Historically New Zealand enjoyed a high standard of living which relied on its strong relationship with the United Kingdom, and the resulting stable market for its commodity exports. New Zealand's economy was also built upon on a narrow range of primary products, such as wool, meat and dairy products. High demand for these products – such as the New Zealand wool boom of 1951 created sustained periods of economic prosperity. However, in 1973 the United Kingdom joined the European Community which effectively ended this particularly close economic relationship between the two countries. During the 1970s other factors such as the oil crises (1973 and 1979) undermined the viability of the New Zealand economy; which for periods before 1973 had achieved levels of living standards exceeding both Australia and Western Europe. These events led to a protracted and very severe economic crisis, during which living standards in New Zealand fell behind those of Australia and Western Europe, and by 1982 New Zealand was the lowest in per-capita income of all the developed nations surveyed by the World Bank.
Since 1984, successive governments have engaged in major macroeconomic restructuring, transforming New Zealand from a highly protectionist and regulated economy to a liberalised free-trade economy. These changes are commonly known as Rogernomics and Ruthanasia after Finance Ministers Roger Douglas and Ruth Richardson. A recession began after the 1987 share market crash and caused unemployment to reach 10% in the early 1990s. Subsequently the economy recovered and New Zealand’s unemployment rate reached a record low of 3.4% in the December 2007 quarter, ranking fifth from twenty-seven OECD nations with comparable data. In 2009, New Zealand's economy ranked as the fifth freest in the world according the Heritage Foundation's Index of Economic Freedom.
The current government's economic objectives are centred on pursuing free-trade agreements and building a "knowledge economy". On 7 April 2008, New Zealand and China signed the New Zealand China Free Trade Agreement, the first such agreement China has signed with a developed country. Ongoing economic challenges for New Zealand include a current account deficit of 7.9% of GDP, slow development of non-commodity exports and tepid growth of labour productivity. New Zealand has experienced a series of "brain drains" since the 1970s, as well as educated youth leaving permanently for Australia, Britain or the United States. "Kiwi lifestyle" and family/whanau factors motivates some of the expatriates to return, while career, culture, and economic factors tend to be predominantly 'push' components, keeping these people overseas. In recent years, however, a brain gain brought in educated professionals from poor countries, as well as Europe, as permanent settlers.
In 2003 New Zealand decriminalised the sex trade, and the bold experiment seems to be succeeding. The Economist magazine cited the New Zealand system as the world's "fairest", which allows sex workers to ply their trade more or less freely at home or in brothels or on the street. The new system protects prostitutes from violence while preventing abuse from brothel owners. "In New Zealand, prostitutes can fend for themselves" while in nations like the United States, brothel-owners have more power. A government report reckoned "only about 1% of women in the business were under the legal age of 18". The report noted New Zealand had particular advantages – "the country’s isolation and robust legal system make it relatively free from the problem of trafficking".
Since 2000, New Zealand's fashion industry has grown significantly, doubling exports within a ten year period, according the The Economist magazine. The nation now has "a vibrant and steadily expanding fashion industry, with some 50 established labels, up from a handful ten years ago, half of which sell abroad." Much of this activity is based in Auckland. Clothing exports in 2007 were $315 million, up from $194 million ten years earlier. This is a remarkable turnabout for a nation which has had a reputation for lackluster fashion – "Visiting diplomats have remarked upon the penchant among New Zealand women for short haircuts, backpacks and sensible shoes ... One ambassador accused them of dressing like soldiers; another said they looked as though they were going to a funeral."
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