from conflict-affected and high-risk areas, and the OECD Guidelines for Multinational Enterprises. Multi-national businesses are the main focus, such as a New Zealand company that operates overseas, or a foreign-owned company operating in New Zealand. The guidance can also be applied to businesses with only domestic operations that form part of an international supply chain. Individuals wishing to complain about the activity of a multi-national business that happened in another country, will need to contact the National Contact Points of that country. In New Zealand, MBIE is the NCP to carry out the government’s responsibilities under the guidelines.

To help businesses meet their responsibilities, MBIE has developed a short version of the guidelines to assess the social responsibility ‘health’ of enterprises, and for assessing the actions of governments adhering to the guidelines. If further action is needed, MBIE provide resolution assistance, such as mediation, but do not adjudicate or duplicate other tribunals that assess compliance with New Zealand law. MBIE is assisted by a liaison group that meets once a year, with representatives from other government agencies, industry associations, and NGOs.

As reported over the past five years in the Trafficking in Persons report, human traffickers exploit domestic and foreign victims in New Zealand.  Foreigners from South and East Asia, the Pacific, and some countries in Latin America are vulnerable to working as forced laborers in several of New Zealand’s tourist, construction, and agribusinesses. Temporary migrant workers in sectors most negatively affected by pandemic, such as hospitality and tourism, are increasingly vulnerable to exploitation.

9. Corruption

New Zealand is renowned for its efforts to ensure a transparent, competitive, and corruption-free government procurement system. The country consistently achieves top ratings in Transparency International’s Perceptions of Corruption Perception Index. Stiff penalties against bribery of government officials as well as those accepting bribes are strictly enforced. The Ministry of Justice provides guidance on its website for businesses to create their own anti-corruption policies, particularly improving understanding of the New Zealand laws on facilitation payments. U.S. firms have not identified corruption as an obstacle to investing in New Zealand.

New Zealand supports multilateral efforts to increase transparency of government procurement regimes. The country joined the WTO Government Procurement Agreement (GPA) in 2012, citing benefits for exporters, while noting that there would be little change for foreign companies bidding within New Zealand’s totally deregulated government procurement system. New Zealand’s accession to the GPA came into effect in August 2015.

New Zealand also engages with Pacific Island countries in capacity building projects to bolster transparency and anti-corruption efforts. The country has signed and ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the UN Convention against Transnational Organized Crime. In 2003, New Zealand signed the UN Convention against Corruption and ratified it in 2015.

The legal framework for combating corruption in New Zealand consists of domestic and international legal and administrative methods. Domestically, New Zealand’s criminal offences related to bribery are contained in the Crimes Act 1961 and the Secret Commissions Act 1910. If the acts occur outside New Zealand, proceedings may be brought against them under the Crimes Act if they are a New Zealand citizen, resident, or incorporated in the country. Penalties include imprisonment up to 14 years and foreign bribery offences can incur fines up to the greater of NZD 5 million (USD 3.4 million) or three times the value of the commercial gain obtained.

The New Zealand government has a strong code of conduct, the Standards of Integrity and Conduct, which applies to all State Services employees and is rigorously enforced. The Independent Police Conduct Authority considers complaints against New Zealand Police and the Office of the Judicial Conduct Commissioner was established in August 2005 to deal with complaints about the conduct of judges. New Zealand’s Office of the Controller and Auditor-General and the Office of the Ombudsman take an active role in uncovering and exposing corrupt practices. The Protected Disclosures Act 2000 was enacted to protect public and private sector employees who engage in “whistleblowing.”

The Ministry of Justice is responsible for drafting and administering the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) legislation and regulations. The AML/CFT Amendment Act 2017 extends the 2009 Act to cover a wider group of professionals, such as lawyers and accountants, along with businesses that deal in high-value goods. The New Zealand Police Financial Intelligence Unit estimate that NZD 1.3 billion (USD 910 million) of criminal proceeds is laundered in New Zealand annually, driven in part by the ease of forming a business in the country. The Department of Internal Affairs is working on a solution for businesses that are facing difficulty meeting their AML/CFT obligations during COVID-19.

After a standard review of the 2017 general election and 2016 local body elections, the Justice Select Committee conducted an inquiry in 2019 on the issue of foreign interference through politicized social media campaigns and from foreign donations to political candidates standing in New Zealand elections. New Zealand intelligence agencies acknowledged political donations as a legally sanctioned form of participation in New Zealand politics but raised concerns when aspects of a donation are obscured or are channeled in a way that prevents scrutiny of the origin of the donation, when the goal is to covertly build and project influence. In December 2019 the government passed the Electoral Amendment Act under urgency to ban donations from overseas persons to political parties and candidates over NZD 50 (USD 35) down from the previous NZD 1,500 (USD 1050) maximum, to reduce the risk of foreign money influencing the election process.

