cd_dp_88.pdf

During the decade following britains entry to the eu

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During the decade following Britain’s entry to the EU, government policies continued to provide a degree of protection for parts of the agricultural sector. Moves to remove this protection accelerated from 1984, as the new Labour government began a large-scale process of economic liberalisation and deregulation. New Zealand is now unique among developed countries in that our farmers receive no subsidies from government and have to compete with subsidised production from other producing countries (Statistics New Zealand, 1999). In most of the agricultural and horticultural sectors, producer boards have been established in order to provide a level of coordination in the processing, marketing and distribution of products. Some of these boards are able to compulsorily purchase product from farmers, and have the sole right to export them; in other industries they have less power. This cooperative approach acts to reduce the variability in returns to producers. 4.2 Financial Services Industry The banking and financial services sector in New Zealand today is highly competitive but it hasn’t always been that way. Until the mid-1980s, only four commercial banks operated in the country, and these were subject to governmental controls over their interest rates, investments, and lending portfolios. Other organisations (such as savings banks, building societies and finance companies) offered a more limited range of banking service, and were also subject to tight government control. Strong restrictions on foreign exchange transactions effectively protected New Zealand banks from overseas competition, and the lack of any effective competition in the sector meant that
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19 little innovation occurred. Ledingham (1995 p. 163) has characterised the sector at this time as being “boringly stable”. The large commercial banks developed multi-levelled hierarchies and mechanistic cultures appropriate for the stable and predictable environment. They were also dominated by male managers at higher levels in the hierarchy, despite having a majority of female employees (see, for example, Bank of New Zealand, 1984). Large overseas banks or the government owned the commercial banks and their savings bank subsidiaries, and other savings banks were either owned by government or had explicit government guarantees. Probably in common with many other countries, commercial banks were considered to be cautious and conservative, with cultures ill-suited to rapid or radical change (Harris, 1996). During the 1970s and 1980s, competition developed outside the banking sector, with finance companies, building societies and other organisations beginning to capture an increasing share of the deposits and lending markets. These institutions exerted pressure to be allowed entry to other activities (such as foreign exchange dealing) which government regulations excluded them from. The distinction between banks and non-banks began to diminish and, in 1984-85, government carried out major reform of the financial sector.
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