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Vulnerability to shocks:

  • New Zealand is unusually vulnerable to natural disasters (particularly earthquakes). As a small, open economy with a significant agricultural base we are also vulnerable to a range of other domestic and international shocks. For example, droughts or lower demand for our exports can have significant impacts. Increased vulnerability to shocks implies that a lower level of public debt is prudent as a fiscal buffer.

Shocks are part of life in New Zealand

Here is a brief sample of some shocks that had significant negative economic or fiscal impacts for us over the past 40 years:

  • Oil price shocks in 1973, 1979, 1990, and 2002.
  • Decline in commodity prices in 1974.
  • Global sharemarket crash of 1987.
  • Asian Financial Crisis 1997/98.
  • Droughts in 1973, 1992, 1998, 2008 and 2013.
  • Global Financial Crisis in 2008/09.
  • Canterbury earthquakes in 2010 and 2011.
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