10. Political and Security Environment

New Zealand is a stable liberal democracy with almost no record of significant political violence.

The New Zealand government raised its national security threat level for the first time from “low” to “high” after the terrorist attack on two mosques in Christchurch on March 15, 2019.  One month later it lowered the risk to “medium” where a “terrorist attack, or violent criminal behavior, or violent protest activity is assessed as feasible and could well occur.”  The incident led to wide-ranging gun law reform that restricts semi-automatic firearms and magazines with a capacity of more than ten rounds.  An amnesty buy-back scheme of prohibited firearms administered by the NZ Police ran until December 20, 2019.

A series of anti-vaccine mandate protests in Wellington commenced February 8, 2022, and lasted for 23 days. Although not overtly violent, they included groups that blocked roads, trespassed, and caused general disruption.  The issue has not been politicized, however, with complete cross-aisle agreement from all parties in Parliament not to respond to the demands of the protestors – who remain a tiny minority in a country that is among the most completely vaccinated in the world.

11. Labor Policies and Practices

Following restrictive Covid-related immigration policies, the New Zealand labor market tightened further from already-tight levels pre-Covid. Unemployment is currently 3.2 percent. Labor shortages are reported across a multitude of sectors but are most pronounced in construction and agriculture, where specialty skills and migrant workers are impacted by immigration regulations.

New Zealand’s informal economy is considered to be relatively modest, contributing approximately one-tenth of GDP. The relatively small size of the informal economy can be explained by low levels of corruption, along with respect for the rule of law and regulations.

New Zealand operates a Recognized Seasonal Employer (RSE) scheme that allows the horticulture and viticulture industry to recruit workers from the Pacific Islands for seasonal work to supplement the New Zealand workforce. There have been prosecutions and convictions for the exploitation of migrant workers, with reports that the hospitality, agriculture, viticulture, and construction industries are most effected. New Zealand recruitment agencies that recruit workers from abroad must use a licensed immigration adviser. Impacted by Covid, the RSE scheme underwent changes during the pandemic. While immigration was heavily restricted between 2020 and 2022, the RSE was eventually expanded in early 2022 with an announcement by the Government that the cap would be increased for Pasifika workers in the horticulture sector.

New Zealand has consistently maintained an active and visible presence in the International Labour Organization (ILO), being a founding member in 1919, and its representatives have attended the annual International Labour Conferences since 1935. The ILO and the government of New Zealand have collaborated on several initiatives, including the elimination of child labor in Fiji, employment creation in Indonesia, and the improvement of labor laws in Cambodia.

The government has taken a more proactive approach to enforcing employment law in New Zealand, because the migrant worker population has increased rapidly in recent years and the resources to protect those workers have not kept up with the increase. The government has been steadily increasing the number of labor inspectorates – situated within MBIE – to double the number in 2017.

There is no stated government policy on the hiring of New Zealand nationals, however certain jobs within government agencies that handle sensitive information may have a citizenship requirement, minimum duration of residency, and require background checks.

Labor laws are generally well enforced, and disputes are usually handled by the New Zealand Employment Relations Authority.

MBIE provides guidance for employers on minimum standards of employment mandated by law, guidelines to help promote the employment relationship, and optional guidelines that are useful in some roles or industries. Agreements on severance and redundancy packages are usually negotiated in individual agreements. For more see: https://www.employment.govt.nz/ 

After a three-year review and consultation, the government introduced the Screen Industry Workers Bill in February 2020. The previous government passed the Employment Relations (Film Production Work) Amendment Act 2010 – commonly referred to as the “Hobbit law” -which put limits on the ability of workers on film productions to collective bargaining.

New Zealand law provides for the right of workers to form and join independent unions of their choice without previous authorization or excessive requirements, to bargain collectively, and to conduct legal strikes, with some restrictions. Contractors cannot join unions, bargain collectively, or conduct strike action. Police have the right to organize and bargain collectively but sworn police officers do not have the right to strike or take any form of industrial action. In November 2019 MBIE sought feedback on a discussion document entitled “Better protections for contractors” to strengthen legal protections for contractors. They aim to ensure that contractors receive their minimum rights and entitlements, reduce the imbalance of bargaining power between firms and contractors who are vulnerable to poor outcomes, and ensure that system settings encourage inclusive economic growth and competition. Submissions closed in February 2020.

