Country Profile - New Zealand continued...

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Economy

New Zealand has a mixed economy which operates on free market principles with sizeable manufacturing and service sectors complementing a highly efficient export oriented agricultural sector. The agricultural, horticultural, forestry, mining, energy and fishing industries play a fundamentally important role in New Zealand’s economy, particularly in the export sector and in employment. Overall, the primary sector contributes over 50% of New Zealand’s total export earnings. The service sector accounts for over two-thirds of GDP and employs around 65% of the workforce. Transport is a major component of economic activity in New Zealand with the efficiency of the country’s internal transport system playing a critical role in New Zealand’s economic growth. Tourism is one of the largest single sources of foreign-exchange revenue and a major growth industry in New Zealand.

The economy is strongly trade-oriented, with exports of goods and services accounting for around 33% of total output. The largest export markets are Australia, USA, Japan and China, Korea and the UK.

The Consumers Price Index for the year to June 2009 rose by 1.9%, the lowest increase since late 2007.

The Reserve Bank of New Zealand’s Official Cash Rate (OCR) stands at 2.5% (at 1st September 2009). Source: Statistics NZ and Treasury NZ

For an extensive summary of the NZ economy see the website of The Treasury at www.treasury.govt.nz/nzeconomy/

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Taxation

The tax year begins on 1 April. Employees have tax deducted from their income on a “pay as you earn” (PAYE) basis. Since the introduction in 1985 of consumption or Goods and Services Tax (GST), currently set at 12.5%, income tax rates have been considerably reduced.

From 1st October 2008 tax cuts were introduced to reduced tax for all taxpayers;-

• Income up to NZ$14,000 is taxed at 12.5%.
• Income of $14,001 to $48,000 is taxed at 21%.
• Income of $48,001 to $70,000 is taxed at 33%.
• Income over $70,001 is taxed at 38%.

Non-cash forms of remuneration received by employees (e.g. company cars) are not subject to income tax, but are instead subject to a Fringe Benefits Tax, which is payable by the employer. For the most recent tax details visit the IRD website at - www.ird.govt.nz.

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