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Friday 25 June 1999

NZ CONSUMERS BETTER OFF FROM TARIFF REDUCTION

"New Zealand consumers have more money in their pockets as a result of trade liberalisation, " Prime Minister Jenny Shipley said today.

"A new study, prepared by the New Zealand Institute of Economic Research, provides hard evidence to show that the process of tariff removal begun in 1987 has already delivered the equivalent of a significant wage increase to New Zealand consumers.

"What's more, the study shows that the increase will almost double by 2010, four years after the current schedule for complete removal of tariffs on all goods imported into New Zealand.

Launching the study today, Mrs Shipley said it was a valuable addition to the mounting body of evidence showing that New Zealand has done well out of trade liberalisation.

"Official statistics show that more than quarter of a million new jobs have been added to the economy during the last decade - the same period that tariffs have been steadily lowered. Real wages have grown by around eight per cent in the same period.

"The NZIER Study, 'Consumer Benefits From Import Liberalisation: A New Zealand Case Study,' shows that prices have come down as well. The report focuses on four consumer goods that were subject to high tariffs - cars, household appliances, clothes and shoes. These items together account for about one-quarter of all household spending.

"Car prices have dropped by 16 per cent since 1987. That translates into an extra $4.90 a week for each member of a typical three-person New Zealand household.

"If we look forward to 2010, four years after tariffs have been completely removed, that gain rises to $9.40 a week for each member of the same household.

"Turning to household appliances, tariff removal has led to prices falling by around nine per cent, meaning a gain of $1.20 a week for our average household member. By 2010 that will rise to $2.10 a week.

"Thirdly, clothing prices have fallen by 15 per cent, a gain of $1.10 a week for the householder. By 2010 that will have risen to $2.40 a week.

"And finally, shoe prices have fallen by five per cent, adding another ten cents a week to the householder's income. But by 2010, shoe prices will have fallen by 22 per cent.

"When we add all this together, we find that the typical New Zealand householder has another $7.30 in his or her pocket as a result of tariff removal in these four items alone.

"For a three-person household, that’s a gain of $22 a week, or $1,140 a year.

"Looking forward to 2010, the gain for the average consumer rises to $14.10 a week. That translates to an extra $42 a week, or $2,180 a year.

"The figures are at the conservative end of any estimate of the total gains New Zealanders have made from trade liberalisation.

"For a start, the figures are based on only four items. Liberalisation has led to lower prices for other consumer goods as well.

"The figures also ignore the benefits to consumers from being able to choose from a much wider range of products.

"The evidence, then, is quite clear. In terms of both jobs and prices, New Zealand is winning from trade liberalisation. This government has every intention of continuing down this path, " Mrs Shipley said.

ENDS

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