Lying in the South Pacific, 1600 km (992 miles) southeast of Australia, New Zealand comprises the main North and South Islands, separated by the Cook Strait, and a number of smaller islands. South Island is the more mountainous; North Island contains hot springs and geysers, and the bulk of the population. The political tradition is liberal and egalitarian, and has been dominated by the National and Labour Parties. Radical, and often unpopular, reforms since 1984 have restored economic growth, speeded up economic diversification, and strengthened New Zealand's position within the Pacific Rim countries.

New Zealand is a country of migrants. The first settlers, the Maoris, migrated from Polynesia about 1200 years ago. Today's majority European population is mainly descended from British migrants who settled after 1840. Newer migrants include Asians from Hong Kong and Malaysia, and Polynesians. The government is keen to attract skilled South Americans, Russians, Chinese, and Africans to revitalize the economy.

The living standards and unemployment rates of the Maoris compare adversely with those of the European-descended majority, and relations can be tense. The crown signed the Waikato Raupatu Claims Settlement Act and officially apologized to the Maoris in 1995. In 1998 the Waitangi Tribunal ordered the return of confiscated land.

New Zealand was the first country in the world to give women the vote – in 1893. In 2001, the prime minister, the leader of the opposition, and the governor-general were all women.

Strengths

Modern agricultural sector; world's biggest exporter of butter and (per capita) of wool. Rapidly expanding tourist sector. Manufacturing, with emphasis on high tech. One of world's most open economies. Strong trade links within Pacific Rim.

Weaknesses

One of the highest levels of public debt outside developing world. Continuing reliance on imported manufactured goods and foreign investment.

Profile

Since 1984, New Zealand has changed from being one of the most regulated to one of the most open economies in the world. Radical reforms and drastic cuts in social security and related government spending helped to restore growth and cut inflation to a minimum. Diversification into new markets and products recovered after the 1997–1998 Asian economic crisis. Prime Minister Clark dropped objections in 2001 to the idea of a unified Australia–New Zealand dollar. High public debt and poor levels of private investment remain a problem.

New Zealand is a single-chamber parliamentary democracy. The Cook Islands and Niue are self-governing territories.

Profile

Since 1984 the economy has undergone massive reforms; cuts to the welfare system and privatization of public assets have been unpopular. The NP and the LP dominated politics until the introduction of proportional representation (PR) in 1996. Former NP leader Jenny Shipley became the country's first woman prime minister in 1997 at the head of a coalition with the small NZF, and from 1998 led a minority administration when the NZF withdrew. A new minority coalition of the LP and the Alliance assumed power under LP leader Helen Clark in November 1999.

Main Political Issue

Electoral reform

New Zealand shifted from a first-past-the-post electoral system to PR for the 1996 general election. Endorsement of this reform in a referendum in 1993 reflected widespread disillusionment with the NP and LP. The new German-style system strengthened the role of smaller parties. As predicted, the first election to use the system in 1996 produced a coalition government led by the NP. Forced into a minority position in 1998, the NP has, unsuccessfully, called for a review of the PR system.

Many New Zealanders are strongly committed to the British crown and the Commonwealth, but the UK's EU involvement has forced New Zealand to reorient its trade and foreign policy toward its Pacific Rim neighbors, especially Australia, now New Zealand's largest trading partner. Their 1983 Closer Economic Relationship (CER) treaty was strengthened in 1996 by the signing of a mutual recognition agreement. Relations with Asia are growing in importance. The 1997–1998 Asian economic crisis significantly affected trade, particularly tourism. Relations with the USA are improving after a low point when New Zealand's antinuclear stance led to its exclusion from the ANZUS pact. Official ties with France, cut in 1985 after French agents bombed Greenpeace's Rainbow Warrior in Auckland harbor, were restored in 1997.

Military cuts announced in May 2001 emphasized the aim to refocus defense policy on small-scale peacekeeping. The move put renewed stress on the 1951 security pact with Australia and the USA (ANZUS). The 1984 decision to refuse access to nuclear warships from 1985 damaged defense cooperation with the USA and other Western powers for ten years, forcing New Zealand to seek closer links with Australia. Senior-level contacts were resumed in 1994, the USA announcing that it would not send nuclear-armed warships to New Zealand ports. Since then, the UK has also resumed naval visits.

New Zealand's defense strategy centers on protection against low-level economic threats, terrorism, regional security, and peacekeeping.

New Zealand's rich pastures, a result of even rainfall throughout the year, have traditionally been its key resource. The sheep, wool, and dairy products on which the country's wealth was built are still important. Newer export industries include products such as fruit, vegetables, fish, cork, wood, and textile fibers.

