New Zealand’s ‘Light-Handed’ Approach to Utility Regulation

Abstract

FTER enjoying considerable prosperity in the early post-war decades, based 4-A on high commodity prices and favourable access to the British market, New .X JkZ ealand suffered major economic reversals in the 1970s. Britain's entry into the European Community, and massive increases in oil prices, undermined the country's competitive advantage. Its traditional reliance on a narrow range of com modity exports and a single overseas market cost it dearly. Rather than adjusting to these international changes, successive governments opted to continue with policies, originally conceived in die Depression years of die 1930s, designed to insulate New Zealand industry from its compedtors. These intervendonist policies culminated in heavy government borrowing to finance die 'Think Big' energy projects of the 1980s. During diis period New Zealand's reladve standard of living dropped mark edly. In 1950, its GDP per capita was 26 per cent above die OECD average; 40 years later it had dropped to 27 per cent below die average.