Until 1984 the New Zealand economy was relatively closed with high levels of trade protection, considerable regulation of the production sector, a major role for government in the provision of services, price control, many legislative monopolies, and considerable intersectoral distortions. In he 1970s and early 1980s, New Zealand productivity rates were poor compared to OECD averages and growth rates were significantly below trading partners.|

As the economic reality of this situation dawned, there was widespread acceptance of the need for major change. Following the election of a Labour Government in 1984, New Zealand commenced a programme of rapid and widespread economic liberalisation. This liberalisation programme was unusually comprehensive and consistent, the result of its basis on a consistent theoretical microeconomic framework.

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