After the turn of the century economic conditions continued to favour manufacturing development. Large-scale immigration was resumed and export income rose as a result of the development of refrigeration of farm products for export. This meant a wealthier population as well as a larger one. It numbered 1,200,000 by 1920 – twice what it had been in 1890 – which meant that the demand for goods of all kinds continued to rise. Although this demand was met mainly by imports, it also resulted in an increased demand for the products of local manufacture. The greatest increases came in industries which supplied basic needs – clothing, footwear, furniture – or processed materials for industry, such as tanning and woolscouring, or farm products for export. Most of the industries were still based on New Zealand raw materials. But there were signs of a change in the nature of manufacturing, with industries which processed imported raw materials growing in importance – for example, the making up of imported cotton piece goods, and of imported metals. On the other hand, New Zealand industry failed to develop the manufacture of some New Zealand raw materials, such as leather and wool. Instead, the country imported carpets and leather goods from overseas.

By 1920 there were 4,357 industrial units operating in New Zealand and 2,560 of them had been established in the first 20 years of this century. In all the main industries (except coach building, printing and publishing, woollen milling and tanning, fellmongering and woolscouring) far more than half the units in operation in 1920 were less than 20 years old. This was particularly so of the furniture, tailoring, and dress- and millinery-making industries, all of which had recorded spectacular increases in size. The value of factory production was now £82 million, 10 times what it had been in 1890.

It should be noted that the industries which developed most during the period were those which for many reasons were assured of a partial share of the New Zealand market. Protective tariffs were placed on imports of clothing and textiles, while “natural” conditions protected other industries. The sawmills and sash-and-door factories – whose output rose by almost 500 per cent in the 30 years to 1920 – were protected by the heavy bulk of their products and by the need for the user to be close to the supplier to be sure that his special wants were catered for. The foundries and other engineering works, brick-makers, furniture makers, breweries, aerated-water manufacturers, and coachbuilders were similarly protected. And so were the producers of perishable goods, such as bread. Apart from those processing farm products, it was the industries protected by tariff, geography, or the shortages arising from the First World War that expanded most rapidly in the early years of the century.

Meanwhile, New Zealand's manufacturing industries were advancing technically, even though the main contact with overseas advances was through imported cars and machinery. By 1920 each manufacturing worker had the assistance of 4 horsepower of machinery, compared with the average of only 1 horsepower 30 years before. The growth of the “heat, light, and power” and “carriages and vehicles” servicing industries was another sign of technical change.

From 1920 to 1930 the value of all manufacturing rose by only £9 million, from £82.5 million to £91.9 million, in spite of large increases in the primary processing industries and the servicing industries. The output of most industries, as a proportion of total manufacturing output, fell; and in the textile fabrics and apparel industries the fall was absolute. A few new industries, however, were set up or put on a sound basis in the decade. Tobacco, for example, had been grown in New Zealand in small quantities during most of the nineteenth century. In 1907 Gershon Pezaro began the handmaking of cigars from imported leaf and, in 1924, formed a company to take over the business. In 1923 the National Tobacco Co. Ltd. had been formed in Napier to manufacture cigarettes and tobacco. This stimulated the commercial growing of tobacco in New Zealand. Glass manufacture, which had been carried on by various factories since as early as 1850, did not become economic until the New Zealand Glass Manufacturing Co. began production in Auckland in 1922. Similar advances were made in china and earthenware production. But these developments were exceptional.

Various factors contributed to this fall in manufacturing. There was a major post-war boom in 1920, but fluctuations in export prices were reflected in farm increases and in the economy generally, and thus the demand for goods in New Zealand was unstable. Unemployment lowered the demand for consumer goods. Shortage of manpower during the First World War had prevented any increase in manufacturing. Thus any increase in demand from rising population or rising national income had to be met largely by imports.