In the early 2000s New Zealand’s economic structure was similar to that of other developed economies. It had small primary (mainly agricultural) and secondary (manufacturing) industries, which together accounted for about 29% of New Zealand’s gross domestic product (GDP) in 2008, and a much larger tertiary (services) sector which made up the remaining 71%.
- Primary industry was dominated by dairy, sheep and beef farming, and also included forestry and fishing.
- Secondary industry was unusual compared to other countries because of the large number of businesses processing primary products, such as dairy, meat and other foodstuffs, and wood and paper. Together these accounted for more than 30% of secondary industry in 2008. Machinery and equipment manufacturing made up another 10%, and aluminium and steel enterprises 8%.
- Tertiary industry provided the majority of GDP and employment. Finance, insurance, and other business services made up about 15%, and property services another 15%. Transport, communications, retail, building, education and health each contributed between 5% and 10% of total tertiary industry.
Every industry needs material and services (‘inputs’) to carry out its business. For example the New Zealand forestry industry uses inputs of pine forests, which it cuts down to make logs.
Industries also need inputs of capital in the form of equipment, such as the capital invested in the buildings and machinery used to cut and handle logs, and wages to pay employees.
An industry is related to other industries by buying products from them, as inputs. The forestry industry buys services from the transport industry to move logs to processing plants. It buys some of these inputs locally, and imports some from overseas.
Each industry sells its production (outputs) to two main markets.
- Industries sell to businesses or activities in other industries. The forestry industry in New Zealand sells logs to the wood-processing industry, which uses them as an input into its own activities, for example making pulp for paper.
- An industry may sell products or services directly to households, or export them to buyers overseas. These direct sales are known to economists as the ‘final demand’.
The outputs of New Zealand’s primary industries do not usually make their way directly to households. Most are processed or prepared before final consumption or other uses. The forestry industry sells raw logs to the wood-processing or paper-product manufacturing industries, and not to the householder (the consumer).
A proportion of logs are exported in their raw state directly to overseas buyers. These export sales bypass the primary product processing sector of the secondary industries.
In contrast, most of the output of the service industries is sold directly to consumers, though there are exceptions – some legal, accounting, banking and other business services, as well as the services of the building, electricity, transport and communications industries, are sold to local primary and secondary industries, so those industries can complete the production of their own outputs.