From the 1950s the country diversified both its economy and its export markets, reducing its dependence on sheep and butter. Diversification has taken it into new agricultural products (kiwi fruit, apples, timber and wine), and seen significant growth in fishing, tourism, manufacturing and services.
In 1984, after a period when the economy stalled, inflation was high and the currency devalued, the country embarked on a policy of liberalisation, deregulation and privatisation. In 1989, control of inflation was passed to the Reserve Bank; the subsequent austerity measures brought inflation to below two per cent by the end of 1991, and tight fiscal policy was maintained. Economic policy has been to protect the core of social spending while reducing government expenditure through privatisations and cost-cutting. New Zealand is a proponent of regional free trade, including the entire Pacific Rim.
The economy grew steadily during the 1990s until 1998. By mid-1998 the impact of the Asian financial crisis had become very serious, causing a sharp fall in trade with Asia and the government announced emergency spending cuts. However, in 1999 there was a return to confident growth.
The early 2000s saw the start of a strategy to reduce the gap between rich and poor, which had opened up since the introduction of free-market policies in the mid-1980s. Measures included increases in spending on health, education and public housing, focused on the Maori and Pacific Islander communities. Economic growth was steady at around four per cent p.a. 2002–04 but slowed to 1.9 per cent p.a. during 2004–08. As demand for New Zealand’s exports collapsed in the global recession in 2008, the economy moved sharply into recession, resulting in a contraction for the year of 1.9 per cent. However, after exports picked up during 2009–10, the economy began to grow again and growth was sustained at two to three per cent p.a. in 2011–15.