Turning loose the invisible hand: New Zealand’s information technology policy

Information technology (IT) policy in New Zealand has closely paralleled the broader economic policies that have prevailed in the country. Until the mid-11980s, economic policy was inwardly oriented, marked by high trade barriers and heavy government regulation. In 1984, the Labor government responded to a balance of payments crisis with a radical program of economic liberalization. By the end of the decade, this process had fundamentally altered the New Zealand economy through deregulation, privatization, and public sector reform. IT policy likewise moved from protectionism and centralized control to almost pure laissez faire. Tariffs on computer hardware were lowered from 40% to 10%. Government computing was moved from a central data processing bureau and placed under the control of individual departments. In terms of IT production, the government has refused to provide any significant incentives or subsidies to the fledgling software industry, feeling the industry should succeed or fail on its own. Under laissez faire policies, New Zealand has become a heavy user of IT, ranking behind only Japan in the Asia-Pacific region for IT spending as a percent of the gross domestic product (GDP). It has also had some success as a producer and exporter of software. However, the hands-off approach to the industry is likely to prove problematic in an international environment in which many countries have explicit strategies to improve their infrastructure for IT production and/or directly subsidize the industry. New Zealand is unlikely to become a hardware producer, but it has a number of endowments favoring software production, particularly its well-educated, English-speaking workforce. However, it faces obstacles, such as a small domestic market, distance from international markets, and a shortage of venture capital. Although software may be a potential growth industry in the ailing New Zealand economy, it is unclear whether the industry can thrive without at least some government support. Even the government now seems to be considering this possibility, and is considering the creation of an IT unit within the Ministry of Commerce.