New Zealand is well endowed with energy resources. It has coal, oil, and natural gas reserves, but most energy is generated by hydroelectric plants.

New Zealand's isolation, small population, and limited industry have helped to keep it one of the world's most pollution-free countries. It was a leading opponent of French nuclear testing in the Pacific and has banned nuclear vessels from its ports. Ozone depletion over Antarctica, deforestation, and protection of native flora and fauna are major issues.

Although both the main islands are well served by transportation services, the more populous North Island's road and rail network is more extensive than the South's. Air and ferry services complement the land networks and provide links between the North and South Islands, as well as with the numerous smaller islands. Cargo ferry services are particularly important for Antarctic bases in the Ross Dependency. Links with New Zealand's other associated territories – the Cook Islands, Niue, and the Tokelau atolls – are underdeveloped.

In 1936 New Zealand was the first country to introduce a full welfare state. Government efforts since 1991 to impose UK-style market systems on the health service have been very unpopular. While life expectancy continues to improve, the nation's OECD health ranking is falling. In comparison with other OECD countries New Zealand has high mortality rates for heart disease, respiratory disease, breast and bowel cancer, motor vehicle accidents, and suicide.

Education is free, and compulsory between six and 16. A number of schools are composite, providing both primary and secondary education. New Zealand has one of the highest proportions of the population with tertiary qualifications in the OECD. However, it has one of the worst rates of adult literacy of developed world countries. A government initiative, More than Words, was launched in 2000.

Crime rates in New Zealand's urban areas have increased in recent years. However, overall, the country remains one of the world's safest and most peaceful places in which to live.

The years since 1984 have been very difficult for New Zealanders, who are used to affluence within a generous welfare state. A rash of economic and social reforms has held back wages, raised unemployment, and cut welfare benefits. Even so, average living standards are still high, and a strong egalitarian tradition means that wealth remains quite evenly distributed.

The quality of life in New Zealand is among the world's highest, in terms of access to basic necessities, and a pure, healthy, urban and rural environment. Social mobility is fairly high. Wealthier people tend to spend their money on houses close to the water. Yachts are a major status symbol.

New Zealand's prime attraction is its scenery. Unspoiled and, relative to the country's size, the most varied in the world, it offers mountains, fjords and lakes, glaciers, rainforests, beaches, boiling mud pools, and geysers. Other attractions are the Maori culture and outdoor activities such as river rafting, fishing, skiing, whale watching, and bungee jumping – a local invention.

Tourists come mainly from Australia, the USA, Japan, and the UK. The tourism industry is the largest single foreign-exchange earner. Tourism continues to grow, although the 1997–1998 Asian economic crisis saw the number of Asian tourists drop by 10%. The huge success of the Lord of the Rings films, shot in New Zealand, has seen an increase in tourism in 2002.

A former British colony, New Zealand became a dominion in 1907, self-governing from 1926, and fully independent in 1947.

• 1962 Western Samoa (now Samoa) gains independence.
• 1965 Cook Islands become self-governing.
• 1975 Conservative NP wins elections. Economic austerity program introduced.
• 1976 Immigration cut by over 80%.
• 1984 LP elected; David Lange prime minister. Auckland harbor headland restored to Maoris.
• 1985 New Zealand prohibits nuclear vessels from ports and waters. French agents sink Greenpeace ship Rainbow Warrior in Auckland harbor.
• 1986 USA suspends military obligations under ANZUS Treaty.
• 1987 LP wins elections. Introduction of controversial privatization plan. Nuclear ban enshrined in legislation.
• 1990 LP defeated by NP in elections. James Bolger prime minister.
• 1991 Widespread protests at spending cuts.
• 1992 Maoris win South Island fishing rights. Majority vote for electoral reform in referendum.
• 1993 Docking of first French naval ship for eight years. NP returned with single-seat majority in election. Proportional representation introduced by referendum.
• 1994 Senior-level US contacts restored; agrees not to send nuclear-armed ships to New Zealand ports. Maoris reject government ten-year, US$660 million land claims settlement.
• 1995 Waitangi Day celebrations abandoned after Maori protests. Crown apologizes to Maoris and signs Waikato Raupatu Claims Act. UK warship visits resume.
• 1996 NP forms coalition to preserve overall legislative majority. First general election under new proportional representation system.
• 1997 NP forms coalition with New Zealand First (NZF) party. Bolger resigns. Jenny Shipley becomes first woman prime minister.
• 1998 Shipley sacks NZF leader Winston Peters as deputy prime minister. Waitangi Tribunal orders government to return to Maoris US$3.3 million of confiscated land.
• 1999 November, LP led by Helen Clark wins general election.
• 2001 Air New Zealand renationalized.
• 2002 Combat wing of air force taken out of service.