All the developments were, of course, taking place within a context of growth and change, but with fluctuations, largely brought about by external factors, greatly affecting the general level of economic activity in the country. As a result of a world depression in the early 1870s, the prices of farm products fell by about 23 per cent between 1874 and 1880. The adverse effect of this was aggravated by the fact that the peak of gold production had been passed by 1870, so that incomes per head in New Zealand were falling. Indeed, from 1865 to 1895, apart from a few years in the 1870s, there was an economic depression in New Zealand. Population, stimulated by immigration, continued to increase. It rose from 267,000 to 501,000 between 1871 and 1881, and this factor helped manufacturing to continue to expand. As labour was largely unorganised, the falling prices had a marked effect on wages, which fell more than prices and quickly adjusted labour costs of production. Thus the internal depression in a sense aided the development of manufacturing in some fields, because industries were better placed to compete with imported goods and even to export some of their products.

In another sense, too, the depression in New Zealand helped the further development of other manufacturing interests. Until the eighties, manufacturing in New Zealand had received little protection. Tariffs and excise duties had been mainly for revenue, although industry had been given some help by admitting certain raw materials free of duty and imposing a tariff on some finished goods, and bounties had been offered by the Government and the provinces for the establishment of new factories. Nevertheless, there was no organised movement or sentiment towards protection. As unemployment became more marked during the eighties, however, the manufacturers and their employees combined in demanding protection against imports. Furthermore, the development of the steamship had reduced New Zealand's isolation from Europe and the natural protection this isolation gave New Zealand industry. A New Zealand Protection Association was formed in 1884; and in 1888 the Government was induced to put a tariff on imports, generally around 20 per cent, which gave protection to footwear, clothing, machinery, manufacturing, and metalworking factories. Nevertheless, protection was still only limited in scope, and free trade with a low tariff continued to be the main characteristics of Government policy.

Improved internal transport was by now assisting development and unifying the market. In 1890 coastal shipping carried more than 4 million tons of goods and there were about 2,000 miles of railway either in use or under construction. The population was becoming more urbanised, which helped to compact the market. In April 1891 the population of urban Auckland was 51,000; Christchurch had almost 48,000 people, with Wellington 34,000, and Dunedin 23,500.

The last decade of the century was not, however, a particularly happy one for manufacturing. After 1890 industrial expansion rather tended to slow down. The Australian financial crash, which started in 1893, forced a good many New Zealand firms into bankruptcy, and unemployment was such a serious problem that Seddon, then Prime Minister, felt impelled to write to the Premier of Victoria asking him to make it public that jobs were hard to find in New Zealand and that immigrants would have to endure hardship and privation. In 1895 there was additional tariff protection provided for the manufacturer, and in 1896 the Liberal-Labour policy of giving contracts to local industry, coupled with State backing of the Bank of New Zealand, helped to stabilise industry. But the expansion of export income from primary produce – North Island dairy produce by this time was growing rapidly in importance – weakened the case for self-sufficiency in manufactured goods, and the 1896 census revealed that unemployment remained severe, particularly for industrial workers.

Nevertheless, recovery from the depression was taking place. This, together with trends over the last 20 years of the century (especially the spectacular development of meat freezing and dairy factories and the rapid settlement of the North Island following the pacification of the Maoris), stimulated manufacturing. Between 1896 and 1900 the rise in value of factory production in some of the more important industries was little short of spectacular. The value of production in iron and brass foundries rose by 187 per cent; in furniture factories, by 184 per cent; in flax mills, by 526 per cent; and in spouting and ridging works, by 374 per cent. Price changes accounted for some of these increases, but, by the end of the century, manufacturing industry was progressing well.