The ERA requires registered unions to file annual membership returns with the Companies Office. MBIE estimate total union membership at 380,659 for the March 2020 quarter, representing 16.4 percent of all employees in the New Zealand labor force.

Industrial action by employees who work for providers of key services are subject to certain procedural requirements, such as mandatory notice of a period determined by the service. New Zealand considers a broader range of key “essential services” than international standards, including: the production and supply of petroleum products; utilities, emergency workers; the manufacture of certain pharmaceuticals, workers in corrections and penal institutions; airports; dairy production; and animal slaughtering, processing, and related inspection services.

The number of work stoppages has been on a downward trend until the Labour-led government took office in 2017. The number of work stoppages increased from 3 in 2016 (involving 430 employees causing 195 lost workdays), to 143 in 2018 (involving 11,109 employees causing 192 lost workdays and NZD 1.2 million (USD 780,000) in lost wages), to 159 in 2019 (involving 53,771 employees causing 142,670 lost workdays and NZD 9.2 million (USD 6 million) in lost wages). In 2020 there were 112 work stoppages involving 595 employees causing 613 lost workdays and NZD 120,000 (USD 84,000) in lost wages. (While figures have not been released for 2021, health care and rail workers voted on strike action during 2021 and 2022.)

Work stoppages include strikes initiated by unions and lockouts initiated by employers, compiled from the record of strike or lockout forms submitted to MBIE under the Employment Relations Act 2000. The data does not cover other forms of industrial action such as authorized stop-work meetings, strike notices, protest marches, and public rallies which have also increased in recent years. Several strikes during the year involved employees of United States businesses or franchises particularly within the fast-food industry. The New Zealand government does not get involved in individual work disputes unless the striking employees violate their legislated responsibilities.

The Labour-led government campaigned on a promise to lift the minimum wage to NZD20 (USD 13) by April 2021. From April 1, 2022, the minimum wage for adult employees who are 16 and over and are not new entrants or trainees is NZD 21.20 (USD 14.84) per hour. The new entrants and training minimum wage is NZD 16.96 (USD 11.87) per hour. In recent years some local government agencies have raised minimum wages for their staff up from the government mandated rate to a “living wage” of nearly NZD 22.75 (USD 15.93) as of 2021. All businesses in New Zealand affected by COVID-19 have been eligible to receive from the government a wage subsidy from March, to pay their employees 80 percent of their salary to stem job losses.

The Health and Safety at Work Act 2015 sets out the health and safety duties for work carried out by a New Zealand business. The Act contains provisions that affect how duties apply where the work involves foreign vessels. These provisions take account of the international law principle that foreign vessels are subject to the law that applies in the flag state they are registered under. Generally New Zealand law does not apply to the management of a foreign-flagged vessel but does apply to a New Zealand business that does work on that vessel. The Fisheries (Foreign Charter Vessels and Other Matters) Bill 2014 has required all foreign charter fishing vessels to reflag to New Zealand and operate under New Zealand’s full legal jurisdiction since May 2016.

In March 2017, the New Zealand government’s ratification of the ILO’s Maritime Labor Convention (MLC) came into effect. While New Zealand law is already largely consistent with the MLC, ratification gives the Government jurisdiction to inspect and verify working conditions of crews on foreign ships in New Zealand waters. More than 99 percent of New Zealand’s export goods by volume are transported on foreign ships. About 890 foreign commercial cargo and cruise ships visit New Zealand each year.

The Maritime Transport Amendment Act 2017 implements New Zealand’s accession to the intergovernmental International Oil Pollution Compensation’s Supplementary Fund Protocol, 2003. The fund gives New Zealand access to compensation in the event of a major marine oil spill from an oil tanker and exercises New Zealand’s right to exclude the costs of wreck removal, cargo removal and remediating damage due to hazardous substances from liability limits. Accession to the Protocol was prompted in part by New Zealand’s worst maritime environmental disaster in October 2011 when a Greek flagged cargo ship ran aground creating a 331 ton oil spill resulting in NZD 500 million (USD 350 million) in clean-up costs.

On April 4, 2022, the Public Health Response Order 2021 requiring mandatory Covid vaccinations was removed for some workers. Mandatory vaccines remain in place for those employed in health and disability sectors, prison staff, and those working at the border. Border restrictions to enter New Zealand are also currently being eased. From May 1, travelers from visa waiver countries will be permitted to enter the country. From October, the border is expected to fully reopen. For more information, please visit:

https://www.immigration.govt.nz/about-us/covid-19/border-closures-and-exceptions/border-entry-requirements 

14. Contact for More Information

Economic Officer
U.S. Embassy Wellington
PO Box 1190
Wellington 6140
New Zealand
+64-4-462-6000

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